India's commitment to substantially reduce carbon emissions and the evolving global sentiment against hydrocarbons is leading public sector entities active in the country's energy sector to aggressively expand their renewable energy (RE) capabilities.
In a major development, Bharat Petroleum Corporation Ltd (BPCL) has allocated Rs 25,000 crore to ramp up its RE portfolio by 2040. The company that currently has an RE capacity of 45 megawatts (MW), is eventually looking at enhancing it to 10 gigawatts (GW).
The decision by BPCL comes nearly a month after ONGC signed an MoU with the Solar Energy Corporation of India (SECI) to launch renewable as well as environmental, social and governance (ESG) projects. The global energy holding company is also targeting a minimum of 10 GW of renewable power by 2040, even as it continues to focus on its core exploration and production (E&P) strength.
"In India, the private sector had already taken a lead, but it is time that the public sector also lends a hand given the large size of unmitigated emissions with them. It is natural for the petroleum sector to get into verticals like green hydrogen and wind and solar. It is also looking at blending petroleum fuels with ethanol," explained Jigar Shah, CEO at merchant bank Maybank Kim Eng Securities India.
Signatories to the 2015 Paris Agreement have committed to reducing their emission intensity to ensure that global temperatures don't rise more than 1.5 degree Celsius by 2050. Since then, major initiatives have been underway in fossil fuel-based industries like oil and gas, coal and transportation.
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"Given the prime minister's commitment for India to achieve net-zero emissions by 2070, companies that have oil or coal as their base are moving towards green energy over time. What that essentially means is you are getting future-ready," opined research analyst Abhineet Anand at Mumbai-headquartered research firm, Emkay Global Financial Services.
According to the Ministry of New and Renewable Energy, the country is confident of achieving 450 GW of renewable energy installed capacity by 2030.
Avoiding stranded assets
The country's largest energy conglomerate, NTPC Ltd, revised its renewable energy target to 60 GW from 30 GW by 2030 at its annual general meeting in September last year.
In case of an energy company like NTPC, the power produced by it should be in the equitable 50:50 ratio of coal and RE to implement its capacity plan of achieving 60 GW going forward, said Kim Eng's Shah.
"If they don't do that, global banks will shy away from lending to them for future projects. In a worst-case scenario, this could lead to them ending up with stranded assets as the world shuns equity and debt financing to fossil fuel-based projects," he observed.
"Incremental capacities are getting added on the green side. If you wish to survive in the long-term, you have to enter the field because that is where the future lies for both oil and coal companies," said Emkay's Anand.
In the coal sector, Chennai-headquartered Neyveli Lignite Corporation (NLC) India is already among the leading developers when it comes to installed solar capacity. In 2020, the company entered into a JV agreement with Coal India Ltd (CIL) for developing 5 GW of solar and thermal power assets.
For its part, CIL has incorporated two new entities -- CIL Navikarniya Urja and CIL Solar PV -- for the development of renewable energy and manufacturing solar photovoltaic modules, respectively, in April last year. The world's largest coal producer intends to generate nearly 3,000 MW of solar power by 2024 with Rs 13,500 crore of proposed investment.
In yet another development, state-owned hydropower operator NHPC Ltd has entered into an agreement with the Odisha government's Green Energy Development Corporation of Odisha (GEDCO) for building 500 MW floating solar power projects across reservoirs in the eastern state. Initially, Rs 2,000 crore will be invested in the joint venture (JV) to set up 300 MW floating solar projects.
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