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IEEFA Update: How India’s clean energy drive is supercharged by Reliance’s grand ambitions

November 30, 2021
Kashish Shah

With more than 100 gigawatts (GW) of renewable energy on its grid, India is now commencing what some energy industry experts are referring to as chapter 3 of its clean energy story.

Chapter 1 began in 2010 when the government set a 20GW solar capacity target by 2020 under the National Solar Mission. In Paris at the 2015 United Nations Climate Change Conference, or COP21, India agreed to build significant renewable energy capacity, with 40% of electricity on the grid coming from renewable sources by 2030, and to reduce its carbon emissions intensity by 33-35% compared to 2005 levels.

From 2016, in chapter 2, India’s power sector experienced incredible deflation in solar and wind energy tariffs – an ongoing trend that is being driven by state-backed, competitive renewable energy auctions. The solar and wind tariffs in India are now 30-40% cheaper than the average coal-fired power tariff of Rs4/kWh (US$54/MWh).

It is clear that ultra-low cost solar and wind will fuel the transition to electrifying everything

In IEEFA’s view, this next chapter of India’s clean energy story will be the most critical one. The challenge will be to step up the rate of activity threefold so as to accelerate the decarbonisation of the most energy-intensive components of the economy – the electricity, transport and industrial sectors. Electrifying everything will massively enhance India’s energy security.

It is clear that ultra-low cost solar and wind will fuel this transition. Deploying 500GW of renewable energy capacity by 2030 is only a part of the challenge and achieving that target still doesn’t entirely solve India’s energy security and reliability problems. India relies heavily on imports of solar modules, wafers and cells, which impacts trade and current account balances.

Reliance’s grand plans

To be “atmanirbhar” (self-reliant) for its energy needs, India requires a significant localisation of the clean energy value chain. And it appears that one of the country’s largest industrial conglomerates, the Reliance Group, plans to do exactly that with its belated but grand entry into India’s clean energy scene.

After disrupting the telecoms market, Reliance now aims to propel India’s renewable energy targets by enabling 100GW of clean energy capacity by the end of this decade.

In addition to its 2030 renewables target, Reliance aims to enter into battery manufacturing and green hydrogen production to play a key role in India’s energy transition. Mukesh Ambani, Chairman of Reliance Industries, recently unveiled a plan to develop four gigafactories on 5,000 acres of land in Jamnagar, Gujarat, as part of an investment outlay of Rs75,000 crore (US$10bn) by 2024.

If commissioned as per the stated plan, this would be one of the largest clean energy hubs in the world. The plan includes an integrated solar photovoltaic (PV) module factory, an advanced energy storage battery factory, an electrolyser factory for the production of green hydrogen, and a fuel cell factory for converting hydrogen into motive and stationary power.

Reliance’s four gigafactories in Gujarat will be among the world’s largest clean energy hubs

The group entered the market by investing in several foreign leading-edge technology entities in recent months. There are three big acquisitions to build its portfolio across the solar energy value chain to include polysilicon, wafer, cell, module manufacturing and engineering procurement & construction (EPC) capabilities.

Reliance has acquired REC Group of Norway for US$771 million. REC is a long-established solar module manufacturer with two facilities in Norway for making solar grade polysilicon and one in Singapore producing PV cells and modules. Further, it has invested US$29 million in German solar wafer manufacturer NexWafe GmbH and is entering a strategic partnership to commercialise NexWafe’s product in India.

Reliance is also in the process of buying a 40% stake in India’s leading solar EPC and operations & maintenance (O&M) company, Sterling and Wilson Solar Ltd (SWSL).

The solar industry, which is heavily dependent on imported Chinese equipment, has support for domestic manufacturing from the Government of India’s production-linked incentive (PLI) scheme. In the Indian Renewable Energy Development Agency’s (IREDA) recent tender for 10GW of integrated module manufacturing capacity – worth Rs4,500 crore – Reliance bid for 4GW of polysilicon to modules capacity.

Reliance aspires to replicate its drive for dominance in solar manufacturing in two other important clean energy technologies – battery storage and green hydrogen.

Reliance has partnered with the Bill Gates-owned investment management firm Paulson & Co to invest a total of US$144 million into US-based battery development company Ambri Inc. which is exploring alternatives to Li-ion for longer duration (4-24 hours) battery storage systems. Reliance has acquired 42.3 million shares for US$50 million.

Currently, grid-scale battery storage systems globally have storage capacity of up to four hours. Investing in longer duration battery storage systems looks to be a part of Reliance’s long-term strategy to dominate the clean energy industry in India.

Growing a green hydrogen industry

Aligning with India’s ambition to become a hub for the production of green hydrogen, Reliance has moved into the space by partnering with renewables pioneer Henrik Stiesdal to develop and manufacture hydrogen electrolysers.

Stiesdal’s company is a world leading clean power technology innovator in wind, long-duration storage and fuel cells technologies. Reliance will look to scale up Stiesdal’s commercially proven technologies in India.

The production cost of green hydrogen currently ranges between US$2.5/kg for fossil hydrogen and US$7/kg for green hydrogen. The electrolyser cost is roughly at US$850/MW. This should drop significantly, to US$200/MW, to bring green hydrogen production costs down to US$1.5/KgH2 to be competitive with fossil hydrogen produced from methane gas reformation.

Reliance’s ambitious objective is to bring the green hydrogen production cost even lower to US$1/kg within a decade to make India a hub for green hydrogen production.

Reliance has a track record of disrupting the market by bringing down prices and has set objectives to do the same in the clean energy industry. The group is acquiring world-class technology and will look to scale it up in the Indian market, which relies heavily on cheaper Chinese imports.

In the past three to four years, India’s clean energy sector has not been able to maintain momentum – that could be about to change as Reliance’s ambition brings a critical mass of investment.

Kashish Shah is an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA)

This article first appeared in SolarQuarter India

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Kashish Shah

Kashish Shah was an energy finance analyst with the Institute for Energy Economics & Financial Analysis (IEEFA). He specialises in financing, policy and technology matters of the Indian electricity market.

Kashish has a master’s degree in Economics from the University of Sydney and an Electronics Engineering degree from NMIMS University in Mumbai.

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