Adani allegations bring India's clean-energy conundrum to the forefront
The allegations of bribery against Adani Group's founder Gautam Adani highlight the increasing difficulty that India's renewable energy developers have in finding buyers for their power.
Officials say that while India's central governments wants to move away from coal-fired power generation and towards renewable energy sources, state-owned companies in charge of supplying electricity have been slow to strike deals. U.S. officials allege that Indian billionaire Adani devised a $265-million scheme to bribe Indian government officials in order to secure solar energy supply deals after his company was unable for years to find buyers for a six-billion dollar project.
The Adani Group denies the allegations.
Conglomerate faces increasing delays in signing up customers for renewable electricity capacity that is being developed now in India, the third largest emitter of greenhouse gas in the world.
In India, coal accounted for about 75% of the power generated in the year ending March. Renewables, such as wind and solar, but excluding hydro-electricity made up the remaining 12%.
India still falls more than 10% behind its publicised goal of adding 175 gigawatts of renewable energy by 2022.
The federal government has stepped up its bidding on renewable projects in order to reach an ambitious target for 2030 of increasing the non-fossil energy capacity to 500 gigawatts. It plans to bid for four times the amount of renewable energy capacity it has commissioned over the last five years.
New Delhi introduced renewable purchase obligations (RPOs) in 2022 to encourage states to meet India's goal. These RPOs mandate that the states increase their clean energy adoption to ensure that the national percentage doubles to 43.3% by March 2030.
A report released in February by the government think tank NITI Aayog revealed that to honor these RPOs, 20 of the 30 monitored provinces would have to double their share of green energy in their electricity mix.
India's states lack the necessary infrastructure to handle the rapid growth of renewable energy, and they are unwilling to risk using "intermittent renewables" because their state is not prepared.
Adani Green, India's leading renewable energy company, faced a number of challenges. It took almost three and a half years for it to reach agreements with buyers on the 8 gigawatts of solar power that the company won in an auction widely regarded as the largest in the country.
DEMAND POOL
R. Srikanth is the dean of India's National Institute of Advanced Studies and an energy industry advisor. He said that setting targets and issuing contracts are "meaningless" as long as there is a low level of interest by power distribution companies.
Srikanth added that the allegations against Adani could lead to a further slowdown in renewable energy, since it may be more difficult to obtain low-cost financing from foreign investors.
The way that some tenders have been run has caused delays in the completion of renewables projects. Adani Green won the first major contract from state-run Solar Energy Corp of India without a PPA (Power Purchase Agreement) guaranteed by the state.
SECI announced the agreement in June 2019. It said that buyers would be guaranteed. However, it removed the guarantee from the contract signed a year after.
SECI's Chairman told the media last month that, despite a threefold increase in renewable project tendering, 30 GW worth of projects have been completed but are still without buyers.
R P Gupta said in an interview that you can't expect states to sign three times as many power supply agreements. He added that "demand pools" must be created and the states "sensitized" to renewables.
JM Financial, a broker, said it takes between 8 and 10 months after a contract has been awarded to sign resale contracts for power.
SECI data revealed that, compared to companies awarded contracts between July 2018, and December 2020, it took around three months for them to reach a supply agreement.
JM Financial stated that delays in signing were due to the sudden surge of bids, the large pipeline of construction projects, and mismatch between power demand and bid pipeline.
Gupta stated that renewable energy projects were also cancelled, with 4% to 5% of all projects being annulled. There are also backlogs for the development of transmission infrastructure.
Rakesh Nth, the former chairman of India’s Central Electricity Authority said that one solution would be to know how much power customers want before projects are put out for bid.
He said that if buyers are given confidence prior to inviting bids, it could reduce the time taken for signing power supply contracts. (Additional reporting and editing by Alexander Smith; Shubham Btra)
(source: Reuters)
