Mint Explainer: Can Mukesh Ambani disrupt India's wind energy sector?

Reliance Industries Chairman Mukesh Ambani. (PTI)
Reliance Industries Chairman Mukesh Ambani. (PTI)


  • With Ambani announcing his mega wind energy plans, the industry could be in for a rapid makeover.

Mumbai: Billionaire Mukesh Ambani's proposed plan for Reliance Industries' foray into the wind energy space could disrupt the sector in the same way his group did with refineries, petrochemicals, telecom, and retail.

To his credit, Ambani has created the world's largest grassroots petroleum refinery at Jamnagar, Gujarat, doubling its capacity from 33 MTPA in 2010 to over 72 MTPA now.

Ambani launched the retail business in 2010 and today Reliance Retail Ltd is the largest retailer in India. RIL launched telecom services under the Jio brand in 2016, and it is now the largest telecom operator in India. In 2020, RIL raised a record $20 billion by selling stakes in its digital and retail businesses.

Under Mukesh Ambani, RIL’s market capitalization has grown from $5.5 billion in 2002 to over $200 billion now.

With Ambani announcing his mega wind energy plans, the industry could be in for a rapid makeover.

On 28 August, Mukesh Ambani addressed shareholders at his $200 billion RIL group's annual general meeting, stating that RIL's large-scale "carbon-fibre" manufacturing capabilities (used to make wind turbine blades) could place the company in a unique position to reduce the cost of wind turbines.

“We will be partnering with the world’s leading technology players in wind equipment manufacturing to deliver most cost-efficient solutions," said the billionaire business tycoon.

Ambani's plan to rope in global firms for wind energy business came as a bit of a surprise because RIL's first priority, according to Ambani, is to deliver a fully integrated, end-to-end Solar PV manufacturing ecosystem, which is something similar to plans of solar-cum-wind energy hybrid renewable power production plans being drawn by Adani Group and other conglomerates in India.

Ambani says RIL will set up one of the largest, most technologically advanced, flexible, and most cost-competitive solar giga factory globally, and will be converting sand into solar PV modules.

"Our Solar giga factory will include manufacturing of PV Modules, Cells, wafers and ingots, polysilicon, and glass at a single location in Jamnagar. We will target to bring the factory on-stream in a phased manner by the end 2025," said Ambani in the AGM, adding that RIL will also pursue cost-effective wind power generation through in-house carbon fibre blade making capacity.

Adani group has already installed a hybrid renewable energy capacity of 8.5GW through solar and wind.

Ambani feels integration of energy storage with wind and solar power generation is critical to providing grid-connected, round-the-clock electricity.

Inside RIL's solar energy plans, a key attempt is the deployment of grid-scale of batteries to convert intermittently captured photons (from the Sun) into electrons and make them available round the clock for RIL's captive requirements, as well as for India’s growing energy needs.

"Reliance has a golden chance to enable India to transform itself from a net energy importer to a net energy exporter. Therefore, as I look into the future, I can clearly see Reliance creating substantial wealth for India and for all our shareholders in perpetuity," said Ambani in his AGM speech.

Ambani's statements in RIL’s 46th AGM not only indicates that India could be leading from the front in Asia’s net-zero journey but also hints that a fierce battle may be in the making in the world of wind energy.

Why is RIL, the country’s most valuable private firm, keen to enter wind energy biz?

India is the world’s third-largest carbon emitter, after China and the US. India is also the world’s third-largest wind energy producer, catering to both onshore and offshore consumers. The government wants to curb dependence on imports of oil and gas. For this, Prime Minister Narendra Modi has committed to meeting 50% of energy demand through renewable sources and reducing the carbon intensity of the economy by more than 45% by 2030.

According to a 29 June ICICI Securities report, Indian power grid needs more wind in its mix.

Alongside, clean energy transition is a global priority aiming to restrict the average global warming at 1.5 degrees Celsius by 2050, forcing companies across the globe to pace up their multi-billion dollar green energy transition roadmaps and large investment managers to shift their bets on green energy-compliant firms. Asia alone accounts for over 50% of global carbon emissions.

In hindsight, clean energy has emerged as one of the most promising businesses of the future for many global industrial groups, including RIL. With oil prices breaching the $90 per barrel due to prolonged supply cuts from Russia and Saudi Arabia, the migration to renewables such as wind and solar could be faster.

“Towards this, we have made significant progress in developing a manufacturing ecosystem critical to achieving cost-efficient Wind Power generation at giga scale.," said Ambani.

RIL wants to leverage its engineering capabilities, along with its giga-scale manufacturing ecosystem, to accelerate installation of at least 100 GW of renewable energy generation by 2030, said Ambani.

RIL owns a vast land at Jamnagar, Gujarat that may help it integrate capacities at mega-watt scale in the next few quarters.

Billionaire Gautam Adani-led Adani group too has set an ambitious green energy target, entailing investments worth $50 billion. But, RIL sees the enormous business opportunity, which is why it accelerated the journey to achieve Net Carbon Zero by 2035 and has mentioned that the group is ready to double its investment to Rs. 1.5 trillion to establish renewables and green bioenergy business.

“We are well on our way to build the New Energy ecosystem of manufacturing solar, wind…," said Ambani, who is competing with the likes of Tata, Vedanta, Adani group and L&T among others in the race to go green.

Currently, Suzlon is the leader in domestic wind energy space, with a market share of 33% (based on total installations).

However, RIL’s entry may change the wind energy landscape altogether, given its financial superiority compared to hundreds of other Indian and global firms.

Currently, India’s top wind energy production and services firms include Vestas India with installed capacity of 57 GW across 70 countries; Chennai-based Regen Powertech Pvt. Ltd. which manufactures wind turbines and erect wind energy projects; Suzlon Energy Ltd producing 23 GW in wind energy across 30 countries; Enercon India Pvt. Ltd. (runs under the brand Wind World Ltd.) can produce 28 GW of wind energy and is a part of the top 500 companies of Engineering News Record (ENR).

Then, firms including GE Wind Energy Ltd.(26 GW capacity); Chennai-based Indowind Energy Ltd., Gamesa Wind Turbines Pvt. Ltd. , Orient Green Power Ltd. (with capacities in Tamil Nadu, Maharashtra, Gujarat, and Andhra Pradesh), and Noida-based Inox Wind Ltd., are engaged in wind energy business.

Will India’s wind energy journey be smooth?

India’s fast economic growth has so far largely been fuelled by coal ‐ the most carbon-intensive fossil fuel, which accounts for over 70% of India's power mix.

Ambani said the next few years are going to be “transformational" for RIL, which will help position India to be a world leader and trendsetter in energy transition.

Even though wind generates power in monsoon and nights when solar generation is low, and higher wind will lead to lower battery storage requirement for a decarbonised grid, growing demand for wind energy will require substantial land and air space.

In 2003, when Minnesota-based DanMar & Associates placed an order for 24 wind turbines first time with an Indian wind energy firm -- Gujarati businessman Tulsi Tanti-led Suzlon Energy Ltd., several Indian business houses were possibly enthused to redraw their diversification roadmaps.

But in 2012, the market was shocked when India’s biggest convertible debt default occurred as Suzlon failed to repay $209 million, following reports of orders running dry, top level exits and poor quality of blades – the most expensive component of a wind turbine, whose one rotation covers an area equal to the size of a standard soccer turf and can generate power that is enough for an American home for a day, according to global reports.

Technological advancements

“Wind power industry faces size problem as blades get longer than football pitches· The growth in offshore wind turbine size is accelerating," said a 29 August report by Financial Times.

“The 169 wind turbines spinning off the Yorkshire coast are an engineering feat: each eight-megawatt model erected by Danish developer Orsted can power a home for 24 hours with a single rotation of its 81-metre turbine blades," said the FT report.

Dozens of miles north, the FT report said, rival wind farm developer SSE is already upping the ante with its newest turbines, where a single rotation of the 107-metre blade can power a home for two days.

The jump in turbine size in the offshore wind industry, where blades can reach higher than New York’s Rockefeller Center and provide electricity for millions of homes, reflects the fierce race for scale over the past decade or more.

As a result, windmills will require larger spaces in the future. There is a possibility that RIL, which has built offshore rigs, will now build mega-windmills offshore as well.

A windmill to generate 1 MW energy costs at least 10 crore and it requires more land than any other power generation plant. The upfront cost is high but the production cost is cheaper.

However, wind energy could be the trickiest of all the energy businesses.

Wind’s occurrence is beyond human control and given the climate change (like the ongoing El Nino storm) wind’s intensity pattern may completely change from one geography to another.

While RIL and Adani group are setting up their wind energy capacities in Gujarat, Suzlon already has an 1100 MW wind park in the Kutch district. Apart from Gujarat, Indian companies have set up windmills in Kerala, Karnataka, Rajasthan, Maharashtra, Tamil Nadu and Andhra Pradesh.

Also, windmills are set up typically in the countryside since enough lands are not available in cities. Any growth in wind energy business will need more land acquisition, which has been a decades-old problem in India due to fragmented land ownership, importance of agriculture, farming, and changing political influences that impact land acquisition and habitat. With India’s population surpassing 1.4 billion, this may turn out to be a major issue.

In India, wind energy business could be even trickier with most of the windmills located in the top-most earthquake-prone states including Gujarat. Any adverse seismic event in these states, where companies like RIL and Suzlon are betting on the most, could expose the wind energy business to bigger threats that could completely disrupt India’s wind energy ambitions.

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