 "Sumant Sinha, Founder Chairman and CEO of ReNew Power")
The key is to find places that are the cheapest to produce it, says ReNew Power Founder & Chief Executive Officer, Sumant Sinha, as he speaks to S Dinakar about how his company’s plans are aligned with India’s quest for net zero. Edited excerpts:
IEA’s latest report expects the world to add as much renewable capacity in the next five years as it did in the last two decades. How viable are these projections in terms of the supply chain of materials, and costs? Will this global race led by China, Europe and US affect India's renewable targets?
We have a lot more companies that are now realising that renewables are the way of the future. So, there are many more arms and legs out there willing to get into the sector. People are looking to get into the manufacturing supply chain, governments are looking at expanding transmission infrastructure. Where there are limitations I think it is in the area of local permits and land acquisition because that sits in the hands of local governments.
The second area where I think more work needs to be done is grid management because as all of these renewables hit the grid, are grids prepared to absorb so much intermittent renewable energy and service the demand side? We need more storage solutions as well.
Do you see a change in ReNew Power’s strategy because your latest presentation talks about Round the Clock (RTC) power, storage systems and corporate PPAs?
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We are beginning to look at ourselves as not just being a company that adds renewable energy projects on the ground and supplies into the grid but as a broader company whose job is to provide solutions around decarbonization. Of course, our core business is to clean up the electricity supply through renewable energy but, as I said earlier, renewable energy would have a lot more applications in the other areas of energy consumption. Those are areas we want to explore.
The second thing is that so far discoms have been the buyers of our power, but going forward we see many more companies joining the bandwagon of decarbonization.
Can you talk more about your $8 green hydrogen project in Egypt; are you planning any such project in India?
Green hydrogen will have a global application and will not be limited by borders. You have to find places that are the cheapest to produce green hydrogen. India is of course a really good location to produce green hydrogen, and one of the largest consumers of grey hydrogen. We have a joint venture that we are putting together with IOC and L&T to service the Indian market. In addition to that we would be looking at whether we can use India as a manufacturing destination for exporting green hydrogen. Similarly, we're also looking at other geographies where it might be economical and cost-effective to produce green hydrogen. Egypt is one such place but there are other places in the Middle East as well and other parts of the world including the US where it might be sensible to produce green hydrogen.
You have more than 13 GW in the pipeline including commissioned projects. Do you have any targets mirroring India’s renewable targets, and investment plans to get there?
We have not said anything in the public domain. But if you just extrapolate from where we are right now, and that's one way to arrive at potential number without telling you what our thinking is, eventually India is likely to get to let's say 400-450 gigawatts of renewable capacity by 2030. Our market share of all new incremental projects getting set up is 10 to 12 per cent, and if you have to set up another 300 gigawatts to meet the target then you can assume that we should be looking at an incremental 30 to 35 GW over the next eight to nine years. Add that to our 13 GW current pipeline and it will take us in the 40 to 45 GW range.
What kind of investments are you looking at?
Now we have a pipeline of about 5 1/2GW of projects that we are building in the next 18 months. The total capex for that is close to Rs 35,000 crore. (1MW of solar costs Rs 4 crore and 1 MW of wind Rs 6-7 crore. A weighted average of that is about Rs 5-6 crore per megawatt.) There aren't that many companies in India that have capex programs of that scale and size. Renewable energy will be one of the biggest single sectors of capex investment by Indian companies over the next seven to eight years.
Have you closed the funding?
Equity is already there. It's a 75-25 mix, by and large. The equity is either sitting on our balance sheet or gets generated as we go forward. We've raised a lot of debt. We recently tied up a billion dollar of syndicated loan from international lenders. We've done a number of international green bond issuances. And then of course we have lenders like PFC and REC, so more than two-thirds of the total debt financing is already lined up, and the balance should get lined up.
How do you see your revenue streams changing in the next five years? Right now corporate PPAs and hybrid and RTC's seem a smaller component.
I think you'll see much more of our sales going towards the corporate market directly. Most of our new projects are being done with Solar Energy Corporation (SECI), whether RTC or vanilla wind or solar projects, and so our offtake mixes shift very strongly towards either SECI or towards corporate PPAs and away from discoms directly. We are a company that started ten years ago, and in the first 5-6 years of our evolution 100 per cent of our PPAs were with discoms. Today that number is down to 50 per cent. By the time we finish building out the 13 1/2 GW, the discom exposure will be down to about 30 per cent. And as we roll forward the direct discom exposure will come down even more substantially.
How are your receivables? They seem to have come down in your latest quarter. Do you see any defaults by discoms?
It really depends on when you started as a company. If you started earlier, chances are that you had some of these discom exposures, and that is probably a bigger part of your portfolio. If you started more recently, you probably have only SECI as your offtaker in which case your overall situation is probably somewhat better. Our receivables will continue to improve quite substantially as we go forward, and the government’s LPS scheme is making the discoms be a lot more current on clearing their payments as well as the backlogs. We have not seen any defaults in our history. Discoms will be late but they do pay, and there’s a strong legal underpinning to our sector for contractual payments.
Can India achieve its renewable targets as it needs to double current installations to reach the 450-500 GW number? Where are the chokepoints?
The chokepoint actually sits at the end of the discoms, because discoms are really where the electricity sector meets the consumer. The private sector is geared to add capacity, the transmission infrastructure is getting built up by the government, SECI is waiting to do more auctions, but unfortunately the distribution utilities continue to make losses, and operate as government departments. I think we need more cooperation from the state governments.
