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Clean energy developers look to diversify in bid to boost profits
India’s clean energy firms such as ReNew Power Ventures Pvt. Ltd and Greenko Group are looking at diversifying across the electricity value chain in segments such as transmission and distribution to derive better value.
This comes against the backdrop of record low green energy tariffs that will impact project developers’ margins.
Wind power tariffs plummeted to Rs2.43 per kilowatt-hour (kWh) at an auction conducted by state-run Gujarat Urja Vikas Nigam Ltd last month, beating the record low solar tariff of Rs2.44 per unit registered in May.
While solar power tariffs rose to Rs2.65 per kWh at an auction conducted by the Gujarat government in September, last month’s auctions conducted by state-run Solar Energy Corp. of India threw up winning bids of Rs2.47 and Rs2.48 per unit.
The development also assumes importance given the size and role of these firms on India’s clean energy landscape. While Goldman Sachs-backed ReNew Power has around 3.5 gigawatts (GW) of operational and under-construction capacity from its own wind and solar projects, Greenko currently has over 3.2GW of operating capacity, with plans to reach 5GW by 2019. ReNew Power has set a target of over 11GW of wind and solar power capacity over the next five years.
“Developers are exploring how to go the customers directly to derive better value. That’s the reason why both ReNew Power and Greenko are exploring entering consumer facing businesses,” said a person aware of the development, speaking on condition of anonymity.
Mint reported on 4 October that Singapore’s sovereign wealth fund GIC Holdings Pte and Abu Dhabi Investment Authority backed Greenko’s $750 million equity investment plans for buying power transmission and distribution assets to diversify, given the uncertainties surrounding India’s renewable energy industry.
Hyderabad-based Greenko’s founder, president and joint managing director Mahesh Kolli confirmed his firm’s interest in acquiring electricity transmission and distribution assets but declined to name them.
“ReNew Power is one of India’s leading green energy IPPs (independent power producers). As a policy, we do not comment on any speculation,” a company spokesperson said in an emailed response.
Indian utilities are also hopeful that the government’s focus on improving electricity access with the Rs16,320 crore Saubhagya scheme to provide electricity connections to over 40 million families in rural and urban areas by December this year will help improve electricity demand in the country and drive up consumption.
“Large renewable firms such as ReNew Power and Greenko are looking at electricity transmission and distribution space for the next phase of their growth. Going forward there will be a focus on electricity distribution and retail supply,” said another person aware of the company’s interest. This person also spoke on condition of anonymity.
The expansion plans of these firms come at a time when the largest global green energy expansion programme is unfolding in India. The National Democratic Alliance government has set an ambitious clean energy target of 175GW by 2022.
Such a large amount of green power being added to the country’s electricity grid will also require a robust national transmission grid for a smooth transition to a low-carbon economy.
While 100GW of the government’s targeted renewable energy capacity is to come from solar projects, 60GW is expected to be generated from wind power plants. The government has also proposed to award 100GW of solar and wind contracts by March 2020.
The government seems to be enthused by the work done so far.
“A capacity addition of 27.07GW of renewable energy has been reported during the last three and half years under grid connected renewable power, which include 12.87GW from solar power, 11.70GW from wind power, 0.59 from small hydro power and 0.79 from bio-power,” the government had said in a statement on 27 December.