The renewable energy landscape is undergoing rapid transformation due to the increased demand for round-the-clock and firm renewable power, along with the emergence of virtual power purchase agreements and a growing number of corporates and industries switching to green energy. The developer community is evolving with these changing trends by introducing a variety of innovative business offerings. While various regulatory interventions have enhanced the uptake in both the utility-scale and commercial and industrial (C&I) spaces, there are still many challenges. Leading renewable energy developers discuss the hits and misses in the sector…
Naresh Baluja and Dhananjay Kumar
Currently, we have about 1 GW of capacity under execution in India, and we are looking at close to 2 GW of operational capacity before the end of 2025. Globally, we have set ourselves some targets in terms of renewables: 4 GW per year up to 2025 and 6 GW per year up to 2030. India will play an important role in achieving the targets set. So, what we are essentially saying is that from 2025-26 onwards, every year we will add 600 MW in India and 2027 onwards, we will add at least 800 MW to 1 GW per year till 2030. We were not very competitive in the Indian market till two years ago, but now we have cracked the code of being competitive. We have won 950 MW in solar auctions in the past 14 months or so.
We have been working with 100 per cent utility-scale projects. Around four years ago, we were about to close a 100 MW commercial and industrial project in Rajasthan. That did not work out well for us because of some regulatory issues and challenges. Thus, right now, our focus is on utility-scale projects. Further, we are looking at getting into corporate power purchase agreements to sell power to corporates. We believe that corporates now prefer a complete decarbonisation solution instead of just physical delivery of green energy and will need a lot more products, services and support to decarbonise. So, we want to become their decarbonisation partner, provide complete solutions and be a reliable partner.
There are two other segments of interest apart from decarbonisation in the corporate sector, and these are storage and green hydrogen (or the ancillary products related to hydrogen). For storage, we are very actively looking at a few opportunities in India, for both utility and corporate purposes. Energy storage can significantly help us increase our corporate base, as today corporates are not looking at just solar or wind projects. Adding storage to our portfolio makes us far more valuable to them, as we are able to match their demand profile. We are exploring round-the-clock renewables. Pumped storage is still under discussion and the models are still evolving. There are auctions that do not allow you to lease out pumped storage. Meanwhile, battery costs today are too high. We need to be competitive, and so, we are looking at both these options, but more at batteries and less at pumped storage.
Regarding green hydrogen, it is still early days for us. Globally, we have around 70 odd pilot projects, and we are analysing all the associated challenges, be it storage, transportation, losses or flammability. These are purely green hydrogen and green molecule projects. There is another important segment that we believe will find its space in the market – carbon capture and storage. The only challenge there right now is the disposal part of it – what you do after you capture it and store the carbon – and we are trying to address this. Globally, we have been involved in multiple projects in this segment. We are actively evaluating this segment of the market. In the offshore wind space, there is interest, but the quantum of that interest depends on policy stability. We are sure there will eventually be stability, but it is being delayed too much.
One of the key difficulties for not only us but for the entire industry, in general, is the lack of consistent policies on land across different states, as land is a state subject. The second major difficulty is related to supply chains and the availability of material. For instance, in the case of the Approved List of Models and Manufacturers (ALMM), there is lack of clarity regarding the deadline for implementing it. For now, the deadline is March 31, 2024 and we have been hearing from the market that this may get extended. If it gets extended, how does a developer strategise and source his equipment for upcoming projects? Will developers have to rely on Indian manufacturers, or can they go ahead and source from China?
Meanwhile, the basic customs duty does not have a clear sunset day at present. In the case of wind power, the reverse auction mechanism is supposed to be done away with. Frequent changes in policy mean uncertainty for your contract. Contract enforcement itself is a major issue, and it is challenging for smaller companies to navigate these concerns, while bigger companies with deep pockets can survive.
On the plus side, while transmission is a risk area in many geographies globally, in India, it is quite robust with decent grid availability. Further, there is scale available in India and one may choose from various states and models. In addition, the implementation of the payment security mechanism has really helped. Our receivables have reduced significantly because of the late payment surcharge mechanism. It has helped us as an international developer, and this is one of the reasons that we are more keen on expanding our footprint in India.
Abhishek Goyal
Currently, we have about 1.5 GW of operating assets as we close the year. Amplus is a pure play corporate service company involved in selling power to private customers in the C&I segment, with a large portion being corporates. Out of this 1.5 GW, about 500 MW are onsite projects, including both rooftop and ground-mounted projects, situated within customer premises. The remaining 1 GW is entirely open access, encompassing both captive and non-captive ventures.
The entire portfolio is exclusively solar, but a significant amount of capacity under construction is based on wind. The reason for this shift is that most discoms have withdrawn the banking options that were available earlier. Going forward, wind projects will constitute 30-40 per cent of our power mix.
Some of the positive developments in the C&I space include the introduction of various policies and regulations supporting corporate power purchase agreements (PPAs). As developers, we have to be proactive in addressing the challenges, which only affect the incremental capacity and not the operational capacity that is already fully tied up. We are thankful to the government for creating an open framework.
The savings for consumers through corporate PPAs as compared to discom power vary from state to another since each state has freedom to tariffs for supplying power to customers. Maharashtra is at the top in terms of savings, which are around 50 per cent less than the cost of grid electricity. For other states where open access is possible, savings of around 26 per cent can be offered, significantly impacting the entire bill. However, savings from a PPA setup or a captive on-site rooftop solar plant depend on the industry as the cost of capital plays a key role. For some, it might make sense to own the plant, but for those seeking tariff savings, PPAs are a better option. Virtual power purchase agreements (VPPAs) require more clarity on regulatory and financial aspects.
Amplus carefully selects its clients. We conduct internal checks and examine past track records to assess financial creditworthiness. We have face-to-face discussions with the management which takes the final call. We conduct our own analysis, not solely relying on credit ratings. Going forward, we need more clarity on the deadline for ALMM and consistency in banking at the state level.
Nishit Mehta
Serentica Renewables is a C&I renewables generation platform focused on decarbonising hard-to-abate industries, primarily in India. The company’s portfolio predominantly consists of metal industries involved in smelting aluminium, zinc, etc. All of these projects are structured as hybrid power purchase agreements (PPAs), combining both solar and wind energy. None of the projects is purely based on solar or wind. We believe that the next step in decarbonising industries requires moving beyond traditional solar and wind solutions. We aim to provide higher carbon offset solutions to our customers, ranging from annual assurances to time-lock assurances.
Serentica has had the opportunity to work with various industries facing unique challenges, and one notable case study involves Hindustan Zinc Limited. Hindustan Zinc, one of the world’s largest zinc smelters, operates a 250 MW plant load in Rajasthan and is characterised by a predominantly flat load. Before venturing into renewables, the company primarily met its energy requirements through a thermal captive power plant (CPP). With an internal voluntary target of achieving net-zero emissions by 2050, Hindustan Zinc aims to integrate renewables as much as possible while remaining commercially viable. Initially, we began discussions around a 55 per cent annual assurance product, with equal MWs of wind and solar. Now that we have contracted 1,500 MW of pumped hydro storage of a six-hour duration, we are evaluating the potential to further increase the renewable component to provide an 85 per cent time-block assurance PPA but we have realised that opting for a 70 per cent annual assurance product makes commercial sense. This decision was influenced by the client’s existing captive power plant (CPP) using imported coal, where the cost of renewables proved to be more economical than the current CPP. In practical terms, this means that in every 15-minute interval, we will be able to guarantee that 85 per cent of the contracted capacity will be available from renewables, either directly or cycled through pump storage.
It is noteworthy that we operate at the central transmission utility (CTU) level, connecting both our generation capacity and the customer to the CTU. This unique set-up enables us to position solar in the optimal solar region and wind in the prime wind region, unconstrained by the state where the customer is located. This flexibility results in a higher capacity utilisation factor, subsequently reducing the tariff for the customer. Transitioning to the CTU can be complex, but with the expertise of our sister company, Sterlite Power, we assist customers in smoothly transitioning from their state transmission utility connection to a CTU connection, ultimately providing a tariff that is more competitive than if constrained by the state’s wind and resource potential.
Navigating the challenges posed by varying regulations from state to state, our focus is on the ISTS. A unified regulatory regime across all projects allows for more effective management. While our team leverages extensive experience in navigating diverse state regulations, opting for the ISTS system provides us with a level of comfort and regulatory consistency. However, it is important to note that one drawback of the central network is the absence of banking, meaning our customers forego banking benefits in exchange for lower tariffs.
The most significant requirement is a well-defined open access policy. However, the challenge lies in the implementation and enforcement of this policy as different states interpret it in various ways. The key breakthrough, in my opinion, would involve ensuring that the policy is not merely conceptual but is effectively enforced, thereby facilitating easier open access for C&I customers and fostering increased support for renewables. Moreover, achieving more regulatory visibility is crucial.
Shriprakash Rai
Established in 2016, with a focus on providing renewable energy solutions to the C&I segment, AmpIn Energy has a presence across 17 states in the country. In 2020, the company also forayed into the utility-scale segment. Overall, we have 800 MW of operational portfolio and around 1.5 GW of under construction projects. By March 2024, we will have more than 1 GW of operational capacity in India. Of this, around 70 per cent will be in the C&I segment and around 30 per cent in the utility-scale segment, since the latter usually takes more time for construction and development. To ensure control over the supply chain, AmpIn has also ventured into manufacturing. Recently, the company announced its plan to set up 1.3 GW of cell and module manufacturing capacity in Odisha.
The key developments in this space can be categorised into two parts: consumer and regulatory aspects. On the consumer front, there have been a lot of positive developments since a majority of states in India have a reference project that shows customers how open access operates. Consumers have been a part of open access projects in various states. Moreover, the quantum of procurement by consumers has increased significantly. Over time, with the realisation of benefits, consumers are now more confident about achieving 100 per cent replacement. Over the past one year, corporates have expressed interest in transitioning to 100 per cent renewable energy, driven by the dual benefits of cost savings and sustainability achieved by open access or rooftop or other renewable energy projects that they have adopted. On the regulatory front, some states have come up with clear-cut open access policies. The projects are ready to be commissioned.
While there are issues on the ground, the customers are now on the side of developers and they understand that it is not easy to fight with the regulators for project implementation, which has reduced the overall pain. With respect to feasibility, from the developer’s perspective, rooftop and intra-state open access are the best models. Over the past one year, there has been a growing demand for round-the-clock power from C&I consumers, met by many developers with 80-85 per cent replacement of conventional power. The commonly adopted model is wind-solar hybrid with overloading of wind capacity to ensure a higher capacity utilisation factor.
I firmly believe that VPPAs, rooftop solar and intra-state plus VPPA can help consumers achieve 100 per cent renewable energy transition. Several C&I consumers have fragmented facilities across India due to their lower contract demand or rented premises. They find it difficult to benefit from rooftop solar or open access. In this context, VPPAs can be helpful as they require no physical delivery of power. However, the main intent of companies in India is to achieve the physical replacement of power. Thus, Indian corporates will take time to adopt VPPAs. In terms of policy asks from the government, we request the implementation of green open access regulations across the country as it will bring consistency, clarity and also a long-term focus for lenders, customers and developers.
Navneet Vashishtha
Cleantech has a portfolio of around 1 GW, of which 20-30 per cent is rooftop solar, while the remaining 70 per cent is open access. In 2015, Cleantech started with offering solar rooftop solutions in India. The company eventually diversified to the open access space. Currently, the company has solar as well as wind assets, and is gradually moving towards hybrid solutions.
One of the positive developments seen in the past one year or two years is the increasing awareness of consumers regarding the intricacies of renewable power procurement. Further, consumers today are more pro-green and have their internal mandates to achieve organisational net-zero goals. This creates demand for value-added products from developers, encouraging them to come up with different and innovative solutions. The developers can charge premiums for these value-added products. Although this approach involves various risks, it opens substantial potential within the C&I space. Since we have not tapped more than 5-6 per cent of the total C&I demand yet, it would be a huge requirement in the coming years. In addition, the lenders have become more flexible and have accepted the PPA requirements. This makes PPAs more easily bankable.
The open access rules are still not mature but we are moving in the right direction. Many states have aligned with the green open access rules. However, they still come up with their own formats or drafts, creating a lot of confusion regarding central and state rules. The states come up with the policies first, followed by regulations and tariff orders. Therefore, the policy and the regulations should be synchronised.
The preferred business models chosen by consumers vary based on various factors. When India was not surplus, the captive structure was developed. By keeping 26 per cent equity, consumers could avail of cross-subsidy surcharge and additional surcharge waivers. However, discoms have been apprehensive about captive models from the beginning. Nevertheless, if VPPAs see the light of day, they would be the best model for both developers and consumers as they will not be affected by any operational challenges or regulatory uncertainties since physical power is not required and settlements are not necessary.
While selecting our clients, the key consideration is credit rating. Cleantech solar conducts due diligence on the partner and the industry’s future growth prospects as well as the longevity of the business as we enter into a long-term agreement.
A key policy recommendation is that if a policy exists, the associated regulations should come on time. Setting a target for this purpose ensures that the policies and regulations are synchronised, enabling developers to plan their projects accordingly. Another ask would be a nodal agency for providing intra-state transmission system solutions.
