India well-prepared to achieve 500 GW renewable energy target by 2030: A Nithyanand, Sembcorp India

Sembcorp is a large global investor in the Indian renewable energy sector. What are your thoughts on the sector’s performance and potential in 2024?

India is projected to remain the fastest-growing major economy in the world, underpinned by rising domestic demand and robust manufacturing and services sectors. Consequently, power requirement has reached about 1,600 billion units in 2023. Driven by investor-friendly policy initiatives, India today ranks 4th globally in renewable energy installed capacity. During 2023, about 13 GW of renewable energy capacity was added, taking the share of non-fossil fuel sources to 42 per cent in the energy mix till January 2024. Solar and wind lead India’s energy transition journey - the country ranks 4th largest in wind power capacity and 5th largest in solar power capacity, globally. As a result, India's ranking in the Climate Change Performance Index has significantly improved from 31st position in 2014 to 7th position in 2023.

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India’s renewables growth story is expected to grow stronger this year. We are the second largest renewables growth market in Asia. Renewable energy capacity of 25GW is expected to be added in 2024. Of the 156 GW of new power capacity under construction, renewables comprise 103 GW of capacity. The total capacity addition by 2031-32 is expected to be 469 GW, as per the Ministry of New and Renewable Energy.

Going forth, a focused thrust on exploring green hydrogen and green ammonia through policies such as the Green Hydrogen Policy and the National Green Hydrogen Mission, will help position India as a manufacturing hub for this fuel. The focus on proliferating rooftop solarisation will help generate employment opportunities as well as support charging of electric vehicles. India is firmly on the path to emerge as a leader in renewables, batteries and green hydrogen. Green hydrogen will be a key component of the renewables shift, with its significant potential for energy storage, clean industry, and sustainable transport. Overall, India appears well-prepared to achieve its renewable energy target of 500 GW installed capacity and reach 50 per cent cumulative electric power installed capacity from clean energy sources by 2030.

Do you think the country has the right policy framework for supporting its ambitious renewables’ targets and decarbonisation goals?

Favourable policy interventions, like the Electricity Amendment Rules 2023, have brought about positive reforms and enhanced efficiency within the sector. Particularly, initiatives such as the waiver of Inter State Transmission System (ISTS) charges for inter-state sales of solar and wind power for projects, revised renewable generation obligation, structured annual auctions for 50 GW of renewables capacity, revising the wind tender mechanism from reverse-bidding model to closed-envelope model, declaration of a trajectory for RPOs up to the year 2029–30, laying of new transmission lines, and creation of new sub-station capacity under the Green Energy Corridor Scheme, have increased the attractiveness of this sector.

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Offshore Wind Energy Lease Rules 2023, notified to regulate allocation of offshore wind sea blocks to developers, will boost the development and operation of offshore wind projects. The viability gap funding for harnessing offshore wind energy potential for initial capacity of one gigawatt, is a welcome step.

Determination of Green Tariff 2 under Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022, will incentivise the use of renewable energy by streamlining pricing. The Green Hydrogen Standards for India have outlined the emission threshold that must be met for hydrogen produced to be classified as ‘Green’, from renewable sources. Further, it is encouraging that the distribution sector has stemmed losses in the power sector, which have declined to 15.41% (provisional) in FY22-23. As we embark on a large-scale energy transition, we require innovative technologies and business models to swiftly embrace low-cost intermittent renewable energy. Hybrid projects are emerging as viable in India's renewable energy landscape.

Energy storage will be crucial to support the pace of renewables addition by balancing the variability in renewable energy generation. Further, the intermittent nature of these fuel sources will have to be managed through renewable hybrids to produce round-the-clock clean energy. In this respect, investing in new and green fuels as a viable storage alternative may well have an important role in making clean energy more affordable.

For global investors looking at the Indian renewable energy space, what are the two key areas of opportunities, and two key challenges for growth, currently?

Wind and solar continue to be attractive investment opportunities due to competitive costs, which have decreased by 84% since 2010. The cost of wind power has fallen by 49% in the past decade. This has led to India emerging as one of the most attractive destinations for clean energy investment. Foreign direct investment worth US$6.1 billion was pumped into India’s renewable energy sector between April 2020 and September 2023. The surging private sector investment in large-scale renewables projects will boost manufacturing and drive innovation of critical renewable energy technologies, equipment, and raw materials supply chain.

India has emerged as a key player in the global wind energy supply chain, with its decisive strategy to boost manufacturing and export capabilities while fostering domestic renewable energy growth. Reports estimate the total pipeline for domestic energy transition investments, including supply chain innovation and manufacturing, at about US$240 billion 4 . Innovative low-cost financing instruments, ensuring availability of skilled workers, promoting export-oriented incentives, and a consistent policy and regulatory environment will go a long way in driving the competitiveness of India’s renewable energy supply chain.

Another significant opportunity lies in developing tailored green solutions for the commercial and industrial (C&I) sector, which accounts for almost 50 percent of India’s power consumption. The growing focus on sustainability and environmental stewardship is expected to bring a robust expansion of this market. This will also be driven by favourable policies and the increasing cost-effectiveness of renewables technologies. The Green Energy Open Access Rules 2022 have addressed important issues faced by the industry, such as open access, banking, and time-bound clearances. C&I consumers across diverse industries, including steel, automotive, polymer, hospitality, retail, and realty are actively harnessing the potential of renewable energy for their operations. To meet this huge untapped potential, the renewables sector will have to come up with innovative technologies to supply schedulable round-the-clock power.

India is expected to add 22 GW of wind energy capacity over the next five years, given the current pace of growth and its extensive coastline. A huge opportunity lies ahead for offshore wind. To harness this potential, one area that would need more focused intervention is to ensure availability of the critical components – land and transmission – for wind development. Further, domestic innovation in wind manufacturing and improving the access to technology will be required to build next level models.

How does Sembcorp plan to leverage on the business opportunities emerging in the renewable energy space in India?

India is a key market for Sembcorp and integral to the group's strategic focus. Our growth strategy is underpinned by a three-pronged approach. At the core of this is our journey to drive energy transition. We strive to unlock the maximum efficiency of our renewable energy assets. Through state-of-art analytical capabilities, and integration of asset data into our self-O&M platform, we have achieved cost optimisation and higher generation. Our deep local market understanding, and proven asset development capabilities help us maintain our track record of delivering critical projects, within timelines and budget. To date, we have achieved a robust portfolio in India with 4.2GW* (as of February 2024) of gross installed renewables capacity, which includes 2.4GW of wind and 1.8GW of solar assets. This is a balanced mix of greenfield projects, portfolio acquisitions, and C&I customers.

We are actively bolstering our development capabilities by engaging in disciplined project bidding. In the past year, we have completed the acquisition and seamless integration of the 583MW Vector Green Energy Private Limited portfolio into our operations. We recently announced our acquisition of a 228MW operational wind portfolio from Leap Green Energy Private Limited. We secured a 300MW ISTS connected solar power project from NHPC Limited in December 2023, followed by our first 450MW wind-solar hybrid power project from Solar Energy Corporation of India Ltd. These greenfield projects offer earnings stability. Moreover, these projects also offer significant synergies in both procurement and operational efficiencies with our existing projects.

How do you see India’s renewable energy sector shaping up in 2024? What are the trends that you foresee gaining traction?

India's renewables sector is poised for significant growth and transformation in 2024, driven by several key trends and government initiatives. The government's steadfast commitment to renewable energy and sustainability will continue to drive the transition towards cleaner sources of power. This commitment is reflected in the interim budget, which allocated substantial funds for renewable energy projects, including green hydrogen, solar, and wind power. Grid infrastructure development and advancements in energy storage will be pivotal in supporting the growth and stability of the renewable energy sector. These investments will enhance grid integration capabilities and enable better management of fluctuating renewable energy sources.

The substantial increase in allocation for the solar energy (grid) in the interim budget underscores the government's commitment to accelerating the adoption of renewable energy technologies. The pipeline of solar PV manufacturing projects, which includes announcements, permitting, and projects under construction, is set to draw approximately US$15.5 billion in investments. The provision of viability gap funding for offshore wind power projects is expected to unlock significant opportunities in the wind sector, driving down generation costs and attracting investment in offshore technologies. A vibrant renewables industry, backed by a growing skilled workforce is a recipe for creating job opportunities. Increased focus on research and development will herald new innovations and technological advancements in the sector.