India is seeing a buyers’ market emerge for clean-energy assets, as Mint reported, with a rise in businesses vying to attract investors for stakes big and small in renewable power projects. Among others, Siemens Energy is looking to sell the wind-turbines unit of its local subsidiary, Shell is scouting for investors in Sprng Energy and Renew is in talks to hawk some of its solar assets.
An over-supply of climate-friendly generators of electricity suggests that deals will be struck at weaker valuations than sellers would like, with saleability likely to hinge on project viability, market conditions and the risk-return profile.
Meanwhile, project tenders issued in 2023-24 indicate that greenfield investor interest in clean gigs ran at 69 gigawatts (GW) of capacity, well above the rate of 50GW per year needed for India to meet its 2030 goal of 500GW from renewables. Some companies are in the business of setting up and selling off generators to re-invest in new ones. Unless secondary demand for these assets picks up, however, we risk the financial equivalent of a power cut.
For all the buzz of action in our power sector, it still presents a dismal picture overall. The power ministry’s website says that India has 418GW of installed capacity. About 237GW of it is housed in thermal plants that burn fossil fuels (mainly coal) to create steam and drive turbines, almost 47GW is from watermills in dams, and nearly 110GW of the total is attributed to windmills and solar panels.
Yet, as seen in recent years, the Centre begins to huff and puff over coal supplies to prevent power cuts as soon as peak demand reaches the level of our thermal capacity. Last summer, demand peaked at an estimated 221GW. This year, it may exceed 240GW. Coal wagons doing extra runs bear the air of a seasonal routine. In spite of a big policy push for emission-free power and related gains in renewable capacity, the power we use today broadly remains the same.
Our decarbonized facilities are either off-grid or unable to plug supply gaps to meet overall demand for other reasons. What keeps supply and demand apart in this key infra sector needs an updated study, but state-run distributors that don’t charge users enough to profitably pay power suppliers are part of a statist legacy.
Reform attempts so far have failed to empower price signals, power handouts retain their role as political freebies, and we’re stuck with a creaky grid-work that can hardly pay for itself, let alone respond to an online cry for electricity free of snap-offs. Since reliable supply is what users need, solar and wind sources have a particular drawback.
The sun and wind do not shine and blow at anyone’s command. So, barring captive use, the energy they generate needs to be stored for this supply to be effective. Storage is very costly, and while batteries can get cheaper, renewable generators can’t beat carbon-heavy plants on affordability.
As an emerging economy with rising low-end demand, India doesn’t yet plan to quit coal-fired power. Relative costs explain why. This is also why private players need the lure of subsidy support—and state purchase mandates, etc—to invest in clean energy. Clearly, to meet climate goals, the state has no option but to play a big role.
While subsidies can be stepped up to fund a clean-up, the Centre may also need to play the prime mover (as a direct investor). For market forces to help, though, we’ll also need a parallel carbon market to incentivize an overall tilt away from emissions. Carbon pricing could close the cost gap, draw private money into clean power and give our climate plan the boost it needs.
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