The global energy market is witnessing one of its worst crises with severe shortages in gas supplies, skyrocketing energy prices and increasing inflation owing to the current geopolitical situation. Commodity prices have increased and supply chains have been disrupted, further complicating the situation. While the renewable energy sector has witnessed an increase in project prices, there are positive signals indicating growth in the clean energy space. In order to ensure energy security, countries worldwide are introducing policies for the larger uptake of clean energy. Meanwhile, corporates are rapidly switching to green energy to reduce their operating costs. This trend is visible in India as well, providing a favourable growth environment for renewable power developers, especially as renewable energy is driving the majority of capacity deployments. A. Nithyanand, Business Head, Renewables, Sembcorp India, talks about the company’s response to current market dynamics, recent deals and future growth plans, as well as the outlook for renewable energy…
How is Sembcorp reacting to the way the renewable energy market is behaving now and what is the plan?
A warm scorching summer, a gradual rebound in industrial activity, and supply-side pressures in both domestic and imported coal together tightened the Indian power market this year. Our decision to proactively adapt to the changing times and incorporate strategic measures to combat the challenges that arose across our operations has stood us in good stead. In the process, our generation remained reliable and our operations sustainable. This has enabled us to perform well. And we will need to maintain this going forward.
Our renewable energy business won new bids and customers in line with our focus on long-term sustenance. Our focus in the next two years will be on delivering these projects. Our aim will be to take learnings from each project and build on them.
The Indian market is uniquely positioned to pioneer new models for low-carbon and inclusive growth. In terms of expansion, we will continue with our trajectory on the central or other high quality bids. At the same time, we will try and incorporate our learnings from other markets, especially in the energy storage space.
How do you gauge the impact on global net zero transition and investments in renewables in the wake of the war in Ukraine?
Countries in Europe and elsewhere are seriously working towards adopting renewable energy alternatives at an unprecedented speed to secure their energy needs and enhance energy efficiency measures.
In India, the unprecedented heat waves have added a new dimension to this requirement. They have provided us with an opportunity to focus on renewables. Our recent wins of the SECI 180 MW and REMCL 50 MW bids have added to our project pipeline. Our renewed focus on group captive is also resulting in encouraging outcomes.
Concerns regarding energy security present policymakers with an opportunity to accelerate the deployment of net zero technologies. While long-term investors such as Sembcorp will continue to focus on building a strong project pipeline, the industry will need enabling policies to create adequate support mechanisms to ringfence vulnerable of, as well as support the true energy prices due to the transition.
How do you view the impact of global disruptions on the energy markets?
The war in Ukraine has disrupted commodity markets, altering global patterns of trade, production and consumption. The conflict and the embargo on Russian energy exports has added to the existing pressures in the aftermath of the pandemic. Consequently, energy prices earlier this year, in March 2022, were double their levels in March 2021, with a maximum spike seen in natural gas and coal prices.
Back home, the spot auctions earlier this year for coal witnessed a premium, crossing 730 per cent over the notified price. In the backdrop of rising power demand, low coal stocks at plants, and high coal prices, the power supply situation was aggravated.
These events have revealed the extent to which many industry value chains – from energy, food, pharma to logistics – have been operating without adequate spare capacity, while demand continued to grow. Geopolitical realignments and restrictions, along with frequent unseasonal weather events, further sharpen the disruptions and volatility. We can expect volatility in these industry supply chains to continue until supply catches up with demand, and sufficient supply cushion is created to absorb shocks in different parts of the value chain.
Sembcorp’s asset portfolio has seen significant changes over the past few months, the most recent development being the acquisition of Vector Green. How will these changes contribute to Sembcorp’s growth strategy in the region?
In line with our “brown to green” transformation strategy, the acquisition significantly increases our utility-scale solar capacity. Our strengthened renewable energy capabilities and expanded footprint reflect our commitment to growing our portfolio in India, which is one of the fastest growing renewable energy markets in the world. With the completion of this acquisition, the gross renewable energy portfolio installed and under development in India will grow to 3 GW and to 8.5 GW globally, pushing us closer to our 2025 target of 10 GW. Poised to play our part in transforming the country’s energy systems for a greener tomorrow, Sembcorp is well positioned to pursue its green growth.
What are the promising emerging technologies that can be game changers for the country’s energy systems?
Green hydrogen is set to become a game changer in the global energy landscape. Its versatility means that it can be used across various sectors such as transport and power. To give an impetus to this emerging sector, the Ministry of Power, in February 2022, notified the first phase of the Green Hydrogen/Green Ammonia Policy. This policy was a step towards realising the National Hydrogen Mission to make India a green hydrogen hub, producing 5 million tonnes of green hydrogen per annum by 2030.
The arrival of green hydrogen and renewable power storage at scale is a unique opportunity for India to take the lead globally in green manufacturing based on decarbonised energy. Over the course of a year, we can expect a lot of activity in this segment. Despite being at a nascent stage, we need to keep our eye on the ball.
Having set ambitious renewable energy targets, how do you foresee India’s growth in this space going forward?
The next level of renewable energy growth in India will require an impetus and a fresh set of investments. The country’s energy mix in the coming decade, wherein renewables are expected to have a sizeable double-digit percentage share, will require a fresh set of reforms. The government has been very encouraging and accommodative of the industry’s suggestions, enabling policymakers and the industry to work in unison to resolve inherent policy bottlenecks and legacy issues.
The Covid-induced economic slowdown in India has created an urgent need to ramp up investments and create jobs. As the country looks to enhance economic activity, investing in green projects can help India move to a low-carbon pathway. We are now entering the next decade of renewable energy growth. The sector is suitably placed to contribute to reviving economic activity and emerge as a global renewable energy powerhouse in the process.
