Gradual uptick in the GDP and increased economic activities, backed by various government schemes such as Saubhagya and Udaya, are bound to increase the base demand of power in coming quarters, Ashwani Kumar, CEO, IL&FS Energy Development Company, tells Vikas Srivastava in an interview. Thermal power projects, operating at an efficient marginal cost and with high availability factor will become the most reliable source of power. Edited excerpts:
With renewable energy tariffs tumbling at every auction and discoms reneging on their existing PPAs, will thermal power get a leg up?
The thermal power sector is currently under stress. At the same time, the power exchanges are witnessing competitive tariffs on an average throughout the year. The tariff discovery of sub-Rs 3.00/kWh in recent bidding for solar and wind projects has attracted great interest from various discoms. However, when we look at the holistic scenario, the gradual uptick in the GDP, backed by increased industrial output and economic activities, and various schemes from the government, such as Saubhagya Scheme (that guarantees power to all households) and the Udaya Scheme (aimed at improving financial health of state discoms), will increase the base demand for power. At that point, we believe the thermal power projects, operating at an efficient marginal cost and with high availability factor, will again be in demand, as they are the most reliable source of large amount of power that India needs for its economic development.
Given the government’s focus on renewables, what are your short- and long-term plans?
We have already invested more than Rs 7,000 crore in renewable energy, including wind and solar. We have around 900 MW of operational wind projects spread across several high wind states of India. We are also developing solar parks across Rajasthan in a joint venture with the state government. Solar parks are being developed with an objective to provide independent power producers (IPPs) a ready infrastructure for implementing their projects with minimum issues and least development time, sort of a plug and play facility. We have successfully developed the first phase at Bhadla III. The bidding for the solar project was carried out by SECI, which resulted in the lowest-ever solar tariff of Rs 2.44/kWh. We are currently in the process of developing the remaining solar parks.
You spoke about providing renewable electricity to corporates without supplying to the grid. Are there any other new models?
We are for the first time developing and implementing a 100 MW solar project on the design, build, finance, operate and transfer (DBFOT) model. The beauty of this project is that the payment remains fixed for the client company, and when converted into per unit tariff, the tariff is very competitive with the existing alternatives. We are hopeful to complete our first project on this model soon and are planning to pursue this model in future. In addition, we are assisting IL&FS Lonestar Fund in identifying and evaluating investment opportunities in stressed power assets. Risk mitigation during the conceptualisation and development stage of a project is very crucial. We have strategically tied up PPAs through different routes, such as open access plus renewable energy certificates (APPC+REC), feed-in tariffs (FiT) and third party power purchase agreements (PPAs).
There is a big focus on electric vehicles, how is IL&FS planning to tap this opportunity?
At IL&FS, we believe energy storage and EV charging are intrinsically linked and we want to be present in the space. We are currently evaluating a few opportunities to create value in the entire value chain. We believe that our core strength of conceptualising, developing and implementing innovative yet robust business models would make us a key player in this growth opportunity.