In mid-2014, Banmali Agrawala, president and CEO of GE South Asia, journeyed from the steel and chrome of his office building in Gurgaon to a village in Maharashtra's Satara district, some seven hours south of Mumbai. This wasn't an opportunity for the $146-billion GE to scout for some new business in the hinterland; instead, Agrawala, a former Tata Power executive, was visiting the wind farms of Greenko, a renewable energy developer.
Supply Issues
Since October 2011, when GE made a $50-million investment in Greenko, its wind energy capacity has increased from 65 MW to over 600 MW in 2014. Investors had flocked to the firm too, most recently in July this year when it raised $550 million in an overseas bond sale (the largest debt sale by a firm with low or sub-investment grade ratings). Greenko's order book is valued at over $1.4 billion.
Agrawala sees a spring in the step of renewable energy developers. "I think things have changed," he says. "Traditional energy sources have faced serious challenges for the past three or four years and this has pushed developers towards renewable energy." He contends that while the earlier phase was driven by tax breaks, this round will be more focused on building long-term businesses. "Now, we have a more serious set of players...their emphasis is not on that one-off tax break, but on building power projects that will run for a long time and operate efficiently and profitably," he adds.
Rush of Players
GE and Greenko are hardly the only two firms eyeing the renewable energy opportunity. Across the country, a raft of companies ranging from global conglomerates such as GE to Indian giants such as the Tatas, Aditya Birla Group, Adani Group, Reliance Industries Ltd (RIL) and Mahindra Group are all rushing to make investments and expand their renewable energy pipeline.
While some conglomerates are vocal about their ambitions, two of them are flying under the radar. Mukesh Ambani, India's richest person and promoter of RIL, has only made occasional statements of his interest in renewable energy. "We will transit from [a] hydrocarbon presence which is coal, oil and natural gas into a fully renewable, sustainable future over the next many decades and solar really will be at the heart of it," Ambani said in a TV interview last year. RIL's Reliance Solar has been quietly working on building both upstream clean energy products such as home lighting systems and solar lanterns as well as products used in building renewable energy plants.
Another ambitious billionaire, Gautam Adani, who plans to build over 20,000 MW capacity in power by 2020, is also considering expanding in this space. After unveiling his first solar project in 2012, as the economy has picked up and renewable energy norms improved, Adani is interested in renewable projects across the country, a spokesperson said without providing further details.
Joining these conglomerates is a clutch of start-up renewable energy firms such as Greenko, ReNew Power and Azure Power that have announced plans to expand. Investors too are jumping into the fray, with marquee names such as IFC (a World Bank company), KKR and speciality investors such as Berkeley Energy willing to provide financing. Add to this power gear makers frantically looking to keep pace — one wind energy equipment manufacturer was swamped with over a hundred enquiries in August — and this is an industry with a new sense of purpose. The rush for renewables is perhaps most evident with the deluge of orders power gear companies like ABB, Bhel and Alstom are racing to fulfil. ABB is seeing a strong rise in demand for power electronics for wind turbine manufacturers and plant engineering solutions and substations for wind farms that connect the facility to the main grid. In May this year, the state-owned Bharat Heavy Electricals Ltd (Bhel) opened a Rs 3,000-crore solar fab unit in Maharashtra and in September commenced work on a 20-MW solar power plant in Odisha. French giant Alstom is a top provider of equipment for hydroelectric projects and is now looking to expand its presence.
There is little doubt that India needs the power generated by renewable energy projects. The country has a peak power deficit of some 5% and the conventional power units expected to fill the breach are months, if not years, behind schedule. Renewable power project developers don't have to worry about issues such as fuel linkages and price escalations and their projects take a few months to get operational. Add to this falling power prices (wind power is today cheaper or comparable, per unit, to the power spluttered out by diesel gensets, for example). With the government making a firm push to promote renewable power — tax rebates, focused schemes, and possibly fixed tariffs instead of competitive bidding for solar power — the excitement in the sector is only expected to grow.
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