Betting on green

India’s largest clean power producer ReNew Power will soon merge with blank-check company RMG Acquisition Corp. II, then become Renew Energy Global, and trade on the Nasdaq.

The merger will extend a wave of clean-tech deals involving special purpose acquisition companies in the US, to include India’s growing renewables market. Announced last month, the deal will give Goldman Sachs-backed ReNew — which has over 5 gigawatts of commissioned capacity — an enterprise value of $8 billion. In January, Total of France said it was acquiring a 50 per cent stake in the 2.4 gigawatts operating solar portfolio owned by Adani Green Energy, as well as a 20 per cent minority stake in the company, in a $2.5-billion deal.

There has been a recent spurt of investor interest in India’s renewables space, with the outlook for the sector, as well as for electricity demand growth, remaining strong.

Solar debutants

Besides the direct investment deals, the list of “debutants” in India’s solar auctions also tells a similar story. Companies like Italy’s Enel and Saudi Arabia’s Aljomaih Energy and Water seem to have adopted an aggressive “bid-to-win” strategy. However, some like Vena Energy (portfolio company of Global Infrastructure Partners) managed to secure higher tariffs than others, according to BloombergNEF’s lead solar analyst, Rohit Gadre.

The first-time winners of 2020 auctions also include Indian companies like Torrent Power, Axis Energy and SJVN, a public sector firm.

“Intense competition at auctions and the continuous entry of new bidders, shows that power producers remain bullish on India’s solar prospects,” said Gadre. The competition led to solar tariffs touching a new record low of Rs 1.99 per unit last year. This interest is despite the challenges posed by the financial distress of many distribution companies, and various other systemic issues. The investment in India’s wind sector, in contrast, has been subdued, with tariffs edging up and some bids under-subscribed. The debutant in this sector was JSW Energy, which bagged 810 megawatts in the only wind auction of 2020 with a tariff close to Rs 3 per unit. According to the auction terms announced, there is an option to add up to 20 per cent solar in the project mix, but that is not mandatory.

In January 2021, India’s solar capacity surpassed that in wind. According to data on the website of the Ministry of New and Renewable Energy, solar power capacity totalled 38.79 gigawatts at the end of January, while wind power installations were at 38.68 gigawatts. The crossover was expected, and fits in with the fact that the target for solar capacity by December 2022 is 100 gigawatts, while that for wind is 60 gigawatts.

Top country

China is the world’s largest investor in the energy transition, and it looks set to maintain its top slot with the new targets announced for 2030. The National Energy Administration of China has proposed new green power mandates for grid operators, power distributors and retailers that imply a cumulative wind and solar capacity of 1,580 gigawatts by 2030, according to BNEF estimates. This tops the 1,200 gigawatts cumulative target announced by President Xi Jinping at the Climate Ambition Summit in December.

China also remained the largest investor in renewable energy last year, with its $84 billion spend marginally surpassing the $82 billion total of European countries, according to BNEF. The US was at $49 billion. The world’s most populous country, and the largest emitter, has committed to reach net-zero emissions before 2060.

ADB and energy transition

The Asian Development Bank is reworking its energy financing strategy to help developing countries in the region with their energy transitions.

In addition to reflecting in its new strategy the “dramatic” decline in the cost of renewables, ADB will also look at the opportunities presented by technologies such as hydrogen, energy storage, micro-grids, artificial intelligence, blockchain, carbon capture and storage, Yongping Zhai, ADB’s energy sector group chief told BNEF in an interview.

The bank aims to provide $80 billion in climate financing over 2019-2030, including funding for climate mitigation as well as climate adaptation. Almost all of its climate financing is for low- and middle-income countries.

The writer is the Editor – Global Policy for BloombergNEF. vgombar@bloomberg.net