US$100 billion in new renewable investments power Indian energy transition

Investments worth over US$100 billion in the past eight months alone are driving an unprecedented shift to renewable energy in India, according to a major new report from the Institute for Energy Economics and Financial Analysis (IEEFA).

The report – Global Capacity Building: India’s Electricity Sector Transformation – charts the accelerating influx of global capital and capacity into India as the country strides towards its goal of installing 175GW of renewable energy by 2022 – over seven times more renewable capacity than is currently used in the UK.

“In India’s so-called ‘seven horses of energy’ electricity sector transformation, renewable energy is ahead of the pack and rapidly gathering pace,” said Tim Buckley, Director of Energy Finance Studies at IEEFA.

“In early 2015, global financial markets were sceptical about whether good intentions and big promises could be turned into concrete actions. But today the figures speak for themselves, with well over US$100bn of firm commitments signed and sealed. This include deals with state owned enterprises, leading Indian power companies, a number of Indian billionaires new to the power sector, plus leading global renewable energy firms and global utilities.”

Leading consultancy, Bridge to India, calculates that the Indian solar project pipeline is over 8GW, with another 4GW of tenders underway currently, up from less than 1GW annually in the previous three years.

Significant moves in 2015 have included:

– Four of the world’s largest solar manufacturers advancing plans to build Indian solar manufacturing capacity (Trina Solar, JA Solar, Hanwha Q CELLS, LONGi);

– Three of the world’s top renewable energy utilities acquiring top Indian renewable project development firms (EDF Energies Nouvelles, ENEL Green Power, ENGIE);

– Four of North America’s top solar development companies accelerating project development in India (Sky Power of Canada, First Solar, SunEdison and SunPower);

– Leading Asian innovators and utilities targeting Indian renewables (Foxconn of Taiwan, SoftBank of Japan, Sembcorp of Singapore, CLP Group of HK);

– Major Indian energy sector conglomerates initiating multiple new investment programs in renewables (Adani Power, Tata Power and Reliance Power);

– Several of India’s wealthiest companies entering the power markets to invest in renewables (Aditya Birla Group, the Dilip family, Bharti Enterprises, Jindal Steel and Power);

– Global development banks and leading equity investors providing innovative green finance (International Finance Corp, the World Bank, KfW of Germany, Asia Development Bank, Abu Dhabi Investment Authority, GE, Goldman Sachs, Actis Capital);

October 2015 alone saw more than a dozen major deals in the renewable energy sector, most notably Sany Group, China, announcing plans to invest US$3bn in Indian renewables by 2020, Chint Group, China, announcing plans to invest US$2bn of Indian renewables by 2020, the new SoftBank/Foxconn/Bharti joint venture signing its first US$2bn memorandum of understanding (MoU) in Andhra Pradesh for 3GW of renewables and the German government pledging €1.5 billion over five years to support India’s solar energy expansion through a German-Indian solar partnership.

The November 2015 SunEdison solar auction win of 500MW at Rs4.63/kWh (US7.1c) sets a record low solar price, 10% lower than the previous record low set just two months ago. The deflationary benefit of solar is stark – declining installation costs and real price annual declines locked in for 25 years.

The consequences for imported thermal coal are stark.

In line with Energy Minister Piyush Goyal’s repeated assertion that India’s reliance on thermal coal imports is not sustainable for the economy, rate payers, nor commercially viable for the coal-fired power plants involved, in the six months to September 2015, Indian coal imports have declined 6% year-on-year, culminating in a 27% collapse in the month of September 2015.

“The sharp, unexpected fall in India’s coal imports reinforces the fact that seaborne thermal coal is in structural decline,” said Buckley. “Coal India Ltd’s production and dispatch growth continued to accelerate in the seven months to October 2015, up 10% year-on-year, a gain forecast by no one just one year ago.”

“While there is quite simply no rational economic case for imported coal, the speed of renewable developments is now undercutting domestic fossil fuels.”

As a case in point, Reliance Power, one of the major private electricity generators in India, is reported to be exiting almost its entire coal and gas fired generation plant expansion plans that totalled 10GW at the start of 2015/16. Reliance Power has even gone so far as to seek to sell its 4GW Sasan coal-fired Ultra-Mega Power Plant, a project was only fully commissioned at the start of this year.

Reliance Power is now focused on profitable growth, which in India almost entirely revolves around its 6GW solar and 5.2GW hydro electricity expansion plans.

“Smart money is backing renewable energy,” concluded Buckley. “India is executing one of the most radical energy sector transformations ever undertaken and this year has shown that the flow of finance is matching the ambition.”

The report is available here.