Welspun Energy Ltd., India’s biggest developer of solar projects, said the nation will surpass its sun-powered generation target by two-fold over the next decade amid shortages of coal and natural gas.
“A lot of investment planned for thermal power projects will go to renewables,” said Vineet Mittal, managing director of the company, a unit of Welspun Group backed by Apollo Global Management LLC co-founder Leon Black. “Most people don’t realize this yet but India’s power mix will change considerably.”
The company joins other developers in diverting new investment to renewable projects. CLP Holdings Ltd., India’s largest wind-farm developer, said last month it’s more likely to fund renewable projects after fuel shortfalls left a new coal- fired plant “dead cold” since April and cut generation at a gas-fired facility in half.
The government has set a goal of installing 20 gigawatts of solar capacity by 2022. Welspun estimates that it’s more likely to reach 40 gigawatts as renewables close in on the cost of fossil fuel-based power. Renewables are rapidly becoming competitive, with the price of coal-based power set to rise as high as 7 rupees a kilowatt- hour by 2017, Mittal projects.
India will need to add 169 gigawatts of total power capacity, equivalent to that of 154 nuclear plants, over the next five years to maintain an economic growth rate of 9 percent, according to the nation’s Planning Commission. Gross domestic product rose 5.3 percent in the three months ended March, the slowest pace in nine years.
The power ministry told developers not to plan any new gas- based projects until at least 2015 because there won’t be enough domestic supply, according to a March 14 note sent to companies. The Central Electricity Authority plans to revise guidelines so that new coal plants are designed to import 50 percent of their fuel, up from 30 percent, Mittal said.
The best wind farms have a levelized cost of energy, a measure that allows comparison between different fuel sources, ranging from 2.7 to 4.4 rupees per kilowatt-hour compared with coal’s 1.9 to 4.8, Ashish Sethia, head of India analysis at the London-based researcher, said in a July 3 note.
India relies on coal, oil and gas for 70 percent of its energy supply. That supply has been disrupted by poor rail and pipeline infrastructure constraining fuel delivery, and domestic coal and gas production failing to meet demand.
Companies from billionaire Anil Ambani’s Reliance Power Ltd. to Adani Power Ltd. have stalled 1.9 trillion rupees of investment to expand thermal power capacity amid supply constraints, data from the Association of Power Producers show.
Solar and wind power are already cheaper than diesel, which is used by factories, businesses and homes during chronic blackouts and to bridge gaps in the grid.
Over the next 18 months, Welspun plans to start replacing diesel generation at group companies with renewable alternatives, which would help save on fuel costs and lock in power prices, Mittal said.