Renewable Investments Set To Jump Threefold, Low Tariffs To Drive Demand: CEOs

Investments in renewables will surge threefold in five years as power tariffs fall, making green energy affordable, according to top executives of India's two private sector electricity generation companies.

"The next 5 years, there is going to be a huge capital expenditure in the renewable energy sector," Prashant Jain, joint managing director and chief executive officer at JSW Energy Ltd., told NDTV Profit in an interview. "Power companies will be making substantial investments in the sector."

India targets reaching 500 gigawatts of renewable energy capacity by 2030 to meet power consumption that is growing at one of the fastest speeds in the world, cut reliance on imported oil and clean up dirty air. Large conglomerates, from Reliance Industries Ltd. to Adani Group, have pledged billions of dollars worth of investment as the nation targets net zero by 2070.

In the last eight months, India added a total capacity of 8.8 GW, according to Jain. Of that, only 1.8 GW is thermal and the rest is renewable, he said. Yet, the incremental capacity has provided only 2.5–3 GW of additional power generation against a demand growth of 16 GW in the current fiscal.

"The pace at which we need to make investments in the energy transition is not matching the pace at which power demand is growing," Jain said. "There will be investments that will take place in the thermal sector going forward."

Praveer Sinha, managing director and CEO at Tata Power Ltd., told NDTV Profit in another interview that in the last few years, the company has added solar plants and now the company is moving towards a hybrid of solar and wind plants and, in some cases, also going for storage. "In the next phase, we are setting up pump hydro plants that will generate 3 GW of energy."

According to Sinha, the cost of solar and wind energy has come down drastically in the last few years, and it will further fall with better technology. The tariff that we are looking at in 2027–28 is going to be lower than the current tariff, aiding its adoption, he said.

"If we implement some of the new energy solutions that have been coming in, we can be sure to have post-2027–28 power rates that will virtually remain flat for the next 25 years," Sinha said. "These solar and wind energies don't have any variable costs."

In thermal plants, variable costs largely stem from fluctuating prices of coal.

Jain said power tariffs are not high in the country. Tariffs in India are around Rs 4.30 per unit, compared with Rs 6 to 7 in other developing countries, according to Jain. "Hence, I am advocating that the power companies need to be disciplined to bid in a rational manner during a competitive bid."

According to Jain, there are no structural hindrances for the power sector; enough reforms are taking place and the payment cycle has improved. "Though there are few pockets where one can experience some regulatory hiccups and litigation,  those are manageable," he said. The lenders, he said, are looking at the power sector in a "very favourable way.".

"Today, if a distribution company is not paying you on time, you have access to the Prapti portal, where you post your dues—they will have to make the payments," Jain said. "Otherwise, there are enough measures by the Ministry of Power."

Thermal and renewable energies are going to co-exist, according to Jain. "But five years down the line, we will be very clearly speaking more about the electron-to-molecule business, as there will be a new hydrogen economy coming from carbon capture," he added.