Solar tariffs will fall further on reduced risk for investors: Ratul Puri, Chairman, Hindustan Powerprojects
Ratul Puri, Chairman at Hindustan Powerprojects Pvt Ltd, talks about sustainability of low solar tariffs, increasing focus on hydro power and viability of storage solutions in an exclusive interview with Anisha Dutta. Edited excerpts..
The government is working on a new hydro power policy and you have also spoken about increased focus on hydro. What is the company’s investment plans on that front?
I think hydro is a focus area for us and it is very important to India because we will not be able to have a stable grid without having hydro capacity as a part of our mix. The share of hydro has come down rapidly in the last five years. We have built a lot of conventional generation capacity, a lot of solar and wind capacity but not a huge hydro capacity. I think policies are evolving. There is a new hydro policy which will be announced and hopefully that will spur investment in hydro again. Hydro projects have long gestation and high risk but once built, they provide India with the ability to store energy. There is no other cost effective energy storage capability than hydro.
What is the plan to increase your own hydro power plants capacity?
We already have two hydro power assets in Himachal Pradesh. We also have hydro assets in Sikkim and we have several hydro power assets in Nepal. So hydro power is certainly an area we want to expand into and we need to see what the government’s policy looks like.
Speaking of solar tariffs, we’ve seen them go to record new lows this year while some raise questions on sustainability. What is your view?
I think solar tariffs would be lower than what they are today over the next ten years timeframe. There is no doubt about it. The question is, are investors and developers moving too fast and therefore taking on too much risk for too little return? I think yes, possibly so but will it correct itself? I think it will as long as we constantly bid out new solar and we keep creating new solar projects. Every industry which is growing more rapidly will go through cycles like this, returns will come down and then they’ll correct themselves to reasonable levels. To what extent do returns correct themselves? It will depend upon how future solar bids are packaged. If you reduce risk for an investor the pricing will be low — provide payment guarantees, take obligation. If we reduce risk for an investor we will certainly see tariffs coming down.
What about storage solutions? That remains a challenge in the face of increasing capacity in the solar sector. Given the government’s target of moving to e-vehicles by 2030, is that something you are looking to get into?
Eventually storage is the long-term overall for the electricity sector and it is going to be the gamechanger which is going to completely change the grid and completely change the way we generate and consume power. But I think storage is still far away from a technology perspective – not just India but anywhere in the world. I do not think utility scale storage technology exists today that can be deployed and masked. And even when it can be deployed and masked it is too expensive. Can we store 1,000 terawatt hours of energy? I do not think we are there yet. You cannot even store 10 megawatt (MW) hours of energy. It is difficult to do that.
There have been talks of Macquarie Infrastructure and Real Assets (MIRA) set to acquire a large chunk of solar assets from Hindustan Power Projects. What is the status of that?
Macquarie is an existing investor in our thermal business. They have invested around Rs 800-900 crore in our thermal business. We are constantly looking at opportunities for raising capital in our solar business and it is a key focus area for us. We want to aggressively go out and build incremental solar and we think the opportunity in solar is unparalleled. We are in talks with multiple people but I do not think there is anything that has been concluded so far.