IL&FS Energy ready for capacity expansion

Has 13,600 Mw of generation capacity in the pipeline, including 5,000 Mw in solar energy parks

IL&FS Energy Development Company (IEDC), with 2,200 Mw of operational capacity, sees a spurt in power demand by 2019. It aims to operationalise 5,960 Mw capacity by then in Gujarat, while increasing the pace of addition in its renewable energy portfolio.

Sunil Wadwa, managing director, says the central government’s initiative for reducing the financial stress in the power distribution sector would create demand. “It is a good strategy not to bail them (distribution companies) out but to do so internally within a state. Financial restructuring will be a good start to see a reforms agenda in states vis-à-vis their discoms,” he told Business Standard.

He said the next stage of capacity addition would be in 2019. “When restructuring happens and there is money in the hands of discoms, the demand which is suppressed and unmet will come up.”

TAPPING FUTURE DEMAND

NEAR OPERATIONAL / UNDER CONSTRUCTION CAPACITY (898 MW)

• 600 Mw imported coal-based power project in Tamil Nadu
• 286 Mw wind power projects across various states
• 12 Mw waste-to-energy project in Delhi

PROJECTS UNDER DEVELOPMENT

• 5,000 Mw solar parks in Rajasthan in joint venture with state govt
• 2,640 Mw imported coal-based power project in Tamil Nadu
• 3,960 Mw coal-based power project in Gujarat
• 2,000 Mw gas-based power project in Gujarat

IEDC commissioned a 600-Mw coal-based unit at Cuddalore in Tamil Nadu this September. It has in the pipeline a 3,960 Mw plant in Gujarat. “We have environment and land clearances in place for the Gujarat project. We are keeping it for the next pace of demand. We hope to see project implementation to start in two years,” he said.

In all, it has 13,600 Mw of generation capacity in the pipeline. This includes 5,000 Mw in solar energy parks. Now the second largest in wind power, it hopes to replace CLP India as the largest by the year-end, when it hopes to have 1,400 Mw in this segment. It currently has wind energy projects totalling 750 Mw capacity in seven states; another 286 Mw is in various stages of construction.

Said Wadwa: “Solar is not going to replace wind. Wind caters to evening peaks, whereas solar will be mainly day peaks. Both have time and location advantages.” Solar energy, he added, has certain advantages, as with rooftop and micro grids. “If you increase the capacity in solar through modular additions, the cost of solar comes down but it is not so in wind.”  

Rates for solar energy had bottomed, he said. For some time, there would be improvement in efficiencies in the performance of modules, due to innovation. “Also because of rate cuts by the Reserve Bank, interest rates will soften. The average of the current rates being bid are in the range of Rs 5-6 a unit. These are very competitive and will not have much scope for reduction in the near term. But, even at these prices, the levelised cost of solar power has reached grid parity.”

Only some more financial engineering might improve the returns for investors, he said. Solar energy rates are fixed for 15-20 years, for the entire duration of a power purchase agreement. In the case of thermal power, the rates can vary.  

IEDCL has a 50:50 joint venture (JV) with the Rajasthan government for solar parks, eventually, these will have 5,000 Mw capacity. The first two projects under this will come in Bhadla and Jodhpur, totalling 1,000 Mw. Another one will be in Jaisalmer.  

“Till such time land and evacuation issues are resolved, you don’t get bank financing for solar projects. The time it takes to get approvals is disproportionate to the time it actually takes to develop a project. If solar park locations are ready, the projects can be ramped up fast. This will de-risk the projects from these issues, which are unique to India,” said Wadwa. The JV has applied for connectivity for 500 Mw, based on which Power Grid Corporation will make the capital expenditure. From the Bhadla project, the company can evacuate 500 Mw using the existing state utility network and Power Grid's lines. By December 2016, the state lines will be ready to connect to Power Grid's.