The gold rush for sustainable energy in India may spark many a tussle but gushing green will be a win for all.
Published Date – 12:47 AM, Sun – 8 January 23
By Amit Mishra
Hyderabad: As India augments the size of its economy, the country’s renewable energy market presents a compelling opportunity for investors. India came in third on the Renewable Energy Country Attractive Index in 2021 (REN21’s Renewables 2022 Global Status Report). Between FY16 and FY22, the industry saw remarkable growth with a compound annual growth rate of 16%.
With the world shifting towards a more sustainable and environmentally friendly future, India is anticipated to enjoy the fastest growth in renewable energy and quadruple its capacity by 2026. Just like the California gold rush of the 1850s, the renewable energy space in India is already seeing a rush of entrepreneurs, investors, and industrialists eager to capitalise on the sector’s growth and potential.
And when the competition to dominate the green energy market is intense, can the country’s most prominent names be far behind? It almost seems as though Mukesh Ambani and Gautam Adani foresaw the viability of renewable energy years before anybody else did, and are now in the squared circle, head-on with each other to triumph over the opportunity. Otherwise, who would have imagined that the purportedly commercially advantageous field of renewable energy would eventually turn in a profit?
Reliance Industries, Adani Group, Tata Group and JSW are planning to make a combined investment of around $55 billion over the next 5-10 years. These companies are reportedly at various stages of negotiations to secure investments for their greenfield solar and wind projects, acquisitions and manufacturing facilities, and are also seeking strategic investments to meet their funding needs.
But why a sudden surge in investment in green energy by the bigwigs? And why is it that all the corporate honchos are vying for their space in the neonate sector? Does it promise a return beyond the ken for a run-of-the-mill person to understand? Let’s find out.
Rising Investments
By 2040, the nation’s energy consumption is predicted to expand to 16,000 Terawatt-hours, and renewable energy will play a significant role in determining how this need is met. Also, the sector will likely see annual investment opportunities totalling more than $30 billion over the next ten years and beyond. This would represent a significant and untapped investment potential that is three times higher than current levels.
India’s share of global primary energy demand is expected to approximately double to around 11% by 2040. The country will need to expand its energy production by 2030, with almost half of this increased output coming from renewable sources to satisfy this growth in demand and keep its promise to reduce its carbon footprint by 35% from 2005 levels. This entails installing 25 GW of renewable capacity every year until 2030, which would cost around $250 billion from 2023 to 2030 in investments, according to Economic Survey (2018-19).
In the past eight years, India’s renewable energy sector has attracted over $70 billion in investment. Foreign direct investment (FDI) in this sector has steadily increased over the years, reaching $1.6 billion in 2021-2022, compared with $414.25 million in 2013-14. It is also worth noting that the FDI in the coal sector in India has been virtually non-existent since 2013-2014, indicating a strong preference for the renewable sector. A total of $64.4 billion was spent on projects and initiatives in this industry between 2014 and 2019, with $11.2 billion coming from one year (2019) alone.
Private Players
The country’s energy sector has traditionally relied on fossil fuels. However, due to the increasing scarcity of these resources, especially since 2020, there has been a push toward renewable energy. Private companies, which previously relied on thermal energy, are now leading the charge in building a green energy portfolio for the country.
Private investment in India’s renewable energy market increased significantly in 2021 and reached $18.8 billion. Since 2020, investment, both local and international, in the sector increased 40%. A large portion of this investment has been used to create solar PV systems. It is evident that the necessity of a switch to renewable energy sources is being more understood now than ever.
The very first to step into the arena was Suzlon in 1995. Slowly and steadily other organisations sprung up, including Azure Power, Orb Energy, Tata Power Renewable Energy and ReNew Power. The total market capitalisation of all the listed renewable companies is valued at over $40 billion and is expected to rise three times in the next five years.
The country has come to the point that every big corporate house in India is venturing into the green energy space as it promises huge returns since India is championing net zero by 2070.
Green with Envy?
Joining the link from where we started, the two of India’s most successful business magnates, Mukesh Ambani and Gautam Adani, are all set to engage in a grand showdown in the nation’s burgeoning renewable energy industry. This marks the first time that their paths will intersect in this field. It is certain to be a battle for the ages, as these titans of industry vie for dominance in the sustainable energy sector. Both RIL and Adani Group have made ambitious commitments to clean energy, with Reliance planning to invest around $10 billion in the sector over the next three years and the Adani group lining up around $70 billion over the next 15-20 years.
Reliance Industries and Adani Group are both working to establish a value chain for green hydrogen. Reliance announced last year that it would build four giga-factories at the Dhirubhai Ambani Green Energy Giga Complex to produce solar panels, energy storage systems, electrolyzers and fuel cells. Last month, it added plans to build a fifth giga-factory at the same location. Reliance has made several acquisitions as well as picked up stakes in the renewables sector. The companies include Sensehawk, a solar energy software maker, Sterling and Wilson Solar, Faradion Ltd and REC Solar.
The Adani Group too has done a swift catch-up. It unveiled plans to add 45 GW of renewable energy production to its Adani Green Energy unit and aims to produce 3 million tonnes of hydrogen per year by 2030, up from its previous target of 2.5 million tonnes. Adani’s new energy unit, Adani New Energy, also plans to generate 20 GW of renewable energy at its facility in Gujarat’s Khavda.
India’s progress in achieving its green energy goals depends on the success of these two billionaires, as they shift their businesses toward renewable energy, turning themselves into green energy barons.
But, it is not important to determine a winner in this race, as it is not a zero-sum game. It is ultimately India that stands to benefit from reaching its goal of net zero emissions by 2070 through the renewable energy wars. The gold rush for sustainable energy in India would continue to spark tussles between billionaires vying to capture a slice of this lucrative market. Will this ‘green’field be a fair game or will it turn into a two-team match just as the telecom space is playing out now? These are early days yet!
Going gets Green
• Reliance Industries to invest around $10 billion by 2024 to establish end-to-end solar power generation facilities
• Tata Group lines up around $10 billion over the next 5 years
• Adani Group commits over $15 billion over the next 10 years aiming to become the largest renewable energy producer in the world by 2030
• Aditya Birla Group and KP Group ink $30 million deal in August to set up wind farm in Gujarat
• Greenko Energies and Hindalco Industries sign pact the same month to construct 375–400 Mw solar and wind power capacity in addition to establishing a renewable energy project that will deliver 100 MW of continuous carbon-free power. The undertaking supports Hindalco’s objective to achieve net carbon neutrality by 2050
• JSW Energy to invest around $10 billion; JSW Steel $1.3 billion
• Ontario Teachers’ Pension Plan Board picks up 30% stake in Mahindra’s Susten Private Limited for Rs 2,371 crore, enabling Susten to establish a robust renewable energy business that focuses on solar, hybrid, and integrated energy storage systems, as well as 24/7 green energy plants
• In October, L&T announces plans to enter the green hydrogen market by building a plant at its Hazira complex, which is expected to be completed in the current financial year. L&T to invest up to Rs 5,000 crore in green initiatives over a 10-year period
• NTPC, BPCL and Indian Oil Corp too plan to set up green hydrogen units
Power Play
• India has a total installed electricity capacity of over 4 lakh Mw, with 40% coming from non-fossil fuel sources
• Targets net zero emissions by 2070
• 2030 targets include expanding renewable capacity to 500 GW, obtaining at least 50% of electricity from renewable sources, lowering cumulative emissions by one billion tonnes and lowering GDP’s emissions intensity by 45%
• India will need 3.5 trillion units of electricity by 2036-37 to maintain a 7.3% growth rate, as against 1.37 trillion units in 2021–2024
• By 2040, the nation’s energy consumption is predicted to expand to 16,000 Terawatt hours
Highlight
On Wednesday, the Union Cabinet approved an initial outlay of Rs 19,744 crore for the National Hydrogen Mission. The plan aims to provide direct incentives for green hydrogen manufacturing to the tune of approximately Rs 13,000 crore.
On Friday, the RBI announced the auction of maiden Sovereign Green Bonds. These will be issued in two tranches of Rs 8,000 crore each, and proceeds will be utilised for funding public sector projects seeking to reduce carbon emissions.
(The author is Academic Associate, Indian School of Business).
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