Mumbai: Power producer Tata Power Co. Ltd is looking to increase its renewable energy portfolio and aims to get more than its earlier stated 20-25% of total capacity from clean energy, said chief financial officer Ramesh Subramanyam in an interview at his office in the Bombay House in Mumbai.
Tata Power’s future growth will be led by renewables, Subramanyam said. “We have an internal target that in the next five to seven years, we must build a strong percentage for renewables so that we depend less and less on fossil fuels... Our stated ambition was 20-25% (from renewable energy) of total, now we will up that ambition," he said.
Tata Power is targeting doubling its total generation capacity across thermal, renewable and hydropower to 18 gigawatt (GW) or 18,000 megawatt (MW) by 2022 from 9 GW now. It had said last year that about 20-25% of the 18GW capacity would come from clean and green sources.
India has a target of installing 100GW of solar power capacity and 60GW of wind power capacity by 2022. Indian and foreign firms have been quoting record low tariffs in government auctions to win solar projects in India, in part helped by lower cost of solar panels. Some of the foreign firms may also come in with cheaper borrowings in dollars or Japanese yen and have an edge over their Indian counterparts, whose cost of borrowing may be higher by 4-7%.
“In renewable energy, we are looking at both India and abroad for opportunities. It’s just that today we see some aberration in the market because of cheap capital available from typically North America and Europe. There is some amount of irrationality and high risk-taking. We are very clear that we are not going to underprice and outprice people to win bids. We believe this market will settle down, there will be people who will be exuberant to start with," Subramanyam said.
The government is working on a Renewable Generation Obligation (RGO) policy to make it mandatory for power producers to set up a percentage of renewable energy capacity for every new thermal energy plant that they put up. This will mean thermal power companies such as Tata Power will have to commission new renewable energy capacity, either through mergers and acquisitions (M&A) or by setting up greenfield projects. Subramanyam said the company was looking at both the options.
In its thermal power business, Tata Power, the country’s oldest private power producer, is looking to buy stressed assets but negotiations are taking longer due to the mismatch in the expectations of buyers and sellers, Subramanyam said.
He estimates at least 50-60 assets in the market are worth looking at with several others facing offtake risks or having little coal linkage. “There are so many assets which are near completion or complete but partially tied up (for supply)... Practically we know the entire market, so it is abut the right price," he said.
Apart from Tata Power, Gautam Adani-controlled Adani Power Ltd and Sajjan Jindal-led JSW Energy Ltd are the few buyers in the market, looking to benefit from the consolidation in the Indian power sector. JSW Energy had last year acquired two hydropower plants from Jaypee Group company Jaiprakash Power Ventures Ltd.