Backlog of PPAs getting streamlined, says Hero Future Energies CEO

For developer, there are pros and cons of integrating upwards into equipment manufacturing. The critical thing here is that India is now developing an ecosystem for solar module manufacturing capacity

Discoms refusing to sign Power Purchase Agreements (PPAs), leading to their pileup, is the biggest problem the Indian renewable energy sector is facing. Srivatsan Iyer, chief executive officer (CEO) of Hero Future Energies (HFE), which is among the largest renewable energy developers operating in India, in a video interview tells Sudheer Pal Singh that the issue is getting sorted as tariffs have started declining on integrated tenders. Edited excerpts:

 

How do you look at the increasing number of Firm and Dispatchable Renewable Energy (FDRE) tenders where tariffs have come down drastically? 

There has been a lot of discussion among the policy makers and the industry on the point that we can only add so much renewable energy before it starts putting strain on the grid because of intermittency. There is a realisation to have a strategy where there is a combination of technologies to provide power round-the-clock so that the use of transmission infrastructure is maximised. That will cause less strain on the grid. The other solution that policy makers have come up with is that a lot of existing solar plants are connected to the grid across the country, but this infrastructure is used only for eight hours. So, there is a discussion on how to maximise the connectivity that already exists, and unlock it for the other 16 hours. A combination of all these factors, along with the fact that battery costs have dropped almost 90 per cent over the last 10 years, are now making storage-integrated projects more viable. That is why tariffs in the integrated bids have gone down steadily over the last few months. This change is driving more private sector investment. It is very important because it makes renewable energy more dispatchable. Leveraging these trends, companies like HFE are already building these kinds of projects.

 

While it is positive for capacity creation, do we have enough equipment manufacturing capability to meet the demand?

 

There have been positive developments on the front of domestic manufacturing capacity for the entire RE value chain too. Now, apart from Advanced List of Models and Manufacturers (ALMM) for modules, we have ALMM for cells and the government has introduced a proposal to introduce ALMM for wafers and the intent is to support as much upstream capacity build as possible. So, while the Production Linked Incentive (PLI) helped, the ALMM concept will now mandate companies to set up manufacturing capacity. Given the volatility in global supply chain and geopolitics, the more we are able to increase domestic manufacturing capacity in these areas, the more India will be shielded from the impact of this volatility. The other important trend is that as renewable energy becomes more dispatchable, the ability to decarbonise hard-to-abate sectors could also go up. This is because it will likely support electrification of industrial processes where possible, and also potentially support the ability to produce green hydrogen competitively and at scale.

 

So, would HFE look at entering into manufacturing in areas like wafers and polysilicon? 

For a developer, there are pros and cons of integrating upwards into equipment manufacturing. The critical thing here is that India is now developing an ecosystem for solar module manufacturing capacity across the entire value chain. The country has a stated goal to add 40-50 Gw of RE capacity annually, and around 30-40 Gw of this will be solar. Against this, the domestic cell manufacturing capacity is around 15 Gw and that needs to build up fast. In wafers, the domestic capacity is very minimal. So, tremendous growth is required in the value chain.

 

To what extent would the issue of delays in PPA signing by discoms impact this growth potential? 

The backlog of PPAs is getting streamlined now. Because the tariffs have started declining on integrated tenders, I believe the discoms are now more comfortable in signing PPAs on a lot of the new tenders.

 

Given this background, what are the top planks of your growth strategy in the near term? 

Over the last 18-24 months, we have won quite a few tenders in India, and almost every one of them has been an integrated tender. Right now, we are focused entirely on execution. As new tenders come up, we will consider participating in those. In February this year, we announced the start-up of our first green hydrogen plant for blending of green hydrogen with Liquefied Petroleum Gas (LPG) at an industrial customer site. We will continue to look at green hydrogen as an avenue to decarbonise hard-to-abate sectors.

 

What is the total capacity being executed at the moment, and what is the overall investment going into these projects? 

At HFE, we have successfully secured 4.9 Gigawatt of complex, round-the-clock, high CUF tenders with 2.3 gigawatt hour of Battery Energy Storage System (BESS) and signed PPAs for approximately 4.2 Gw with 1.7 gigawatt hour of BESS.