Azure Power: Gaining momentum in the clean energy space

Gaining momentum in the clean energy space

The renewable energy sector is set for a massive leap in India. With the ambitious target of 450 GW of non-fossil fuel-based energy capacity by 2030 and zero carbon emissions by 2070, the sector is expected to witness tremendous push and progress over the current de­cade. The government and industry are now working in conjunction to facilitate India’s energy transition. Azure Power is a leading renewable power producer in the Indian renewables industry that has grown by leaps and bounds over the past decade.

Founded in 2008, the company was started with a vision of providing affordable so­lar power in an efficient and sustainable ma­­nner. The company commenced its op­erations in 2009 by developing a 2 MW private utility-scale solar plant in a small village in Awan, Punjab. This was also In­d­ia’s first private utility-scale solar plant. Sin­ce then, the company has established a rene­wable energy portfolio of 7.5 GW ac­ross India. This includes over 2.5 GW of operational and 5 GW of under-construction or in-the-pipeline projects, as of Ja­nuary 2022. The latter includes 4 GW of capacity for which letters of award (LoAs) have been received but power purchase agreements (PPA) have not been signed yet. The ma­jo­rity of the company’s projects are based in the western belt of India across the states of Maharashtra, Gujarat and Rajasthan. As of April 2021, the Azure Power Group operated 45 utility-scale projects with a combined capacity of 1.9 GW. This indicates a compound annual growth rate of 78 per cent for the company since March 2009.

For the financial year 2020-21, the company’s (Azure Power India Limited) total revenue from operations stood at Rs 3.7 billion, which shows a decline in the revenue by 67.26 per cent over the previous financial year. The net loss after tax for financial year 2020-21 was Rs 2.3 billion. Azure Po­wer is supported by several global marquee institutional and public inve­stors such as Caisse de dépôt et placement du Québec and OMERS Infra­structure. The company has also previously received investments from development institutions such as the International Finance Corporation, Société de Promo­tion et de Participation pour la Coop­ération Éco­nomique, and the Nether­lan­ds Deve­lop­­ment Finance Company. Am­ong the many triumphs to its name, Azure Power is the first Indian energy company to be listed on the New York Stock Ex­ch­ange. It has also listed the first solar gr­een bond out of India on the Singapore Stock Ex­change. The company operates purely in the re­new­able energy sphere, with in-house engi­neering, procurement and construction expertise, as well as advanced in-ho­use operations and maintenance proficiencies.

Key milestones

Since its inception in 2008, the company has made significant strides in the Indian renewable energy market, owing to the establishment of several solar and hybrid projects alongside a substantial reduction in total solar project costs. The cost reduction may be attributed to a dec­rease in balance of systems costs owing to improvements in engineering, design and procurement. Azure Power developed a 2 MW private utility-scale solar project in Punjab, in 2009, followed by a 10 MW project in Gujarat in 2011. In 2013, it established a 2.5 MW solar project in Gujarat, which was also India’s first distributed MW-scale solar rooftop project. Other key projects of the company in­clude a 34 MW private solar power plant in Punjab, developed in 2014, as well as Uttar Pradesh’s and Chhattis­garh’s first utility-scale projects, developed in 2015. The company also operatio­nali­sed a 100 MW solar project in Rajasthan under the National Solar Mission in 2015. During the same year, a 5 MW solar power unit was also established under the mission to provide electricity to the Indo-Pak border outposts.

The company surpassed the 1 GW capacity mark in 2016 and became India’s first en­ergy company to be listed on the New York Stock Exchange. Following this, the co­mpany issued India’s first green bond in 2017, established its first microgrid project in Jharkhand, and exceeded the 2 GW portfolio mark in 2018. Subsequently, the company marked 7 GW in its renewable energy portfolio in 2020, with roughly 5 GW of capacity currently in the pipeline.

Recent developments and upcoming projects

In the 2020-21 period, Azure Power signed PPAs for several renewable energy projects, some of which have already been commissioned. In December 2021, the company successfully commissioned a 600 MW solar project located in Bikaner, Rajasthan, connected to the interstate transmission system (ISTS). With this project, the total operational solar assets of the company across the country amount to 2,510 MW.

Azure Power had signed a PPA with the Solar Energy Corporation of India (SECI) for 600 MW of ISTS-connected solar power capacity as a part of its 4 GW manufacturing-linked projects in November 2021. The power generated will be sold to SECI for a period of 25 years at a tariff of Rs 2.53 per kWh. The company also signed PPAs with SECI for 2,333 MW of ISTS-connected solar power projects in December 2021, to be built in Rajasthan as part of the 4 GW manufacturing-linked projects. These projects are anticipated to produce power for 25 years at a fixed tariff of Rs 2.42 per kWh. They will be commissioned in three phases: 1,000 MW by November 2024, 1,000 MW by November 2025, and the remaining 333 MW by November 2026.

The company was also declared one of the winners in the Maharashtra State Electricity Distribution Company’s (MSEDCL) auction to procure 300 MW of power from grid-connected interstate and intra-state wind projects. Under the auction, it won a capa­city of 180 MW at a quoted tariff of Rs 3.43 per kWh. In October 2021, the power producer re­ce­ived an LoA for its first wind project, which is a 120 MW ISTS-connected pro­ject with SECI. The Karnataka-based pro­ject is part of SECI’s 1,200 MW ISTS Tran­che XI tender, and will supply power for 25 years at a quoted tariff of Rs 2.70 per kWh.

Azure Power, along with a few other companies, was also awarded SECI’s 1,200 MW ISTS-connected wind-solar hybrid po­wer projects under Tranche IV on a build-own-operate basis across India in August 2021. Under the auction, Azure Power was awarded a capacity of 150 MW out of 300 MW under the bucket filling method at a ta­riff of Rs 2.35 per kWh. The company also received an LoA from MSEDCL for its second wind-solar hybrid power project of 200 MW. This includes 133 MW of solar capacity in Rajasthan and 67 MW of wind capacity in Maharashtra, to be installed within 18 months of signing the PPA.

Furthermore, the year saw a key financing for Azure Power, as it signed a five-year syndicated financing deal of $163 million with the Mitsubishi UFJ Financial Group in July 2021. The deal will cater to its 300 MW solar project being developed in Rajas­than. For the transaction, the Mitsu­bishi UFJ Financial Group acted as the lead manager, hedging bank, facility agent and bank issuing line of credit.

Future outlook

The renewable energy industry in India, especially solar power, has progressed rapidly over the last few years. With the in­creasing share of renewable energy sour­ces in the country’s overall energy mix, the sector is expected to provide greater opp­ortunities for growth and innovation to companies such as Azure Power in the coming years. However, the company will face tough competition from its peers, esp­ecially in the areas where it is a new entrant such as wind power, solar-wind hybrid and solar manufacturing. Various large firms have already amassed large portfolios and established their position in these spaces. Thus, Azure Power would have to keep in­novating and expanding to capture greater market shares in these areas. On the plus side, the company has strong backers and has already won large projects in recent auctions in these new areas.

In terms of technological advancement and cost efficiency in production and ope­ra­tions, the company utilises lowest-cost capital in its subsidiaries to implement so­lar power projects and ensure that the cost of power generation is at a minimum. While a certain proportion of imported technology is used in its operations, the company em­­phasises the in-house development of supervision processes and technologies for engineering, designing, procurement and construction. For in­stance, the company has invested Rs 1.8 million towards re­search and development of a robotic arm for cleaning of modules. The robotic arm is expected to reduce operation and mana­gement costs of power as well as facilitate an increase in generation capacity.

With its strong backing and focus on diversification, it will be interesting to see how this solar company performs over the co­m­ing years, especially in the new em­er­ging areas of opportunity.