Renewable energy IPPs are at the forefront of India’s energy transition. One such IPP is Avaada Energy, the renewable energy arm of the Avaada Group which has diversified its business from solar and wind project development to include energy storage solutions, green fuels and solar PV manufacturing. In an interview with Renewable Watch, Kishor Nair, chief executive officer, Avaada Energy, shared his views on the recent developments in the Indian renewable energy sector, the key challenges, the policy reforms needed, as well as Avaada’s expansion plans. Edited excerpts…
What have been the key developments in the past one year that have shaped the Indian renewable energy sector?
Over the past 12 months, there have been several key developments, mostly government initiatives, that have helped shape the Indian renewable energy space. These include, one, the introduction of the Late Payment Surcharge policy to ensure timely payments by discoms, addressing the longstanding issue of delayed payments that have hindered sectoral growth.
Two, for the evacuation of 500 GW of renewable energy, immense planning has been undertaken for the creation of evacuation infrastructure to support the development of new projects in various states. This has been spearheaded by the Central Electricity Authority (CEA), along with the Central Transmission Utility and other state utilities, to identify renewable-rich clusters/zones and create necessary evacuation infrastructure, which is a significant move towards enhancing grid infrastructure and reliability.
Three, setting up a monthly bidding calendar helps ensure regular bids, allowing investors and developers to plan their investments and projects over multiple years, bringing predictability to the market. With this, stakeholders such as the Ministry of New and Renewable Energy, the Ministry of Power, the CEA and other renewable energy implementing agencies are working in coordination to achieve the 500 GW non-fossil fuel capacity target. There are regular stakeholder consultations and meetings with IPPs, manufacturers, transmission service providers and state governments to identify and remove constraints, if any, to achieve the target, collectively.
Four, initiatives such as the production-linked incentive (PLI) scheme and the Approved List of Models and Manufacturers (ALMM), as well as the imposition of basic customs duty (BCD) have played a significant role in developing a local manufacturing ecosystem for the renewable energy sector. These policies aim to reduce dependency on imports and foster a domestic manufacturing base. Initially, there was uncertainty around policy actions. However, the government engaged continuously with industry stakeholders to stabilise the policy framework. The imposition of BCD, while increasing the cost of imported solar cells and modules, aimed to support domestic manufacturers. In addition, the extension of the ALMM list relaxation until March 2024 was a strategic move to balance domestic capacity growth with the overall needs of the generation sector. These developments have had a significant impact on renewable energy development. After the uncertainty surrounding the ALMM was resolved, there was a surge in bidding activities, especially from central authorities. This, along with accelerated bidding by central renewable energy implementing agencies created a robust pipeline of projects, including traditional standalone solar and wind projects, as well as innovative projects like wind-solar hybrids and storage initiatives.
Five, the removal of reverse auctions for wind projects reflects a policy shift designed to streamline the bidding process and potentially increase project viability.
Six, the launch of the green hydrogen policy showcased a strategic shift towards newer forms of clean technologies, highlighting the government’s commitment to promoting cutting-edge technologies in the energy sector. The government’s forward-looking approach, particularly with the National Hydrogen Mission and the focus on green ammonia and green hydrogen, illustrates a commitment to not only current renewable energy needs but also future sustainability goals. These policies are expected to shape the Indian renewable energy sector significantly, aligning it with global trends and positioning India as a key player in the global transition to sustainable energy.
What are the key challenges and opportunities you see in the renewable energy industry, and how is your company adapting to these changes?
The renewable energy industry has a trillion-dollar investment opportunity over the next decade, with immense potential for stakeholders such as engineering, procurement and construction vendors, transmission line players, electrical equipment manufacturers, solar panel, wind turbine and electrolyser manufacturing, and green ammonia players. The government’s clear vision, aligned with global commitments, has provided a transparent and robust roadmap for the sector, making it a unique investment landscape.
However, the sector faces significant challenges. Unhealthy competition and the reverse auction system in the solar segment created a highly competitive environment. Supply chain disruptions, especially in module supplies, along with price increases in commodities such as steel, copper and aluminium, coupled with the high cost of wind turbines due to geopolitical factors, are other pressing concerns. The cost of capital limits the ability to significantly reduce costs, affecting project returns. Additionally, large-scale land acquisition, right-of-way issues and identifying optimal locations for wind projects pose logistical challenges. Theft and law and order issues at various projects are another major concern. The government should take strong action against local musclemen who try to extort money from IPPs and contractors. Theft of cables, solar modules or other components not only leads to huge financial losses, but also leads to reduced generation and revenue.
Our company is adapting to these changes by leveraging our experience and expertise. We have seen the industry mature, with several companies now capable of managing GW-scale projects annually. This experience allows for better planning and execution. To address the cost of capital issue, we are exploring innovative financing methods and seeking partnerships that can offer more favourable terms. We are also adapting our supply chain strategies to mitigate disruptions. In addition, we are actively engaging with policymakers to address concerns around bidding processes and the allocation of projects at viable tariffs, ensuring they can be commissioned within reasonable time frames.
In terms of land acquisition challenges, we are investing in advanced technology and analytics to identify suitable project sites and streamline the acquisition process with minimum land required. Our focus is on minimising environmental impact while maximising project viability.
Meanwhile, the renewable energy sector presents numerous opportunities, and navigating its challenges requires strategic planning, skilled teams, technological innovation and collaborative efforts. Our company is committed to adapting and evolving in this dynamic environment to contribute significantly to the clean energy transition.
In your opinion, what are the key reforms required from policymakers and regulators to transform the renewable energy sector going forward?
In terms of policy reforms, we believe the government has already taken significant steps to promote renewable energy in India. The key is to effectively implement and institutionalise these policies across states. A more robust enforcement of renewable purchase obligations by each state is essential. We also need to accelerate the development of a green grid to ensure the evacuation of power from projects awarded by government agencies and streamline land acquisition challenges. While central transmission system planning is aligned to meet the overall target of 500 GW, evacuation system planning at the state level needs a big push. Ultimately, the power generated will be consumed at the state level. However, states are constrained by the lack of funds required for strengthening their grid infrastructure. Therefore, urgent planning and implementation of green energy corridors at the state level are necessary.
With significant solar and wind energy capacity being integrated into the power system, there are concerns surrounding grid stability. Policymakers and grid controllers are advocating the implementation of green energy storage projects such as pumped storage hydro projects and battery storage projects. These projects will consume the surplus green energy produced and discharged during peak non-renewable energy generating periods. Strategically, bids on hybrid, round-the-clock (RTC) renewables and firm and despatchable renewable energy are the right steps towards making renewable energy available on a 24×7 basis. Going forward, subsidies such as the PLI scheme to promote storage projects will play a crucial role in making renewable energy available on an RTC basis at affordable prices.
A major step has been taken by the government to liberalise open access rules and promote open access for industries, especially green energy. This will help numerous industries in meeting their sustainability and net zero targets.
Another crucial aspect is ensuring that global governments honour their commitments made at various COP meetings. It will help India secure global capital at affordable costs to meet its ambitious climate goals.
Several critical financial reforms are also needed. For instance, including the entire energy transition sector – beyond renewable energy – in the priority sector lending list is vital. This distinction will help separate renewable energy from the traditional power sector’s challenges, facilitating access to cheaper funds. Additionally, it is crucial to enable large institutional investors such as pension funds and insurance companies to finance renewable energy projects under the construction and implementation phases. Starting with lending to central utility projects and gradually expanding could significantly boost debt capital availability for the sector.
How do you plan to expand your renewable energy project portfolio in the future, and what are your long-term goals for contributing to the clean energy transition?
Avaada aims to have 11 GWp of operational projects by 2026. Our recent project wins are steps towards this goal. We envision becoming a fully integrated energy player, playing a pivotal role in India’s energy security and transition. Our objective includes catering to international clients by supplying green molecules for their energy needs, in line with our global clean energy ambitions. Domestically, we are committed to supporting commercial and industrial players and corporate entities by delivering green power, aiding their energy transition.
