October 2020

The demand for green energy continues to grow in India as well as globally, as countries focus on mitigating climate change. The Covid-19 pandemic is further driving countries to look at sustainable ways of meeting their energy demand by designing economic recovery packages that accelerate the shift towards renewables rather than falling back on fossil fuels. The European Green Deal, Germany’s Green Recovery Stimulus and The Republic of Korea’s New Green Deal are a few examples of this movement.

Global lenders and financial institutions are also shying away from financing coal-based power in a bid to reduce the carbon footprint and build an environment-

friendly portfolio. Japan-based Sumitomo Mitsui Financial Group, Inc. has decided not to provide support to new coal-fired power projects with effect from May 1, 2020. The Japanese Mizuho Financial Group has made similar commitments. US-based JPMorgan Chase announced that it would not provide project financing for coal-fired power projects unless they use carbon capture and sequestration technology. Similarly, the European Investment Bank plans to stop financing fossil fuel-based projects by the end of 2021.

With some of the largest investors in the world increasingly abandoning coal, it is but natural for companies in the power sector to accelerate the transformation process and pivot towards green energy. For instance, early this year, global private equity major BlackRock, which has stakes in various Indian companies such as Coal India Limited (CIL), NTPC Limited, Adani Power, Torrent Power, Tata Power and CESC Limited, announced plans to exit companies that earn over 25 per cent of their revenues from coal-related businesses, including power plants. As more such announcements come to the fore, large conventional power players, which were traditionally focused on thermal power, are now actively looking at diversifying their portfolios to stay relevant in the future.

Thermal power major NTPC, whose generation portfolio is currently dominated by fossil fuels (over 90 per cent of its total installed capacity of 62.9 GW), is taking significant strides towards meeting its target of adding 32 GW of renewable capacity and accounting for a 30 per cent non-fossil fuel basket by 2032. Bharat Heavy Electricals Limited (BHEL), the country’s largest equipment maker, is rapidly increasing its presence in the solar and battery equipment space. Leading private power producers such as the Adani Group, Tata Power and JSW Energy are also going green in a big way by working towards ambitious renewable energy targets. Mining majors CIL and

NLC India Limited too have joined the renewables’ bandwagon as they realise the challenges to thermal generation.

In the years to come, the power sector is bound to witness a massive change in business models as more companies move towards clean generation. Pure-play thermal power producers are likely to be limited, as coal-based power will increasingly play a more supportive role.

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