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Bigwigs of India’s fossil-fuel industry could drive the country’s green energy sector

India has an ambitious plan to install 175 GW of renewable energy capacity by 2022.

July 26, 2021 / 07:22 PM IST
Image Courtesy: Ajay Tallam/Flickr

Image Courtesy: Ajay Tallam/Flickr


-- Recently, major names of India’s fossil-fuel industry announced their plans for green energy, signalling a transition between the sectors.

-- The major players of the conventional energy industry have admitted the importance of the renewable sector and focused on rapid energy transition.

-- Though there are concerns that the presence of all top coal and oil players in the green energy sector will lead to consolidation in the renewable sector, many existing renewable energy players and industry bodies argue that there is enough space for everyone to grow.

-- Some believe that the foray of big players may even help in quick solutions to the many issues hampering the growth of the renewable energy sector.

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The key players of India’s fossil-fuel industry – from the government and private sector – are turning over a ‘green’ leaf. Many of them have announced massive-scale participation in India’s plans to transition to clean energy. The announcements have generated a huge buzz, as the big players bring economies of scale to the sector, but they have also sparked fears of consolidation in the green energy market.

In June, Mukesh Ambani, the chairman of Reliance Industries Limited (RIL) while speaking at the company’s 44th annual general meeting, announced a new green energy business, stating that the age of fossil fuels cannot continue much longer. He advocated for a “rapid transition to a new era of green, clean and renewable energy”.

Ambani, whose energy business till now has revolved around oil and gas, announced a massive Rs. 750 billion (Rs. 75,000 crore) investment in the clean energy sector over the next three years to ride the energy transition wave. He also announced the setting up of 100 GW of solar power generating capacity by 2030.

In May 2021, India’s other major energy player, Adani Green Energy of the Adani Group, announced a buyout of SoftBank Group’s renewable energy power business, which has almost 5 GW of solar and wind power assets. Following this, in June 2021, Adani Group’s Chairman Gautam Adani announced that they have achieved the target to set up 25 GW of renewable energy capacity four years ahead of the schedule.

Earlier, in March 2021, the chairman of Coal India Limited (CIL), which is responsible for the majority of the country’s coal production, said it wants to aggressively participate in the solar power sector.

While replying to Mongabay-India’s queries regarding investments by major companies leading to consolidation in the renewable energy sector, Gautam Mohanka, who is the managing director of solar components manufacturer, Gautam Solar, said “the renewable energy sector is already consolidating in favour of the organised players.”

“The massive pumping of investments in the renewable energy segment is all set to propel the green energy industry through the roof. Governments and companies are chasing ambitious targets which will lead to increased consolidation of positions across the value chain. Several special-purpose acquisition companies (SPACs) are also entering the green energy space which will in turn boost investments in this space,” Mohanka predicted.

He highlighted the “upsurge in demand” of renewable energy and said, “This tips the balance in favour of large-scale industry leaders who possess the capacity for massive deployment of capital.”

His industry peers, however, think otherwise. Sanjeev Gupta, who is Chairman, Power, Renewable & Alternative Energy, PHDCCI, an industry association, said, “Entry of the major players may not necessarily lead to consolidation of the renewable power sector.”

“The renewable energy sector in India is about to see a major vertical integration by leading large groups as the target becomes cheaper, cleaner power being made more and more available. The renewable energy tariffs are on a downhill path. Cheap financing and sourcing of cheaper generating machineries (solar panels and wind turbines) shall be the key success factor. However, rooftop and existing small, medium and large renewable energy players shall continue to exist being benefited by higher tariffs contracted in the past,” Gupta told Mongabay-India.

Will there be space for smaller players?

While the renewable energy plans by the top energy players of the country spell an exciting time for the sector, there is a concern that this will lead to the shrinking of operating space for the smaller players who may not have the influence or who may not be flush with capital to invest.

Gautam Mohanka said a “plethora of greenfield and brownfield opportunities are available for exploration and are highly likely to trigger a wave of consolidation in the global value chain. Adani-Softbank’s $3.5 billion (over Rs. 220 billion or Rs. 22,000 crore) deal is a great example of this.”

“India needs more project developers with a strong balance sheet to facilitate growth. The local infrastructure investment market is seeing an increasing amount of trust and is, therefore, a key enabler in the process. This will enable smaller players to consolidate under one big corporate umbrella and eventually become organised, which is not adverse for business,” he said.

During the announcements made for the RIL’s energy transition ambitions, Ambani had also emphasised that their move will encourage a whole ecosystem of clean energy businesses across the country.

Meanwhile, the PHDCCI’s Sanjeev Gupta said: “The future beckons larger players with a capacity to provide cheaper tariffs on the back of larger projects. However, we believe that small, medium and existing large players shall all co-exist in various pockets of renewable energy.”

Subrahmanyam Pulipaka, who is the chief executive officer of the National Solar Energy Federation of India (NSEFI), which is India’s umbrella organisation of all solar energy stakeholders of India, had a similar sentiment.

He said that as far as the manufacturing side of India’s solar energy sector the scale tilts in favour of those who have higher manufacturing ability.

“Thus, there will also be players who will have a considerable chunk of manufacturing capability with them at least for wafers, ingots and cells if not modules. But at the same time, there is the rooftop solar market which is an open business for everyone. In rooftop solar, it is a level playing field for a firm which has 80 percent market share or a firm with eight percent market share,” Pulipaka told Mongabay-India.

Pulipaka emphasised that the “generic understanding is that this (consolidation) is a natural phenomenon and is not specific to the solar industry. So if there are big players there the smaller players will find their way into the business.”

“Moreover, we are looking at solar parks and not considering companies involved in rooftop solar, and solar pumps which are huge sub-sectors themselves. I believe that interconnected subsectors, irrespective of their size, have a significant role to play,” he said.

Can big players help resolve the issues hampering green energy growth?

India has an ambitious plan to install 175 GW of renewable energy capacity by 2022. In recent times there have also been mentions of targeting 450 GW of capacity by 2030. However, the reality is that till mid-2021, India is yet to touch 100 GW of installed renewable energy capacity and it increasingly looks difficult that it will be able to achieve the 175 GW target by 2022. At present, the total installed renewable energy capacity is 96.9 GW.

The rapid installation of the renewable energy capacity is being hampered due to several issues including states trying to renegotiate power purchase agreements, land conflicts, slowdown due to COVID-19, climate finance, dependence on imports etc.

Weighing in on the impact of big industry players setting their eyes on the renewable energy market, PHDCCI’s Sanjeev Gupta said: “The big players will have their voice being appropriately heard and issues also being addressed more quickly.”

“However, we believe that the government is equally focused on addressing the issue of small, medium and large players in the renewable energy sector,” he noted.

Pulipaka, who belongs to the NSEFI that represents most of the major solar players including both small and big, said “one of the fortunate things with the Indian government is that it is very receptive to feedback from the industry.”

Gautam Solar’s Mohanka, meanwhile, said: “massive deals by Adani Green and ReNew are surely tipping the balance of power in the sector into the hands of organised players.”

“However, despite ambitious government targets and a myriad of growth opportunities, the adoption of renewable energy has been slower in India. India has added around 10 GW of solar capacity in the last 3-4 years. Acquisition of land is one of the major hurdles in infrastructure development over and above the high receivables from DISCOMS (power distribution companies),” he said.

Mohanka said that more reforms are undoubtedly required in the structural bidding process, the utility sector, the auctioning process and land acquisition laws to speed up the adoption of green energy in India. “To facilitate the humongous growth planned by industry giants and the government, policy reforms will undoubtedly follow,” he hoped.

This story was first published on Mongabay, click here to access it…
Mongabay .
first published: Jul 26, 2021 07:20 pm

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