High noon for clean power

Companies are buying green energy like never before, with India setting new records

Indian companies are procuring cheap green power at a record pace. They signed 2.6 gigawatts of clean power purchase deals in the first half of 2023, surpassing all historical half-yearly volumes, according to BloombergNEF. This puts the country on track for another bumper year.

“Almost every company has realised that buying clean energy is cheaper,” Sumant Sinha, the founder, chairman and chief executive officer of Renew Energy Global, told BNEF in an interview in New York last month. His company is one of the largest suppliers of low-carbon power.

Tech companies like Microsoft and Amazon are large buyers, as are metals and mining companies. The actual price of the power procured depends on multiple factors, including whether it comes from wind or solar installations, duration, and if it’s delivered via the central transmission utility or a state utility. Wipro, for instance, aims to get 75 per cent of its power from renewables by 2025. It reached 60 per cent in 2022-23, from 47 per cent in the year before, according to its most recent annual report.

BNEF tracked over 16 gigawatts of corporate power purchase agreements globally in the first half of the year, with India accounting for about 80 per cent of all deals in the Asia-Pacific region. The largest deals were signed by developers feeding into the demand from their group companies. Tata Power, for instance, concluded an agreement to set up a 966-megawatt hybrid plant for Tata Steel comprising 379 megawatts of solar and 587 megawatts of wind.

From a volume of just 1 gigawatt a decade ago, corporate green power purchases across the world reached 38 gigawatts last year. The US is the biggest market, followed by Europe and Asia. The largest corporate offtakers in 2023 include Meta, Tata Steel, Amazon, Google, ArcelorMittal, Microsoft and Vedanta.

In addition to economics, clean power purchases are driven by net-zero commitments of companies, or policy mandates. California enacted new laws earlier this month requiring companies active in the state to report emissions and climate-related financial risks. They would cover thousands of companies active in the world’s fifth-largest economy, and likely set a precedent for other US states. A federal-level climate disclosure regulation proposed by the Securities and Exchange Commission last year is yet to be finalised.

Other recent developments of interest include:

Hydrogen: The Biden administration announced the names of seven hydrogen hubs that will be getting a slice of the $7 billion in grants announced for clean hydrogen. One of those — the California Hydrogen Hub, which has been awarded $1.2 billion of the funding — will produce hydrogen exclusively from renewable energy and biomass that will be used for the hardest-to-decarbonise sectors such as public transport and heavy trucking.

The hubs programme is one of the multiple initiatives by the government aimed at reducing the cost of clean hydrogen to $1 per kilogram by 2030. Partners in the project include Amazon and Air Products.

A hydrogen hub spanning parts of West Virginia, Ohio and Pennsylvania that is partnering with natural gas producer EQT will receive up to $925 million and produce hydrogen using natural gas with carbon capture, Bloomberg News reported. One of the hubs is proposed to be partially powered by nuclear energy to provide hydrogen for uses including steel and glass production.

Electric air-taxi: China’s EHang Holdings got permission to start trial operations of its autonomous two-passenger craft. It can travel at about 100 kilometers per hour for 25 minutes. The company said it had secured pre-orders for the aircraft locally, and from various other countries, including Japan, Malaysia and Indonesia.

These so-called eVTOLs, or electric vertical takeoff and landing vehicles, are a priority segment for most governments.

Joby Aviation recently delivered its first eVTOL to Edwards Air Force Base ahead of schedule, and a second is planned to be delivered in early 2024. The machine will “be used to demonstrate a range of logistics missions, including cargo and passenger transportation.” It has a range of up to 100 miles (plus energy reserves), and a top speed of 200 miles per hour. The company plans to launch commercial passenger service in 2025.

Vietnam is now India’s top supplier of solar panels, as buyers took advantage of a free-trade agreement which gives import-tax exemption to shipments from Southeast Asia. Meanwhile, US trade restrictions on solar gear from China have opened up an opportunity for sales from India. Waaree Energies and Adani’s Mundra Solar are the two largest exporters of panels to the US.

Renew Energy is ramping up its local solar manufacturing, mainly for captive use. “The production is primarily for our own consumption. There is a 40 per cent import duty on modules, and there isn’t enough capacity in India to make modules. Having security of your own supply is a very important factor in bidding for and winning future auctions,” Mr Sinha said.

The writer is New York-based senior editor – global policy for BloombergNEF, vgombar@bloomberg.net