India’s competitive market for renewable energy development has attracted deep-pocketed investors from across the world. Thus, large Indian renewable energy IPPs are strongly backed to not only develop their own multi-GW portfolios but also acquire quality assets from companies looking to exit the segment partially or fully. Ayana Renewable Energy is one such IPP, which started with funding from the UK’s CDC Group in 2017 and aims to develop a multi-GW clean power portfolio through both greenfield projects as well as acquisitions. In a recent interview with Renewable Watch, Shivanand Nimbargi, managing director and CEO, Ayana Renewable Energy, discussed the company’s growth plans, the state of the sector and the way forward for renewable energy development in the country. Edited excerpts…
What have been the key highlights for Ayana Power over the past one year?
Ayana’s total portfolio is close to 3 GW. Of this, about 1 GW is already operational. Over the past year, apart from solar and wind power projects, we succeeded in winning a solar-wind hybrid bid of 450 MW. Further, we were successful in terms of acquisitions, and we acquired about 600 MW of projects. We have a good pipeline of deals planned in the future as well. We are quite bullish on both greenfield projects as well as on the acquisition front. Our immediate targets are to expand our capacity to 10 GW in the near future.
Ayana has a majority shareholding by the National Investment and Infrastructure Fund (NIIF). CDC, which started the company in 2017, holds a minority stake. A small minority stake is held by the Green Growth Equity Fund, which is managed by Eversource Capital, a joint venture between private equity firm Everstone Group and British Petroleum’s renewable energy platform Lightsource bp.
How has India’s renewables’ sector evolved over the past year? What have been the key hits and misses?
The biggest positive for India’s renewable energy sector has been the transparency in the whole competitive bidding process. This has been responsible for attracting investments and expanding capacities. However, there exists a significant time gap between the auctions and the actual signing and approval of power purchase agreements (PPAs) by the state electricity regulatory commissions, and thus, project construction. The problem is that there are no back-to-back power offtake arrangements at the time of bidding, and hence there is a huge gap between the number of projects allocated in various auctions and the PPAs signed. If these timelines and contractual arrangements are planned properly, it would surely reduce the time taken to start project implementation.
In addition to this, a lot of policy and regulatory changes have taken place lately which are again a cause for concern. For instance, PPAs have a provision of change in law. However, in the case of safeguard duty imposition on solar module imports there is still no clarity on compensation due to developers. These regulatory decisions take a lot of time, which creates an environment of uncertainty for developers and investors. Thus, some standard guidelines are required in this regard so that developers’ revenues are not impacted.
Another issue is of tariff renegotiation. Various states have been trying to renegotiate approved tariffs, which is not a step in the right direction as sanctity of contracts and the entire bidding mechanism needs to be upheld.
Land laws vary across states and must be dealt with accordingly. Right of way is always a challenge constructing both for projects as well as transmission lines. While unifying land laws are certainly challenging, states can surely notify certain areas that are marked for renewable capacity development. Further, they can ease the land acquisition process and fast-track permits so that project construction can start smoothly.
On the grid connectivity side, there is now some transparency and project construction has been streamlined with transmission to some extent. However, a lot of capacity needs to be rapidly built on the transmission end to achieve the target of 500 GW of renewable energy by 2030.
What is your perspective on large-scale green hydrogen development in India? What are Ayana’s plans?
We have signed an MoU with Greenstat and we are working with them on some pilot projects to understand the key technologies and the cost economics involved. Hopefully, the government will come up with a green hydrogen procurement policy as the market starts building up. This will help create demand and we expect to be able to bid for these projects in the future.
The current green hydrogen costs are not that viable. However, we do expect the costs to become much competitive in the short to medium term.
What is your take on clean energy financing? Do you think that the current pace of M&A activity is going to continue?
Overall, the renewable energy financing climate is quite good. However, with regard to creditworthiness and offtake capabilities, the financial health of discoms is quite worrisome, and this creates issues in raising finance. At least with Solar Energy Corporation of India or NTPC bids there is a cushioning due to the credit enhancement through these agencies. Lending has also not been a concern barring the case of few discoms. Hopefully, the Electricity Act amendments will be notified soon which will bring stability to the power distribution sector.
What is your perspective on the various measures taken to promote domestic manufacturing? How is the solar power ecosystem expected to change with the ambitious manufacturing plans of players such as Adani and Reliance?
The plus side is that the government as part of its Atmanirbhar Bharat plans is trying to expand India’s domestic manufacturing capabilities and promote investments in this space. Further, capacities have been successfully allocated as part of the production-linked incentive (PLI) scheme of the government. Hopefully, we should see expansion in the country’s manufacturing capacity.
However, India has ambitious renewable energy targets and the scale of equipment required to achieve these goals is going to be massive. Our present domestic manufacturing capabilities are insufficient to meet this demand, and thus need to be expanded. Getting adequate manufacturing capacity ready to meet the supply is going to take significant time. While complete vertically integrated production facilities are planned under the PLI scheme, they will take a couple of years to become operational. Thus, the government should extend the import duty timelines till the time an adequate demand and supply balance is achieved to not impact project execution.
Assembling a module is the easiest part in the solar manufacturing process. So, unless the entire value chain – from polysilicon to ingots to wafers to cells – is developed in a big way, we cannot be truly self-reliant. Further, supply chains of other essential components such as glass and backsheet must be developed. Creation of this supply chain will take time. Moreover, solar power technology is constantly evolving with module capacity going from 100 W to 600 W. Thus, technology advancements also need to be considered while developing manufacturing capacities. This will help India become a self-reliant and technologically advanced solar market when compared to the rest of the world.
At Ayana, what are your future plans? Which segments do you plan to focus on most?
Our plan is to be present in all spheres of renewable power. Currently, we are operational in the wind, solar and hybrid power space. We will continue to be a firm renewable energy supplier. We plan to use energy storage technologies and combine them with variable renewable power sources to be able to provide firm power to the grid.
In your view, how is the role of IPPs going to evolve in the next few years? What is your key ask from the government as an IPP?
IPPs are the major drivers of this growth. India has an ambitious target to achieve 500 GW of renewable energy capacity by 2030, and we foresee a lot of participation from IPPs in achieving this goal as witnessed in recent bids. A lot of investors and funds are expected to enter the country’s attractive renewable energy sector driven by IPPs, in the next few years. The first ask is to notify the Electricity Act amendments as soon as possible. Second is to ensure a stable policy and regulatory regime. Third is to get all the states aligned with the vision of 500 GW of renewable power capacity by 2030 so that they are committed towards achieving this.