Interview with Gaurav Sood: “We look forward to venturing into new businesses”

“We look forward to venturing into new businesses”

Gaurav Sood,
Chief Executive Officer, Sprng Energy

In the backdrop of India’s ambitious clean energy goals, the renewable energy sector is increasingly channelising capital and policy focus towards wind-solar hybrids and energy storage. For Sprng Energy, this is an exciting opportunity, given its experience in the onshore wind and solar power markets since its establishment in 2017. With the recent acquisition of the company by Shell, Sprng Energy may diversify into emerging segments such as green hydrogen and renewable energy trading. In an interview with Renewable Watch, Gaurav Sood, chief executive officer, Sprng Energy, spoke about the company’s recent developments, emerging trends, key challenges, as well as the outlook for renewables. Excerpts…

What have been the key highs and lows for India’s renewable energy sector over the past one year?

One of the highs for the sector has been the encouraging response from large industry players towards the energy transition aimed at de­carbonising their operations. More and more players have been setting net zero goals. Con­sequently, clean power demand from a new set of C&I customers has witnessed a significant increase. We have seen many corporate PPAs being executed and there is higher visibility on the tender pipeline. Doing away with the e-re­verse wind auctions would be a big positive for the wind sector. This should be replicated for solar auctions as well.

The Ministry of Power has also announced the Gr­een Energy Open Access Rules, which will accelerate progress towards India’s ambitious renewable targets and ensure access to affordable, reliable, sustainable and green power for all. The recent commencement of operations of the third power exchange has also been a good de­velopment. We believe that the deepening green term-ahead market (GTAM) will prove to be a boon for the renewable energy industry. The GTAM will open new avenues for the sector in the form of merchant power as well as through ex­cess generation from renewable power plants even under contracted capacity being sold.

We also welcome the issuance of LPS rules as well as the opening of the PRAPTI portal and firm action by the authorities in case the receivables cross the mandated time limit.

On the downside, the supply chains have been disrupted because of geopolitical volatility, im­pacting the availability of raw materials. The imposition of tariff barriers has further resulted in supply tightness of raw materials. Power supply agreements (PSAs) are not being signed by discoms even at tariffs that are far lower than the prices at which they have been procuring from the exchanges, as was witnessed during the last summer.

One of the low points of the year is that there is a significant difference between the auctioned capacity and the actual commissioned capacity till date and one of the contributing factors is the unavailability of evacuation infrastructure. Fur­ther, land acquisition and right-of-way challe­nges continue to hamper project timelines. Also, he­avy penalties have been announced under the new DSM regulations. Though they are welcome from the perspective of grid balance with higher rene­wable energy injection, they can potentially be a bigger challenge in terms of returns for re­ne­wable energy developers and resulting tariffs.

What is your opinion on Sprng Energy’s acquisition by Shell?

The acquisition of Sprng helps open doors for a potentially broader renewable energy play for Shell in India, wherein we can integrate applications and businesses such as e-mobility, hydrogen, renewable energy tra­ding and rene­wable energy sale to C&I customers.

We believe that Sprng’s capabilities, combined with Shell India’s thriving customer-facing gas and downstream businesses create even more opportunities for growth and for providing end-to-end solutions to customers. This acquisition positions Shell as one of the first movers to build a truly integrated energy transiti­on business in India.

What are the key priority areas for Sprng Energy at present?

Under the new umbrella of Shell, we look forward to scaling up our development of hybrid and power storage projects, both for utility and C&I, in the near term. That way, we will be able to provide not only co­mpetitive but also reliable and firm power supply.

Which emerging renewable energy segments have the most potential to grow? Does Sprng Energy plan to invest in any of them in the near future?

Power trading, RTC tenders, open access and green hydrogen coupled with offshore wind are a few of the upcoming ave­nues in the renewable energy segment. With the grid having a significant amount of intermittent renewable energy in the mix, we would be looking more into hybrid and RTC tenders combined with appropriate storage solutions. Going forward, Sp­rng looks to supplying competitive power in the newer areas and to venture into newer businesses, which will have synergy with its current and future businesses. With regard to green hydrogen, Shell is closely observing the policy shape up as the development of this sector would require a lot of enablement from the government on the demand, supply and technology sides.

What are your key concerns in the wind en­ergy space?

State-wise tenders are a big boon for the industry. However, they need to be synchronised with the availability of evacuation infrastructure and the phased announcement of new substations by state utilities. The high wind potential areas are already occupied by old wind turbine models that need repowering. Introducing a firm and comprehensive repowering policy will ensure better resource utilisation.

As for offshore wind, the Government of India has shown significant interest towar­ds developing this sector in the country. Recently, the MNRE came out with a strategy paper and subsequently with a requ­est for selection document for stakeholders consultation. Shell is closely assessing opportunities in the face of policy de­velopments in the country. We believe that greater policy support and clarity is requir­ed for making offshore wind technically feasible and commercially attractive for developers and investors as well as for buyers and consumers.

What are the key policy asks from the government? Are India’s current domestic solar manufacturing plans sufficient to achieve the ambitious 2030 targets?

A uniform tariff, proposed by the power ministry, is something we are looking forward to and believe that it will be a big positive for the sector. Under the current circumstances, PSAs are not being sig­ned or have been signed with significant de­lays. Also, adequate evacuation in­fra­s­tructure is not yet developed to acco­m­mo­date the capacities being tendered. Ev­acuation infrastructure needs to be developed across all the states in a holistic manner. Also, there needs to be a tra­nsparent process for the allocation of co­nnectivity at any substation and the list needs to be updated periodically by factoring in connectivity granted after every state tender. In addition, we recommend legal and ownership separation of content and carriage entities. This will bring more competition into the market resulting in better infrastructure and improved effi­ci­enci­es. This will also support ease of do­ing business and has the potential to at­tract long-term patient capital in the power market.

Transfer of state government-announ­ced subsidies to end-consumers through direct benefit transfer schemes is recommended to address the financial health of discoms. Strengthening of provisions re­lated to tariff determination including re­for­ms towards cost-reflective tariff and cross-subsidy reduction, greater co­m­pli­an­ce via a functional and effective penalty mechanism with regard to renewable purchase obligations are a few more recommendations that would help accelerate the overall objective of a just transition in the electricity sector.

Most of the state regulators have come up with different provisions on the regulatory front, such as DSM, which affect the business proposition of the stakeholders and may lead to concentration in specific sta­tes. To avoid such conflicts, uniform and co­nsistent regulatory provisions should be introduced in all states.

The constant intervention of the state el­e­c­tricity regulatory commissions on various open ac­cess-related charges, issues and ame­n­­ded notifications affects investor sentiment due to uncertainty on the regulatory front. Therefore, a long-term trajectory on all C&I-related charges is recommended. A comprehensive policy for granting flexible, time-bound and non-discriminatory open access to different consumer segments across states is recommended.

Furthermore, land acquisition policies need to be streamlined. This includes the creation of land banks for renewable energy projects. All states should implement deemed non-agricultural clearance for renewable energy projects, like the state of Rajasthan. The development of solar and wind parks should be promoted to make the pipeline of risk-optimised projects available to developers. Integrated pl­­ayers, those who can produce cells as well as wafers on the manufacturing side, are the need of the hour.

Basic customs duty (BCD) on cells, though welcome, should be waived for at least two years so that it does not un­favourably impact the near-term pace of annual solar installations in support of 2030 targets, and manufacturing capacities that are slated to come online. The current Appro­ved List of Models and Ma­nu­facturers (ALMM) regime needs significant impro­ve­ment. It acts as a high disincentive to foreign players, given that many players are yet to be empanelled in the ALMM list.

How have the current geopolitics and global inflationary tendencies impacted Sprng’s projects and overall strategy?

BCD on solar came into the picture in recent months but its imposition needs to be aligned with the scaling up of do­mestic capacities. BCD should be waived for at least two years on cells till an adequate domestic ecosystem develops. The imposition has resulted in many projects being stranded. Further, protective duties that were introduced, such as duty on st­eel im­­ports, and the increase in fuel prices have affected project costs. Further, due to supply chain impacts alluded to earlier, bottlenecks and shortages have been cr­eated, resulting in a higher procurement cost of raw materials such as CRGO. Chip shortage has resulted in O&M costs shoo­ting up. Debt cost due to inflation markers has also increased and is impacting project returns.

What is your outlook for the sector?

India being a growing economy will see an increase in power requirement in the coming years and hence the sector is attracting significant investments. Backed by strong political will for renewable energy development, and with the prime minister announcing the “Panchamrit” goals at COP26, the sector is bound to evolve and grow exponentially. Many corporates have a strong focus on energy transition and are showcasing GW-scale ambitions. India’s clean energy transition is progr­essing rapidly and is expected to further pick up pace in the coming years.