In what may be one of the most significant efforts to promote non-conventional energy in the country, NTPC Ltd, India’s largest power generation company, will shortly set up a joint venture firm with the Asian Development Bank (ADB) for renewable energy generation.
Because of its heavyweight financial backers, the JV will be in a strong position to secure finances to meet the relatively high capital costs needed to viably generate non-conventional energy, such as wind power.
While it takes a capital investment of Rs3-4.2 crore per MW of power generated through coal-based or gas-based projects, wind-based projects require between Rs5.5-7 crore per MW.
The start-up funding for the JV hasn’t been finalized yet, but NTPC will take a 40% equity stake, with ADB, a multilateral finance institution, picking up 20%. The balance will be taken up by financial institutions and other power companies.
The JV plans to install a commissioned capacity of 500MW. It will also look at solar and biomass energy generation.
“Our board has given its in principle approval to the joint venture and a formal agreement will be signed shortly,” said a senior NTPC executive who did not want to be named.
“This tie-up makes sense as the National Tariff Policy has fixed a 5% procurement criteria from renewable sources within five years,” notes Shubranshu Patnaik, associate director, PricewaterhouseCoopers.
Some state electricity regulatory commissions, such as those in Gujarat and Maharashtra, have already fixed up the procurement standards from renewable energy sources.
ADB already works with Power Finance Corp. and Power Grid Corp.