The National Democratic Alliance government has stressed the need to make the country energy efficient and has set stiff targets for 2022 in terms of green energy. Ratul Puri, chairman, Hindustan Powerprojects Pvt. Ltd, and programme co-chair of World Economic Forum’s (WEF) National Strategy Day on India, talks about the feasibility of these targets. He also discusses some of the key enablers that need to be discussed at the summit, which help in achieving the ambitious power generation targets.
What are the key issues that need to be addressed at the WEF summit for clean energy sector to prosper?
I think the key theme of the National Strategy Day on India is around inclusive growth and energy; and clean energy particularly is an important pillar. The government of India has taken up renewable energy as one of the key platforms; it is utilizing it as it negotiates its contribution towards the global climate change agenda. There are going to be sessions (at the summit) where power minister Piyush Goyal is going to participate in brainstorming session around what are the key enablers that are going to make this massive build up of 165 GW energy generation feasible. There are four sub-themes to that. First is around financing—how will India finance this massive infrastructure, particularly clean energy infrastructure build out, which is going to be one of the key challenges in the next six years till 2022. The second is around the entire supply chain, availability of equipment, human capital and human resources to enable this build out. The third area is around the grid and availability of the grid—how do we ensure that the grid is capable of absorbing this capacity and given the intermittent nature of renewable, if for some period of time renewable is not available, how will India build out its supporting infrastructure to ensure a stable grid and reliable electricity supply? The fourth area is around the entire enabling environment that is required from the policy and risk perspective.
The government and HPPL have set an ambitious target for renewable and clean energy by 2022. Are these targets achievable and how close are we to it?
I agree that the targets are very ambitious, nonetheless if there is one space where I think the target is achievable with enablers put in place, it is the renewable and clean energy space. The advantages of clean energy is on the solar side as one can bypass many of the traditional bottlenecks that exist. So, I think the targets are feasible to be achieved given the four key enablers I talked about are addressed.
HPPL has made huge investments in clean energy in the last five years and a lot of overseas funds have come to other firms as well. What is reason for this trigger and what does the future look like?
The government of India has done a good job in creating that interest in India particularly in the renewable segment. I think foreign investors look at India and look at renewable as being a key area, which not only enables India to achieve energy security and bypass some of the challenges around conventional energy, but also look at this being a key contributor overall towards the climate change initiative.
I think it has multiple benefits and people certainly are excited about the sector, both within and outside India. This is very positive because when you get enough constituents excited about a particular area and excited about investing in a particular area, it makes you believe that investment will be driven in that particular area. We have also seen many initiatives by the government to help drive investments in terms of implementation of clean energy in India.
Talking about government’s commitment, one of the areas has been green bonds. How will that change the investment ecosystem?
There are large pools of capital globally—pension funds, development-oriented funds—which are seeking investment opportunities in sustainable infrastructure. Renewable in India certainly falls into that category. What is needed now is to figure out an enabling framework to allow Indian projects that is going to help build out this 165 GW of capacity access that pool of capital. Green bonds as a category is one of the tools to do that. I think there is focus from the government’s side, though it is still early days as the government announced its targets barely six months ago and a lot has happened since then. We have the new renewable Act put into place, I think there is tremendous focus on the part of state governments to bring out bids to attract investment, there is a lot of initiative at the central government level to try to bring projects on stream. As these projects come about, that is 10GW of solar energy, this is a total solar capacity that India has built in the last five years there is about three times that is going to get created in the next 12-18 months, they need access to finance these and green bonds will be one of the mechanisms to do that.
The pricing of these sources of energy have been a talking point as they are expensive compared with conventional sources. With funds coming in, will this problem be sorted?
The good news is that the cost of renewable has come down very sharply in the last couple of years. Today the cost of renewable, both wind and solar, is in the range of Rs.5-6. The cost of conventional energy, if we look at the bids in the 2-3 years to procure energy in the market under long-term contracts, is also in the same range. Today, the benefit as a country that we have is that as we deploy and build out a significant renewable programme, we don’t as a nation need to pay more for it. That is also very crucial to be able to build out the renewable energy programme because India with low per capita income and low disposable income cannot afford to pay more for renewable energy.