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energy | IST

See 13% growth in all India FY22 electricity demand; prefer NTPC, Tata Power, JSW Energy: Axis Capital

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To discuss India’s renewable energy picture, CNBC-TV18 spoke to Prashant Jain, joint MD & CEO of JSW Energy, and Sumit Kishore, executive director-capital goods, power and infrastructure at Axis Capital.

India has come a long way in its commitments towards renewable energy, and with a total of 100 gigawatts in solar, wind and other renewable energy capacity, it now comprises of nearly 26 percent of India's total power generation. India has ambitious targets in the renewable energy space.
In fact, if you consider solar, wind and hydro combined, they contribute to a third of India's total installed capacity. This has steadily risen and more than doubled over the last six years from less than 47 gigawatts then. But with the expected surge in power demand to cater to the burgeoning requirements of the nation and the need to find an alternative to fossil fuel-based power generation, India has set an ambitious target of 450 gigawatts of renewable installed capacity by 2030. This means an annual addition of 20 gigawatts of solar capacities and 10 gigawatts of wind every year.
Now bringing focus to solar energy specifically, these steep targets come with their own set of challenges. According to broking firm JM Financial, until July, about 53 gigawatts of solar capacities were tendered. However, only 50 percent of that was under construction, with 35 percent of these capacities having no power sale agreements and 14 percent of them being cancelled. This does pose questions for continuity in the incremental addition of capacities. Moving ahead, the pipeline for tenders with power sale agreements beyond FY22 remains subdued. The fact that solar tariffs have also halved over the last five years also has led to distribution companies being more hesitant in signing power sale agreements, which only adds to hurdles. So India may have set lofty targets, but it also has its own set of issues to tide over.
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To discuss India’s renewable energy picture, CNBC-TV18 spoke to Prashant Jain, joint MD & CEO of JSW Energy, and Sumit Kishore, executive director-capital goods, power and infrastructure at Axis Capital.
On renewable resources and coal shortage, Jain said, “This discussion has been happening for quite a long time and the shift has been taking place for a while. Earlier it was primarily on the ESG front, but now the shift is primarily because of the economics. Because if you are in a position to generate electricity from renewable resources at 30 to 40 percent cheaper prices than thermal, coal or natural gas, then it becomes a natural choice. So that is one reason that is making it more and more attractive. India has its own share of challenges, primarily because no capacity has been built in the last 8-10 years and now the GDP is reviving. Also, fixed asset investment is taking place and you are seeing shortage, so shortages are here to stay for some more time.”
On capex for renewable energy plans, Jain said, “So this Rs 16,000 crore capex is fully tied up now and also the PPAs have been signed. The equipment has been ordered, construction is in full swing and commissioning of assets will start happening from the last quarter of the current financial year, wherein we will be commissioning close to 200 megawatt and thereafter 250 to 300 megawatt every quarter will be on stream and will be commissioned and supplied to the grid or to the consumers with whom we have tied up the PPAs.”
“With regard to the equity, as I mentioned last time that JSW Energy is the most under leveraged balance sheet. Our debt to equity is less than 0.4 times and debt to EBITDA is less than 2 times as against the industry average of 2.50 times debt to equity and debt to EBITDA of 5.50-6 times. We are the only free cash flow company, generating Rs 2,200 crore of free cash, which is going to go for expansion of these new capacities. So, entire equity is coming from internal accruals. In the future as well, going up to 20 gigawatts by FY30, the entire equity will be coming from internal accruals,” he said.
Meanwhile, on power demand, Kishore said, “Fiscal year-to-date, there has been a growth of 13 percent year-on-year in all India electricity demand and this is a growth of 3.2 percent if you compare it with the corresponding base of FY20. In September, so far, electricity volume growth has been about 1 percent year-on-year. So post COVID recovery is beginning to moderate the base effect, which was seen till August 2021.”
“So I would say that just looking at the next couple of years, notwithstanding the target of 450 gigawatts till 2030, which is the revision of the 175 gigawatts target that we had till 2022 and our current installed renewable capacity of 100 gigawatts, the key determinant here on would be that post the COVID base effect, do we sustain electricity demand growth of say 5.50-6 percent plus. Just a 5 percent demand growth that you have seen in the country over the past decade will not be enough to justify a 35-gigawatt addition on a per annum basis through 2030 to get to 450 gigawatts. Possibly a 5-5.50 percent growth is just going to justify a 15 to 20 gigawatts addition per annum.”
On top stock picks, Kishore said, “A variety of players in the sector, starting from NTPC, Tata Power, JSW Energy, Adani Green, as well as other places which are not listed like ReNew Power, have announced sizable capacity addition targets. I would even go on to say that companies like RIL are going to enable a lot of capacity addition in renewables.”
For full interview, watch accompanying video.
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