RIL's giga-sized green game plan bets heavily on inorganic growth

By swiftly tying up deals on the basics - manufacture, storage, construction - the petroleum giant has taken the first significant step toward meeting its clean energy goals

Next month, when the global community sits down to plan the clim­ate change agenda and the fun­ding challenges at the United Na­tions Climate Change Conf­erence (COP26), India’s biggest petroleum company in the private sector would have made a well-heeled entry into the green energy space. Reliance Indus­t­ries Ltd (RIL) unveiled its ambit­ion for a greener business fut­u­re only at its June 24 annual ge­neral meeting but it has done at least three deals related to so­lar manufacturing, storage, construction and green mobility in less than four months (see box).

The RIL game plan bets big on inorganic growth and is foc­used on the basics of green energy — manufacturing, stora­ge and construction. The first move came on August 10 when RIL announced its wholly-owned subsidiary Reliance New Energy Solar (RNESL) would make a $50-million investment in energy storage company Am­bri Inc. This was part of a $144-million financing round, which saw participation from Paulson & Co and Bill Gat­es, among others. RNESL acq­uired 42.3 million shares of preferred stock in Ambri, a start-up incubated in the Massach­usetts Institute of Technology (MIT). The two firms also started disc­ussing an exclusive collaborat­ion to set up a large-scale battery manufacturing facility, and distribution and sales centres in India.

Ambri, founded in 2010 by Donald Sadoway, an MIT professor, and entrepreneur David Bradwell, is designing a 1 MWh-long-duration DC battery-system, based on calcium-antimony liquid metal cell technology, for four-hour to one-day daily energy storage applications. Its investors include French energy major TOTAL SE, Khosla Ven­t­ures, KLP Enterprises and GVB. Khosla Ventures is the investment firm of Indian-American billionaire Vinod Khosla, co-founder of Sun Microsystems.

Once the new technology is commercialised, RNESL would be able to offer Ambri’s battery systems in high usage applications such as grid-connected renewable projects and data centres. According to RIL, the new technology is a low capital expenditure technology and will be more economical than lithium ion batteries since it can have a 20-year-plus battery life.

India lacks large-scale adva­n­ced battery manufacturing te­c­hnology so once the new technology is commercialised, a tie-up with RIL would ensure the kind of scale that only a big market like India can offer. This would also help lower costs for RIL’s new energy plans.

Two more back-to-back ann­ouncements came on October 10. These were the acquisition of Norway-based REC Solar Ho­l­d­ings AS from China National Bluestar (Group) Co Ltd, for an enterprise value of $771 million, and the signing of agreements with Shapoorji Pallonji and Com­pany Private Ltd (SPCPL), Khurshed Daruvala and Sterling & Wilson Solar Ltd (SWSL) to ac­quire 40 per cent stake in SWSL through a series of transactions.

REC makes high-efficiency and long-life solar cells and panels for solar power at three facili­ties — two in Norway for solar gr­­ade polysilicon and one in Sin­gapore making PV cells and modules. With over 600 utility and design patents, of which 446 are granted and the rest are under evaluation, RIL has a rea­dymade armoury. It puts RIL in direct competition with Ada­ni Green that is looking to capt­ure India’s solar panel market with a 2 gigawatt (Gw) order for panel manufacturing from the Solar Energy Corporation of India.

The Sterling & Wilson deal brings the construction or EPC piece into RNESL’s business for an equity investment of Rs 2,850 crore even though it does not result in a majority ownership in the company. With 11-plus Gw of solar turnkey projects executed globally and more than five decades of engineering exp­erience, Sterling & Wilson is pre­sent in 24 countries in the EPC and the operation and maintenance service segment of the renewable energy business.

According to RIL Chairman Mukesh Ambani, the recent investments would enable RIL to set up a global scale integrated photovoltaic gigafactory and make India a manufacturing hub for lowest cost and highest efficiency solar panels.

In its post-Sunday announc­e­ment report, Citi Research said the REC acquisition provides RIL access to the company’s in­dustry-leading technology and solar manufacturing capabilit­ies, which it can deploy in the fully integrated solar PV gigafac­t­ory it plans to set up at Ja­m­na­gar. This is one of four giga­fac­tories that RIL had ann­o­unced in its June AGM at a to­tal investment of $8 billion, out of the $10 billion planned investment in clean energy. The other three factories are for manufact­uring large-scale grid battery st­orage, electrolysers for produ­c­tion of green hydrogen and fuel cells for transportation as well as in stationary power applications.

RIL has said its initial solar ma­nufacturing capacity would be 4 Gw annually, event­u­ally growing to 10 Gw. Citi Re­se­­arch said a fully integrated 4 Gw solar manufacturing capac­­ity involv­es a capex of $1.5-2 billion. “Add­itionally, RIL has prev­iously stat­e­d that its target is to help es­t­ablish and enable 100 Gw of solar capacity additions in India by 2030, which the acquisition of Sterling & Wilson sho­uld help facilitate given the company’s EPC, O&M, and project mana­g­e­ment expertise,” the report said.

The two announcements mark the first significant step towards its targeted clean energy investments and provide a degree of visibility on the first of its four planned gigafactories by lowering technology and execution risks. Though details on capex involved, revenue pot­ential and return expectations are not disclosed, the report said RIL is looking “to making meaningful inroads into India’s rapidly developing clean energy ecosystem by making significant commitments, potentially adding up to around one-third of consolidated capex over the next few years”.

Outside of this core, RIL has tied up with Gurugram-based electric mobility and e-charging firm BluSmart for using green energy for electric mobility. This tie-up has been done by Rel­iance BP Mobility Ltd for Jio-bp branded outlets and fuel retailing. Bp, in fact, announced an in­vest­ment of $13 million in BluSmart on September 30.

The middle piece of green energy generation is not yet on RIL’s agenda though it is early days and the Mukesh Ambani-led group may end up pulling out more rabbits out of the hat. The reason perhaps is the highly regulated nature of the generation business and the ill health of India’s power distribution (retailing) business that impacts generation. For RIL, however, distributed energy systems or non-grid power generation could be the key for meeting its giga-size ambitions.