This is Part 2 of the Energy Sector Updates. Part 1 is here.
After making a pledge in the Paris Agreement to increase the share of renewable energy, India is not only pushing large scale renewable energy projects including solar and wind projects, but it has also eased many rules and regulations in a hurry to bring back large hydropower projects to achieve its commitments. India has already given the status of renewable energy to large scale hydro projects. Despite this, the country has been witnessed many bitter experiences with large hydropower projects. They have been neither economically viable nor environmentally and ecologically. Further, they cannot prove to be viable from any point of view in the future too. This is because they have proved to be immensely disastrous for the communities wherever they have been built. The state-owned NHPC Ltd. and Satluj Jal Vidhyut Nigam (SJVN) have already announced to build several hydropower projects especially in the Northeast, Jammu & Kashmir, and Himachal Pradesh. Even, NHPC is buying loss-making private hydropower plants. On the other hand, the state-owned Solar Energy Corporation of India (SECI) is aggressively building large solar and wind parks, following the footsteps of the coal power projects. These large projects require massive amount of land acquisitions across the country. Moreover, these projects are being allocated at a very low tariff rate for 25 years to the companies like Adani Power, Tata Power, SembCorp Energy, and NTPC who also own the coal power plants in India. Moreover, financial institutions like World Bank, ADB, and NIIF are also supporting them.
A big pressure to Hydro Power Projects across the country
In last month government-owned hydropower generating company, NHPC Ltd has pushed many hydropower projects across the country. The company is planning to commission a 2,000 MW lower Subansiri hydroelectric project by 2022 which was stalled eight years ago in 2011 by the peoples’ movements of Arunachal Pradesh due to adverse environmental and ecological impacts in the area. Earlier, the estimated cost of the project was INR 6,900 crore, but now the escalated cost is coming to INR 20,000 crore. The project is located on the border of Assam and Arunachal Pradesh. Majority of the submerged area falls in Arunachal Pradesh. In addition, the company also signed a memorandum of understanding (MoU) with Jammu and Kashmir State Power Development Corporation (JKSPDCL) for the execution of several projects including Kirthai-11 (930 MW), Sawalkot (1856 MW), Uri-I (Stage-II) (240 MW) and Dulhasti (Stage-11) (258 MW). Additionally, Chenab Valley Power Projects, a joint venture of NHPC, JKSPDCL and PTC India will implement the 930 MW Kirthai-11 project on the same terms and conditions as agreed on other projects. NHPC and JKSPDCL are also exploring the potential of renewable energy in the state.
Meanwhile, the trend of acquiring debt-ridden and loss-making private companies through National Company Law Tribunal (NCLT) process by public sector unit like NHPC is now growing. The Company has recently acquired Jal Power Corporation Limited (JPCL), a 120 MW Rangit Stage-IV hydro project in Sikkim through NCLT process. The total cost of the project is estimated at INR 943 crore. Similarly, last year in 2019, the company had acquired Lanco Teesta Hydro Power limited after the company was taken to NCLT by its lead lender ICICI Bank. The company signed an agreement with the Indian Renewable Energy Development Agency (IREDA) for assistance in setting up renewable energy projects.
Another mini Ratna, a joint venture of the government of India and the Government of Himachal Pradesh, SJVN has assigned three projects to include 104 MW Tandi, 130 MW Rashil and 267 MW Sach Khas hydroelectric projects by the Himachal Pradesh government. These projects are located in the Chenab river basin in the Chamba district. SJVN now has six projects with a total capacity of 1,279 MW in the Chenab basin.
Apart from these developments in the hydropower sector, Bharat Heavy Electricals Limited (BHEL) has bagged orders worth INR 3,200 crore from Andhra Pradesh and Telangana. The order for E&M works for the 12×80 MW Polavaram Hydropower Project in Andhra Pradesh envisages the manufacture and supply of Kaplan hydro turbines. Polavaram project, being developed by Andhra Pradesh Power Generation Corporation Limited (APGENCO), is located in the East Godavari district of Andhra Pradesh. The pump-motor sets the order for Lift Irrigation Schemes (LIS) projects in Telangana includes 15 sets (1,992 MW) for Kaleshwaram LIS and 13 sets (1,885 MW) for Palamuru Rangareddy LIS (package 1 & 16). These LIS projects are being developed by the Irrigation & CAD Department, the Government of Telangana. In the meantime, the government of Arunachal Pradesh has terminated the agreement for the execution of TSA-CHU-I lower and Pakkebung II hydroelectric project aggregating 39 MW.
Mounting of Private shares in Renewable Energy Sector
In the last month, there were many updates in the renewable energy sector. India’s import of solar equipment declined last year from April-October 2020. The value of solar imports is about INR 1,839 crore in a period which is 79 percent less than the previous year. It was about INR 8,912 crore in the same period. The main reason for the fall in imports was Covid-19 pandemic. The pandemic has not only slowed down the capacity addition but caused a shortage of labour. This has delayed the project execution as a result of which the imports of equipment were put on hold.
Adani group is one of the private companies which hold the largest share in the Indian energy sector. Adani Green Energy’s subsidiary, Adani Solar Energy Kutchh Two, commissioned a solar power project at Khirsara in Gujarat of capacity 100 MW. The subsidiary, Adani Solar Energy Kutchh Two, has a 25-year-long power purchase agreement (PPA) with Gujarat Urja Vikas Nigam India (GUVNL) to supply the power at Rs 2.44 a unit. Similarly, the company has also commissioned a 25 MW solar power plant in Chitrakoot in Uttar Pradesh. This plant has a power purchase agreement with Noida Power Company Limited (NPCL) at a tariff of Rs 3.08/kWh. AGEL’s wholly-owned subsidiary Adani Renewable Energy Holding Eight Limited has won a 600 MW wind-solar hybrid power from Solar Energy Corporation of India (SECI)’s 1,200 MW interstate transmission-connected (ISTS) hybrid power project. The tariff for this project has been fixed at Rs 2.41 per kWh. The project is expected to be commissioned in a duration of 18 months from the date of signing the power purchase agreement (PPA) for 25 years. Now, AGEL owns a total of 14,795 MW capacity in the renewable energy sector. Of this, 2,975 MW of RE projects are operational and 11,820 MW projects are under the pipeline. And the company has a target of 25 GW by 2025.
Apart from AGEL, ABC Renewables, ACME Solar, and Amp Energy also won 380 MW, 90 MW and130 MW capacities each in SECI’s 1,200 MW solar-wind hybrid tender. ACME signed a tariff at INR 2.42 per unit and the remaining, two bidders have signed a PPA at a tariff of INR 2.41 per unit. The selected bidders have to set up the projects on a build-own-operate basis and sell power to SECI.
There was another auction conducted by SECI under the GUVNL for 1,070MW projects. Indian power giant NTPC Limited (200MW), Torrent Power (100MW), Saudi Arabian firm Al Jomaih Energy and Water Co. (80MW) and Aditya Birla Renewable (120) has emerged as the lowest bidder by quoting Rs 1.99 per unit tariff under the auction. NTPC has won 470 MW in the project at a tariff of 2.01 per unit. The project’s 500 MW capacity has noted the all-time lowest tariff of INR 1.99 per unit to date in solar power.
A private company, SembCorp Energy India Limited (SEIL) also won a new 400MW solar power project auctioned by SECI in Rajasthan. SEIL will develop this project and the entire power generation will be sold to SECI under a 25-year long term PPA. The project will start operating by 2022. It will be synchronized with the state’s transmission utility Rajasthan Rajya Vidyut Prasaran Nigam Limited. With this auction, the company will exceed 3000 MW in RE globally.
Last month, SJVN Limited and Indian Renewable Energy Development Agency Limited (IREDA) has signed an MoU to boost green energy projects in the country. This MoU will help to undertake techno-financial due diligence of renewable energy (RE), energy efficiency, and conservation projects for SJVN. According to MoU IREDA will support the SJVN to develop an action plan to build and acquire RE projects for the next five years. Currently, SJVN is developing two (Dholera and Raghanseda) solar power projects of 100 MW each in Gujarat.
Another Private power giant, Tata Power won a contract worth INR 488 crore in Kerala State Electricity Board Limited (KSEBL) to develop a 110 MW solar project. After the operation of the project, the company will supply the power to KSEBL under a PPA for 25 years. The project has to be commissioned within 18 months from the date of execution of the PPA. Meanwhile, The Kerala State Electricity Regulatory Commission (KSERC) has adopted a tariff for the procurement of 200 MW solar power (Including solar power of 90 MW from NTPC Limited and 110 MW from Tata Power) at a tariff of INR 2.97 per unit. With this, Tata Power’s renewable capacity will increase to 4,032 MW, out of which 2,667 MW is operational and 1,365 MW is under implementation.
Shift in PFC’s Borrowing Plan
India’s largest non-banking financial corporation (NBFC) of the power sector, Power Finance Corporation (PFC) has revised its borrowing plan from INR 90,000 crore to INR 1,18,000 crore for the financial year 2021. A statement issued by PFC on 1st Jan 2021 said that this revised figure will be used to accommodate the moratorium granted to borrowers like power sector projects in the country as per RBI guidelines. The company plans to raise a maximum of INR 83,000 crore from long-term borrowing, INR 15,000 crore from long-term foreign currency borrowing, INR 5,000 crore from short-term borrowing and INR 15,000 crore from commercial papers. In addition to this, the company has planned to raise INR 10,000 crore through selling bonds to individual investors in two tranche in the first quarter of the year 2021. The first tranche of INR 5,000 crore opened public issue of secured, redeemable non-convertible debentures (NCDs) on January 15, 2021. A minimum 75 percent of INR 10,000 crores would be used for lending and financing/refinancing of existing debt and debt servicing.
NIIF’s Rising Stake in Renewable Sector
Indian Sovereign wealth fund, the National Investment and Infrastructure Fund (NIIF) is the top bidder to acquire about 617 MW worth assets of Mahindra Susten. The company is selling its two operational assets include a 337.5 MW at Rewa solar park, Madhya Pradesh, and an 84.5 MW plant at Charanka solar park, Gujarat. The value of the enterprise has proposed INR 3500 crore by NIIF including INR 1180 crore an equity component of the assets. Already, NIIF is a major shareholder with equity funding of INR 2072 crore in CDC-owned Ayana Renewable Energy.
MDBs Investment in India Energy Sector
Multilateral Financial Institution like World Bank, International Financial Corporation (IFC) and Asian Development Bank (ADB), has been continuing to finance Indian energy sector. ADB has sanctioned a total loan of INR 3,080 crore for two projects to the Indian energy sector in past one month. Firstly, it has approved a loan of INR 1,690 crore (USD 231 million) to Assam Power Generation Corporation. This loan will be used for construction of the Lower Kopili Hydroelectric Power (LKHEP) a plant (120 MW) in the state. This loan is the third tranche and a part of USD 300 million to Assam Power Sector Investment Program approved in 2014 by the institution. Secondly, ADB has sanctioned a combined sovereign and non-sovereign loan of INR 1,390 crore (USD 190 million) to modernize and upgrade the power distribution system in Bengaluru city in the state of Karnataka. This loan will help two projects, viz. Bengaluru Smart Energy Efficient Power Distribution Project (USD100 million sovereign loan) and Bangalore Electricity Supply Company Limited (USD 90 million without sovereign guarantee loan).
Another institution, World Bank is looking to finance the world’s largest floating solar energy project in Madhya Pradesh. The 600 MW project is being constructed at Omkareshwar dam on Narmada River in Khandwa district by the state government. The estimated cost of the project is INR 3,000 crore. The project would be ready to operate by 2022-23. The World Bank was already involved in the primary feasibility study of the project. Even, the International Finance Corporation and World Bank have given in-principle their consent to finance the project development. And Madhya Pradesh Power Management Company has agreed to purchase 400 MW power from the project.
Large-scale hydropower and solar/wind may be clean sources for energy but they can never be sustainable and affordable. India may achieve its commitments of the Paris Agreement by building a large-scale project of hydro and solar/wind. But this can create another colossal disaster for the communities. This is because the concerns of communities ‘displacement, environment, and livelihoods with these large scale projects still remain unaddressed. Therefore, the government needs to focus on projects which are non-destructive and community-friendly. And also the government needs to encourage more community-based small-scale projects which are sustainable and affordable. And only these small scale projects can stop the growing monopoly of private corporations over resources.