Renewables can’t keep up with India’s surging power needs

After several years of working in companies including the Aditya Birla Group and Suzlon, Sumant Sinha started ReNew Energy in 2011. The company, which is looking to delist from Nasdaq, provides various decarbonisation solutions including power generation and distribution, storage solutions and solar manufacturing, among others. It now has a clean energy portfolio of more than 18GW. Sinha is also co-chair of the World Economic Forum’s Alliance of CEO climate leaders, which is pushing for measures to counter the slowing in transition to clean energy at the COP30, which starts on November 10 in Brazil. For this month’s edition of the India Business Briefing Q&A, I sat down with him to understand the scale and scope of the renewables sector in India.

Note: This interview has been edited for length and clarity

Let’s start by laying out the scene. What is the size of the market for renewables in India, and what are the growth areas? 

There’s massive organic growth in our core business, which is the independent power producing (IPP) business. The numbers are compelling. India wants to get to 500GW by 2030, and has 225GW of non-fossil fuel capacity installed so far. Therefore, we need 275GW in the next five years; almost 50GW a year. Last year, as an industry, we only did 30. This year, that 30 might go up to 40. Which means as we approach 2030, we will have to add 60W of capacity a year at the very least.

Secondly, we have also recently got into solar manufacturing. We have set up our full module capacity of 6.5GW. We are at 2.5GW on cells right now, which we are going to ramp up to 6GW before the end of next year. And then there are newer areas that are developing — green hydrogen, for example, which we started a couple of years ago, but it is taking off more slowly than we expected. 

The western world is beginning to realise that India is not pushing coal, but using it only to meet the demand that renewables are currently unable to

How does India’s power sector stack up globally?

The sector is growing at about 6-7 per cent a year. We are already the third largest electricity market in the world, after China and the US. And we are the fastest growing by far. This means that we are adding more demand every year to the electricity sector in India, while the US has been flat for many years. Now the incremental demand coming from data centres is driving 1-2 per cent growth, and that is leading to so much excitement there. To India’s 7 per cent growth, if you also add data centre demand and higher electrification of the economy, it is only going to go at a faster clip. In fact, Goldman Sachs has come out with a report saying that India is about to cross an inflection point and that our electricity demand growth will be 7.2 per cent after this.

Yes, but not all of that is coming to renewables . . . 

It is not, but that is step one. Now the question is that within the electricity system, there is a fundamental shift happening towards renewables because it is cheaper and cleaner. So the Indian government has taken a strategic view that it wants to have as much renewable energy as possible. 

But the Indian government has also increased the production of coal. 

Both industry and the government are pressing the accelerator on new renewable capacity addition as much as possible. But there are constraints on building out the grid, land acquisition, distribution companies’ ability to absorb all the power we want to generate, etc. So although renewables are at a significant growth mode, we are not going to be able to meet the demand growth. We are adding coal only to bridge that gap. 

Renewables is also the only sector in India where you have the large conglomerates — Reliance, Adani, Tata, Aditya Birla, ArcelorMittal, Vedanta etc — investing now. And all these people are now putting their shoulders to the wheel. Therefore you’ll see capacity addition in renewables ramping up. But even with this, we will not grow fast enough to meet demand growth. And no government is going to allow economic growth to be impacted because of a lack of power. That is why we require more coal. This is something the western world is now beginning to realise. That we are not pushing coal, but using it only to meet the demand that renewables are currently unable to.

You mentioned the entry of big Indian conglomerates. What does this mean for the competitive landscape for your business?

So the great thing is that because the sector requires so much investment, even the big boys cannot meet that. Also, bear in mind that for them renewables is just one of many businesses. For us it’s our only business. So when I look at the renewable-to-renewable size, we are not disadvantaged in any way.

But they do have deeper pockets . . .

They do, but they also have many other businesses to invest that capital. You can’t look at the entire Reliance balance sheet and say “you know what, I’m competing against that”. Because they also have to invest in petrochemical, telecom, retail, media and whatever else they decide to get into. So we are only competing with a small part of their investible corpus.

As one of the early entrants in the renewables space in India, what do you see as your challenges? 

One is that the power sector touches a lot of different stakeholders — union and state governments, regulators, consumers etc. And all of us have to work seamlessly, and in alignment, for us to be able to achieve our targets. We often do not. Often we don’t get enough support at the local level to acquire land. Sometimes the judiciary acts in opposition to what needs to be done. Sometimes the systems don’t tend to move in alignment. That is the biggest challenge. Everything else is easier. 

A few months ago, the blackout in Spain and Portugal was attributed to renewables. Is convincing people that renewable energy is reliable getting more difficult?  

It’s a relevant question and it’s very important to be cognisant of the things that can go wrong. In India, the ministry of power manages the grid, they are aware of these issues and their primary deliverable is to not have those kinds of things happen. Therefore, they have been increasing the technical requirements for us to be allowed to connect to the grid. These specifications are, in fact, quite onerous now, but I can understand why they are doing it. We have to go through extensive trials, which can take a couple of months. The data from the trials go back to the grid operators, they study it, make sure there is nothing untoward, and only then do they allow us to connect. We have also had to improve our forecasting mechanisms and they impose significant penalties if we get it wrong. 

How relevant is India in the global scheme of things?

There is an understanding now that the decisions India makes over the next several years are going to be fundamental to the climate change battle, and that’s why we get a lot of importance in such discussions. 

But climate change discussions themselves are losing relevance . . .

Sadly, yes. But primarily that is only happening in the US. The rest of the world is still looking at it as an issue. Some countries are hemming and hawing but they were doing that anyway. Consider that India accounts for about 8 per cent of global carbon emissions. And everyone knows that India’s entire development paradigm is in front of us. So there is a real concern that if India grows in the same way that every other country has grown so far, that is, in a carbon intensive fashion, then it will be the end of climate change conversations. Which is why India is central to this, and therefore the energy choices that India makes are very important aspects of global discussions. 

Is the global perception about India’s climate commitments and growth prospects accurate, in your view? 

The world is still struggling to understand how proactive India has been on climate change and energy transition. But people are beginning to realise that 500GW is a serious target and we are getting close to achieving it. 

They also haven’t got their arms around how big the Indian market is going to be, especially in investments for renewables. For example, in the US there’s so much excitement around nuclear power because they consume 4tn kilowatt hours of power right now. Their forecast for the next seven years is to grow to 5tn. In India, today we have about 1.8tn units, so we are about 45 per cent their size. But we are going to grow much faster. They will go by 1tn, we will grow by 1.5tn. So we are going to require much more generation. 

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