Stressed European power utilities bet on solar opportunities in India

Loss-making European power utilities are turning to India for investment opportunities in renewable energy (RE), drawn by the country's impressive drive in the latter.

Engie of France, one of the biggest European power companies, which lost about $40 billion over 2010-16 on its fossil fuel and nuclear holdings, intends to invest $1 billion in Indian solar energy over the next five years, says a report from the US-based Institute for Energy Economics & Financial Analysis (IEEFA). Engie is also exploring opportunities in Indian wind power.

In Europe, the growing appeal of RE has pulled down wholesale electricity rates. This has caused financial pain for utilities that delayed a transition from fossil fuels to renewables. European utilities logged $150 billion in asset write-downs in 2010-16. Investors that include Goldman Sachs and UBS have been warning for years that coal has reached retirement age and solar energy will become the default technology of the future.

In both China and India, capacity utilisation at coal-fired generation stations fell to record lows of 47 per cent and 57 per cent, respectively, in 2016. This was despite growth in electricity demand in both countries.

Tim Buckley, director of energy & finance studies in Australasia at IEEFA, notes the energy ministry here is pushing for energy efficiency and Re targets that are ambitious, but in IEEFA's view, entirely achievable.

"NTPC, the giant, 63 per cent state-owned Indian power company that provides 25 per cent of the national electricity supply (playing a critical role in the country's economic activity), historically has been dependent on coal but is now buying into change. Despite its history as a fundamentally coal-based power generation utility, NTPC is now rapidly rolling out in-house, utility-scale solar projects and signing power purchase agreements for solar power from private operators at record low, deflationary electricity tariffs (rates) absent subsidies," he said.

It is even beginning an entry into the electric vehicle sector by setting up charging stations. NTPC has committed to contributing 10 Gw of solar capacity to the overall 100 Gw government target, making the company a substantial facilitator of India's national electricity transformation, the report states.

IEEFA predicts that the 50,000 Mw of coal power currently under construction in India would operate at only 50-55 per cent capacity, operating largely as reserve capacity. NTPC has 15,000 Mw of coal-fired capacity in development but plans to retire 11,000 Mw of older capacity.