Come rain or shine: Avaada, others up the ante against conglomerates

'You can easily multiply capacity, but the biggest challenge to do any larger project in India is availability of land, availability of evacuation, funding, and the offtake agreement'

When Vineet Mittal first got into solar power, sometime around 2009, and was planting solar panels in Gujarat, renewable energy looked like a sector ripe for startups. Renewables were clearly the future of energy, and the big boys — Mukesh Ambani’s Reliance, Adani Group, and the Tatas — were focusing much more on coal and petroleum.
 

Little did Mittal know that things were going to change drastically.

Today, all the three fossil fuel-fired conglomerates are big on renewables, leaving the startups in the sector — Mittal’s Avaada Energy, Renew Power, and Suzlon – to hustle for a slice of India’s drive to decarbonise its economy.

Mittal, an alumnus of Harvard Business School, stepped into renewables with a 15MW solar project in Gujarat in 2011, co-founding Welspun Renewable with industrialist B K Goenka. “We were one of the first movers in solar power generation, even though people were quite sceptical of solar way back then,’’ Mittal told Business Standard in an interview. “Developing 151 MW (DC) Neemuch solar project in 2013 was then Asia’s largest and the world’s second largest solar project.’’ 

Avaada is the new avatar for Mittal’s company, which it acquired in 2017 after Tata Power bought Welspun’s operational renewable energy business, which had an installed base of 1.2 GW, for $1.4 billion. Avaada has 4GW of operational renewables, which has risen more than 250-fold in 12 years.

In the next three years, Mittal wants to nearly triple the capacity, and triple it again by 2030, achieving a renewable cocktail of 30GW, around 7 per cent of the national renewables target.

Churn is on

The Indian renewable space is in for some churn after the Tatas, Adani, and Ambani decided to venture into renewables with plans of unprecedented scale. That ups the ante for startups.

Reliance aims to install at least 100GW of renewable energy generation by 2030, and Adani Green Energy, a late entrant in the sector, has announced a five-fold expansion to 45GW capacity by 2030. 

But startups are holding their own. Avaada plans to commission 11GW by 2026, which includes the world's largest, single-site solar power plant of 1.25GW capacity in Bikaner, Rajasthan, completed in 2022. It has around 700MW under an advanced stage of commissioning. Of the 4GW of projects under construction, part of the capacity will be commissioned by March 2024, and another portion by March 2025.

“We are targeting 11GW-odd projects by 2026,’’ Mittal said.
 

Avaada last month secured the biggest slice of 1.4GW in an NHPC-driven 3GW tender to set up connected solar power projects in India; the final average price came in at around Rs 2.53 per kilowatt hour.

“You can easily multiply capacity,” Mittal said, “but the biggest challenge to do any larger project in India is availability of land, availability of evacuation, funding, and the offtake agreement, whether it is for green pneumonia or green methanol.” 

Saurabh Kumar, vice president, India, Global Energy Alliance for People and Planet, says there is enough for everyone. “All these players put together do 10 to 12GW annually,” Kumar, who was managing director of EESL, said. “This (capacity) has to rise five times. Our energy needs will grow, and there is room for virtually everyone.”

By making his investors cash out profitably in the past, Mittal has managed to get prominent institutions to bet on his company.

The Asian Development Bank, DEG (Germany), and FMO (Netherlands) collectively invested $150 million in Avaada in 2019. France’s Proparco later invested $15 million. In 2021, after DFI exited, Global Power Synergy, a unit of Thailand’s state oil company PTT, invested about $454 million for a 41.6 per cent stake in Avaada Energy, before increasing it to $779 million this year. 

Anjali Bansal, founding partner, Avaana Climate and Sustainability fund, says: “We continue to see active interest and large capital flows coming into this sector particularly at the utility scale and C&I for renewables. That said, we need to see more funding coming into innovation to create grid scale storage, new battery technology, as well as off grid access.”

Diversification bid

While on a fund-raising spree, Mittal is also diversifying into newer areas, such as green hydrogen and green ammonia, and moving backwards into manufacturing solar equipment.

Avaada recently closed a $1.0 billion funding round this year to finance its green hydrogen and ammonia facilities, with Brookfield Renewables to finance ventures in green hydrogen, Mittal said. The company has also integrated backwards and is in the process of building a solar manufacturing plant under the government’s Production Linked Incentive scheme.“We want to be a sand-to-solar company,’’ Mittal said. “What we are doing is to make sure that we are not facing challenges on the supply side and be self-reliant on our own solar panels. We are setting up a solar panel factory and by 2025 will be fully operational at 3GW.”

Avaada’s expansion comes amid India’s plans to triple renewable capacity and investors making a beeline to capture a slice of the country’s growing renewable space, but at the same time the pace of installations is well behind schedule as India grapples with inadequate grids and uncertainties.

“See, the challenge in India is that the government has great intention, but we are dependent for power purchase agreement with the state discoms,’’ Mittal, who also represents the industry via various fora like the Confederation of Indian Industry, said. “So, India's biggest challenge is that till we fix the distribution-related issues, we would find it difficult to implement all the projects in time.”

The biggest barrier to large-scale solution of decarbonisation is perceived to be transmission infrastructure. For instance, Avaada completed a 280MW solar project in RUMSL but the connecting sub-station of the central transmission utility is not yet commissioned. 
 

The government needs to take a blanket approval for building the transmission grids and the green energy corridor, according to Mittal. What you need is multiple 765 KV lines. Renewable energy integration also poses a challenge for grid stability so demands of mismatch, imbalances in voltage, and the frequency needs to be looked at.

 Mittal says a ban on solar equipment imports was essential to nurture domestic players, and that the approved list of module makers has more than 30GW in capacity, and soon India’s module making capacity will exceed the needs of the domestic market.

“Producers will be crying that we build so much capacity and now we are not seeing enough projects coming online,” he said.