Founded in 2012, Hero Future Energies’ (HFE) current portfolio comprises about 1.8 GW of operational and 1.1 GW of under-construction renewable energy capacity. Adapting to changing times, HFE has directed its attention towards hybrid, peak power and firm, despatchable power tenders. In addition, the company is exploring the increased use of power exchanges and upcoming business models such as virtual power purchase agreements (VPPAs). In an interview with Renewable Watch, Srivatsan Iyer, global chief executive officer, HFE, shares his views on the key challenges and opportunities in India’s renewable energy sector and proposes various policy solutions. He also talks about HFE’s experience with hybrid projects and the way forward. Edited excerpts…
What are the key developments that have shaped the Indian renewable energy sector in the past one year?
The Indian renewable energy sector has witnessed a period of growth over the past year thanks to several regulatory developments and industry trends. One of the most significant trends is the introduction of the roadmap for tenders released by the Ministry of New and Renewable Energy, outlining a minimum capacity of 50 GW per year with a specific focus on round-the-clock (RTC) power, peak power and despatchable power, indicating a clear shift away from plain vanilla wind and solar projects. Recent tenders have also allocated a higher percentage for trading on the exchange market, emulating more mature power markets around the globe. The roadmap issued by the Ministry of Power includes multiple market-based mechanisms as well as approval for market coupling between power exchanges. The recent introduction of uniform renewable energy tariffs is also expected to bring more stability to the market, encouraging independent power producers (IPPs) to grow more sustainably.
The announcement of the National Green Hydrogen Mission and the $2.1 billion programme for electrolyser manufacturing and green hydrogen production has also created significant interest among IPPs. These entities have adopted various strategies to capitalise on the growing domestic and global market for green hydrogen and its derivatives. In addition, several states, including Odisha, Maharashtra and Andhra Pradesh, have released complementary policies and incentives.
The commercial and industrial (C&I) segment continues to see growth in corporate PPAs and open access projects implemented through the ISTS network as corporate demand for firm, despatchable RTC green power increases. State regulations, issued in line with the central government’s open access rules, are facilitating this growth.
What are the key challenges and opportunities in the renewable energy industry? How is your company adapting to changes in the industry?
The key issue faced by the Indian renewable energy market in achieving its targets of net-zero emissions by 2070 and 280 GW of installed solar power generation capacity by 2030 remains the regulatory barriers posed by basic customs duties (BCDs) and the Approved List of Models and Manufacturers (ALMM). Amid a global glut of solar modules and record low prices across the value chain driven by China, the uncertainty around the implementation of the ALMM is raising concerns for developers. While a large portion of existing project ba-cklogs is being addressed during the year-long extension set to expire by March 2024, there are still a substantial number of projects with pending financial closure owing to the uncertainty around module supply post the re-introduction of the ALMM. The bidding on upcoming projects is also fraught with risks as developers struggle to secure a reliable supply of quality modules. Indian original equipment manufacturers (OEMs) still struggle to commission new capacities, and most OEMs listed on the ALMM are relatively new to the utility-scale space. HFE is making an attempt to de-risk this part of the supply chain by forging deeper strategic partnerships with more experienced OEMs.
As more new-age tenders are released in the Indian market, there will be a greater demand for wind sites across the country with high capacity utilisation and relatively easy access to evacuation. Currently, these locations command a premium due to limited evacuation capacities and long gestation periods for the installation of additional substations in these areas. This, coupled with issues related to land acquisition for wind turbines, could potentially be a bottleneck in the execution of peak power, RTC and load-following tenders that require high capacity utilisation from wind-solar hybrid plants. HFE is actively scouting for locations in key wind-rich states and mapping these against its expected project bids to optimise the levellised cost of energy.
How has your experience with hybrid projects been? Is HFE exploring innovative business models such as VPPAs to expand the reach and increase the impact of projects?
HFE has had good success with hybrid projects. Besides setting up the country’s first wind-solar hybrid project in Manvi for C&I customers, we have secured capacities in the SECI-VI peak power tender as well as the SJVN tender for firm, despatchable power. Both these new projects involve the element of storage as well, allowing certain capacities to be traded on the power exchange. We will continue to explore business models in this area as storage costs decline and power trading becomes more accessible, including options such as VPPAs.
What are your views on the shift in the tariff regime from competitive bidding to closed bidding for the wind power sector? Will this transition provide a fillip to the sector? What additional measures are needed to increase the uptake of wind power projects?
The switch to closed bidding for wind power projects is a change for the better. It will enable the industry to grow in a more sustained fashion, instead of the “race-to-the-bottom” approach taken in earlier projects to add more capacities. HFE is focused on hybrid and new-age tenders and we believe that this transition will benefit the industry by maintaining rational prices and providing reasonable returns on investments. As mentioned earlier, the combination of sufficient evacuation capacities at appropriate locations and hassle-free procedures for land acquisition will be critical to increase the footprint of installed wind projects in the country.
What are the key reforms required from policymakers and regulators to transform the renewable energy sector going forward?
ALMM/BCD implementation: One of the key interventions that could create a significant impact on the Indian renewable energy sector is a rethink of the protectionist mechanisms of BCD/ALMM. There has been ample feedback from the sector as well as concrete evidence that this combination of regulations has significantly held back the industry’s progress. While it is important to promote domestic manufacturing and reduce reliance on imported goods, it should be acknowledged that the current measures are too stifling for the industry. As a result of these measures, the cost reductions witnessed across the global value chain over the past year, as well as advances in new technologies, have not translated into domestic projects. Given the fact that several domestic OEMs have been struggling to set up manufacturing capacities that meet the quality and volume demands of utility-scale developers, the ministries should reconsider the implementation of these regulations.
T&D infrastructure expansion: Despite recent activity to expand transmission infrastructure and grid connectivity, the current pace of growth in renewable energy demands more capacities in this area. Measures such as setting up of dedicated green energy corridors, establishment of renewable energy management centres, introduction of competitive bidding for transmission infrastructure and private sector involvement should be accelerated to ensure that on-ground deployment matches forecasted demand levels.
How do you plan to expand your renewable energy project portfolio in the future? What are your long-term goals for contributing to the clean energy transition?
HFE currently has about 1.8 GW of operational renewable energy capacity, with a business development presence across six countries. Another approximately 1.1 GW of capacity is currently under construction. Our target is to grow five times over the next five years. This growth will be driven by our end-to-end energy solution offerings in the C&I space in India and other countries. HFE aims to become an integrated energy solutions partner for C&I customers, while also growing its presence in utility-scale assets, including advanced utility-scale RTC and firm power solutions with integrated battery-enabled storage solutions. We are also planning to position ourselves as the “go-to partner” for green hydrogen energy and mobility solutions. Our overseas footprint is continuously expanding. We have recently signed an MoU with the Electricity Generation Company of Bangladesh for a 125 MW ground-mounted solar plant. In addition, we have commissioned our first rooftop solar plant in Vietnam and we are ready to start construction on the second. Our ground-mounted solar plants in Ukraine are fully operational and we are close to securing our first battery storage project in the UK.
