Amit Jain, managing director of Engie India, a unit of the Euros 57.9 billion-in-revenue French utility, spoke to 'Business Standard'. The company is looking at India as a market for offshore wind energy but it’s not clear what kind of model will come up, he said. The interview is edited for clarity and space.
What has Engie accomplished this year in the renewable space? What are your plans for India?
We have a portfolio of about 1.1 GW of operational assets in solar and about 250MW of wind--so a portfolio of about 1.4 GW. This year we won a project in a 400 MW tender. Our first project was commissioned in 2014. We started off with a 5 MW project and today we are doing 400 megawatts, so that's the change in scale that we've seen in India. We are present in about seven states across 17 different sites.
I believe that the world's biggest solar park for Engie globally is in India. What’s your global renewable portfolio and where does India stand?
Yes, indeed. It’s a 350 MW peak plant in Kadapa, Andhra Pradesh, that's one of the largest for Engie globally at one location. India is one of the top four or five markets in which our solar presence is there. Globally, we have 34 GW of renewables in operation at the end of 2021, and by this year we'll have about 38 GW. Hydro is the biggest chunk at about 17 GW, the rest is about 12 GW of wind and about 4 GW of solar. Our target is to grow this portfolio by 4GW every year until 2025, and then by 6GW until 2030, giving us a total renewables capacity of about 80 GW. We've reduced our country footprint from 70 odd countries to only 30, and India is one of them.
How much has Engie spent on India since you started in 2014? Do you have a country wise investment plan?
We have invested and divested assets, so it's been kind of a churn. We had about 800 million Euros worth of capacity exposure we had to India before we sold down our stake in some of our operating assets to Edelweiss. Now, we have about 300 million Euros on our balance sheet in terms of investment and with the new projects that will increase. We have to commission another 1-2 gigawatts by 2025, so if you just do the math it's another 600 million Euros of investment that we see till then.
What kind of challenges do you see in the wind space in India?
The tariffs are significantly higher in wind, so the discoms at the moment are not looking at signing PPA's or procuring power at such high tariffs. That’s one challenge. There are challenges in the global supply chain as well because of the lockdowns in China, energy prices and the cost of turbines—the economics are not working for the Indian market. Globally, we are doing more wind development than solar. We don't see that challenge in other geographies because they are not price-driven markets. For instance, in Egypt, right now, we currently are doing a 500MW wind project for which we are getting the turbines. But when the price becomes a driver, it becomes a challenge to meet the tariffs that we have in India.
Are you are able to match solar tariffs, but not wind. There’s cost inflation in solar also, right; you have BCD duties and mandatory domestic procurement.
There are limited manufacturers of wind turbines globally. In solar, too, we have seen tariffs rise from as low as Rs 1.99 per unit and correct to Rs 2.60-Rs 2.70. I think the discoms are still absorbing the price increases on solar side but in wind we are not seeing the Rs 3 tariffs seen in recent bids. The delta between tariffs for solar and winds, from a discoms perspective, is a challenge. Hybrid projects will become popular, because from a pooled perspective it makes sense for the discom and the developer.
Where do you see offshore wind in India? It’s the next big thing in the UK and in Europe. I believe 4GW of tender for offshore wind is ongoing in Tamil Nadu with another 4GW due next year.
They (India) have released the document for stakeholder consultation. We have a joint venture called Ocean Winds with a Spanish company for the offshore wind business. We are looking at India as a market but it’s not clear what kind of model will come up; will it be a seabed lease or what the transmission risks are. I think it has to be looked at in totality. Offshore could be the next big thing but the development pipe that you need for offshore is about 5-6 years before we see CODs of these projects. Offshore wind needs port infrastructure, infrastructure to transport large turbines--because offshore wind turbines are significantly larger. I think the government is planning to do seabed leases and then we'll see how it goes, because, to be honest, the wind speeds in India are not so high as we see in other geographies in Europe or in the US. It’s a question of economics and if tariff is the driver then it will be a challenge to meet those low tariff expectations with offshore wind aswell.
Would you need viability gap or upfront funding from the government because capex is high for offshore wind projects?
I think the government was looking at that, at one point of time. But the document released talks about only seabed lease and there is no talk of viability gap funding. In more mature markets it’s a different model where you get seabed leases, where you do your own development, find your own customers and do your own PPAs, and you sell the power there, so I think that's the route that the government is taking. The viability gap funding discussion was pending for quite a while between states and the center as to who will bear the cost. It would make sense at least in the short term for upfront help like they did in solar and wind in the initial days.
Where do you see prospects for floating solar in India? In Europe new technologies enable panels to track the sun. NTPC is doing some floating solar on their reservoirs.
The capacity of India in terms of floating solar is quite significant but the challenge again comes down to I think commercials, right—the cost of selling power from a floating solar park versus selling power from a land based solar farm—that's where the gap is. Tariffs from floating solar would be 20-30 per cent higher, but again it's on the supply chain of floaters. Floaters are very costly to kind of transport so you have to have enough manufacturing at the site or locally present. I think that's where the challenge is. Land is not a constraint for onshore solar in India, till that’s available, floating will on the backburner. There will be one off tenders like that of NTPC, MP state, but it will take time to go mainstream.
Is green hydrogen more of a hype?
Everybody talks about green hydrogen. Globally we are doing 70 pilots on green hydrogen with different small customers. It’s still a bit far away. In India, the government is mandating use of hydrogen by industries. That’s the missing link. It’s easy to produce green hydrogen. But the whole supply chain to ensure the industry uses it is the missing link. India is a good market to make large scale cheaper. But it’s still some time away from the India story perspective.