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.
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.
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.