French state-run power major, EDF (Electricité de France), plans to increase its power generation capacity to 2 GW in India. It is approaching 500 MW installed capacity of renewables in India – solar and wind energy. In an interview with Jyoti Mukul, Jean Bernard Levy, group chairman and CEO, emphasises the need for robust and stable regulation. Edited Excerpts:
How are you looking at the India market and what are you plans?
India is a very attractive opportunity. The economy and power demand are growing. India has mostly built its power system on fossil fuel which is, something that is not sustainable at this level due to carbon dioxide emission. At the same time, as India grows it has to transition its power system towards low carbon so we believe we are partners for India. We plan to achieve 2 GW of renewable capacity in five years through wind and solar investments.
We have most of our sales in developed countries like France and UK, where the problem less as the systems are very efficient which provides our consumers with very attractive prices and great quality of service and security of supply which of course, is yet another issue in India. We are the second largest power generating company in the world and we are very proud of what we do with very low carbon emissions. The global average carbon emission in the world is 500 grams of CO2 for producing one unit (kilowatt per hour) but our average at EDF group is 80 and in EDF France its 15. So, we believe we can help India transition in power system with low carbon, centralized or decentralized and efficient solutions both price wise and in terms of security of supply.
Lately in the renewable sector, we have seen tariffs going down because of aggressive bidding. India already has distress in the conventional thermal sector, do you think there will be similar issues in renewable?
We are very happy that there is competition and tenders. People compete and the one who wins is the one who delivers the service and provide competitive wind and solar solutions. There are independent regulators. As such, today India is a good country for investment. There are risks of bubble but we will not invest when we believe we cannot make the kind of returns our own shareholders are looking for. At this stage, we are confident, we can play a role in the Indian market. We will do so in line with risk-return benefits that our shareholders are expecting. But you are right to say that maybe one day we would find it too aggressive in terms of returns and we would not be competitive but this is not the case today.
Currently, there are concerns on states not signing power purchase agreements after finalization of bids or not buying renewable power which was bid at higher rate since subsequently tariffs have fallen. How do you view this scenario?
We are looking for a stable regulation which will give us expected return, we are expecting in the long run because upfront investment is high. We start by cashing out over a long period of time and get the cash in over 15 or 20 years. So we need to be sure that we have a robust regulation. We will select and invest in countries where we believe we have robust system in terms of regulation. When we analyze the annual net capex at EDF group, we have 2 billion euros for renewables. As we very often have equity partners or maybe debt and when we leverage with debt, it means more than 10 billions euros investment in renewables globally. This we will allocate to various countries, including India, according to the stability and predictability of the legal and tax system and the risk return analysis. We expect protection for investors in terms of long term PPA, everywhere we allocate capital.
Are you looking at acquisition of companies or projects in India?
We may buy projects when they are at inception stage because we excel in developing projects from the early stage. We will make the money and profit by selling it later, from time to time this is what happens but most of the time we build and keep. The real added value is in development.
Do you have plans to invest in coal-based generation in India?
EDF will not invest money in any additional coal unit anywhere in the world including India. From time to time, we have engineering activities to improve the efficiency of existing coal units.
How can India best develop its balancing power?
In some countries, there is a lot of hydropower which is dispatchable. Norway, for instance, has hydropower and less population but they can use hydro for balancing renewables. But this is not the case in high population countries like India which needs to optimise its capacity. You have to balance the renewables with dispatchable power which will come obviously from fossil fuel and nuclear.
EDF is involved with Jaitapur nuclear plant in Maharashtra. Do you see nuclear power growing in India?
Nuclear brings zero carbon emission, a lot of independence, lot of jobs and skills. I believe that nuclear is an important part of the solution for India. We own and operate the largest fleet of nuclear reactors in the world, very safely. We are working with the Indian government to provide nuclear solutions, to offset the intermittence of renewables. We are expecting the award six units Jaitapur. It is a good site, in terms of ground quality and environment
EDF is known for innovative financing. What would best work in a market like India?
We were among the first ones, probably five years ago to launch green bonds where entire money is allocated to green energy projects transparently. EDF has raised such monies in dollars, euros and yens. We have raised close to 5 billion euros of Green bounds over the last four years. In India, most of the financing will come from the private sector. To me, the Indian government has the opportunity to benefit from lot of capital available around the world in the form of equity or debt. In distribution and generation, the needs are huge because that is probably where India lacks infrastructure. We talk about generation but transmission and distribution are the areas which are more difficult to be financed by the private sector. I would expect public funding to be present there.
Are you looking at investing in distribution and transmission?
We are very active in some smart metering projects which will help improve security of supply and price to the end consumer.
Globally, what will be your strategy for the coming years?
We designs digitised innovative solution for our clients. Energy systems are migrating from being very centralised to decentralised based on digitised systems. We will also rebalance our portfolio. We are very strong in nuclear and we want to be very strong in renewables. We want to double our renewable base to 50 GW by 2030. The third part of our strategy is that we are a European centric company and we want to become a more global company. When I joined three years ago, I found the company to be very European – 95% European, we would like the non-European part of EDF to grow.