Public sector enterprises gradually diversifying into green energy

Egged on by government incentives, the state owned enterprises (SOEs) are diversifying into green energy and building renewable energy portfolios.

In October this year, the Ministry of New & Renewable Energy (MNRE) urged all SOEs to prioritise renewable projects in their investment plans to cut carbon emissions. Many SOEs are now venturing into the clean energy space, including grid-connected renewable energy projects and behind-the-meter solar rooftop.

Coal India Ltd (CIL) has announced plans to develop 20 GW of solar capacity over 10 years at an estimated investment of Rs 1 trillion. It is also pumping investments into coal bed methane and underground coal gasification.

NTPC Ltd, the country's largest integrated power producer, is adding more renewable energy to stay profitable in the long run. The maharatna central public sector enterprise (PSE) has set a target to become a 130 GW company by 2032 with a diversified fuel mix and 600 billion units in terms of generation. Though coal will continue as the predominant fuel, the share of thermal power to NTPC's overall power portfolio will be reduced to 70 per cent.

The company aims to invest Rs 25,000 crore ($3.5billion) to set up the world’s largest proposed solar park at Kutch in Gujarat. The solar park will be developed in phases over the next 5 years with an end target of 5 GW. NTPC also plans to bundle generation of power from renewable energy sources with coal-based generation, and shut coal-based plants during the day when solar energy is available. NTPC participated in the central public sector undertaking (CPSU) scheme Phase II and issued a tender for 1 GW of solar projects in June 2019.

“Pollution is a big issue affecting millions of people and a huge cost to health services, state governments and workplaces. A more affordable cleaner supply of energy is essential to clean up the air and ensure daily living isn’t about struggling to breath. Remaining profitable is also important. The government has identified that future profits of SOEs lie with diversification, minimizing risk offtake, and cheaper costs of production. Renewables are cheaper, cleaner and more sustainable than generating power from dirty expensive fossil fuels, whose industries are set to decline into the near future," said Vibhuti Garg, energy economist at the US-based think tank Institute for Energy Economics & Financial Analysis (IEEFA).

Currently, thermal power plant developers in India are under huge pressure. Existing plants are underutilized, with the plant load factor (PLF) sitting below 60 per cent over the past two years. Further stress is being caused by excessive financial leverage, fuel supply disruptions, issues in securing competitively priced power purchase agreements (PPAs) and payment delays which all together ensures debt servicing is extremely difficult.

“India’s coal-based assets are running into huge losses and are a drag on the financial and banking industries. Redirecting investment away from fossil fuel based stranded assets ensures SOEs will remain profitable and relevant in the fast changing energy sector both in India and globally," Garg said.

Other CPSUs are also placing big bets on renewable energy. NLC India has set up total renewable energy capacity exceeding 1GW, including 1GW of solar capacity and 51MW of wind capacity. The company plans to increase  its installed solar capacity to 4 GW by 2022.

Even equipment major Bharat Heavy Electricals Ltd (BHEL) diversified its engineering portfolio by venturing into new areas like solar power and electric vehicle charging in FY19. As a result, the company registered a significant 30 per cent increase in profits, with PBT (Profit Before Tax) increasing to Rs 2,058 crore in FY19 from Rs 1,585 crore in FY18.