Why solar is suddenly so sexy for Indian companies

Why solar is suddenly so sexy for Indian companies

Why solar is suddenly so sexy for Indian companies – In 2014, heavy machinery manufacturer Schwing Stetter put up a rooftop solar power system at its factory near Chennai in southern India. Operating out of a city that experiences frequent power outages, the company wanted to explore other sources of electricity and zeroed in on a 100 kilowatt (KW) rooftop solar system.

“At that time, the payback (time taken to recoup investment) was seven years. Today, our payback has come down to almost five years,” Anand Sundaresan, managing director of Schwing Stetter India, told Quartz. Schwing Setter now plans two more such systems—one 65 KW and another 500 KW.

Another Chennai firm, water pumps manufacturer Grundfos Pumps, put up a 52 KW rooftop solar system in 2014 and followed it up with another 98 KW. The company now gets around 26% of its power requirements from solar sources.

Till a few months ago, Schwing Stetter and Grundfos were among a handful of firms experimenting with renewable energy. Today, with solar and wind energy tariffs crashing below even grid power and the government pushing for them, companies are going big on renewables. Some are even working towards meeting all their needs with clean power.

“In the last couple of years, there’s been mainstreaming of solar for large companies,” said Andrew Hines, co-founder of solar power provider CleanMax Solar.

In fact, such is the demand that the corporate solar market in India could touch around 10,000 megawatts (MW) by 2023, according to a report by the World Business Council for Sustainable Development (WBCSD), a global advocacy association of some 200 firms dealing with business and sustainable development. The rooftop segment, tottering along till now, could make up for 40% of the additions.

Besides rooftop solar, companies typically get their renewable power from on- or off-site solar plants and wind projects. These assets could be either owned by the company or by a clean-power provider.

The driving forces

The movement has picked up steam due to multiple factors.

One, renewable power is now much cheaper than before—around Rs4.5 per unit, including regulatory costs, compared to an average Rs6 for power bought from the state’s grid. Installation costs, too, have fallen from around Rs60,000 per KW in 2014 to around Rs48,000 now, several companies told Quartz.

“Three or four years ago, because the saving would be marginal, the companies who would be looking at rooftop solar would be ones who really wanted to do it not only for cost reasons but for sustainability reasons. Now, I think the savings by themselves are substantial enough,” said Hines.

That’s precisely what’s happened at Grundfos Pumps. “(It) certainly makes business sense. By just buying solar power we not only impact the environment positively, we also save money as the unit cost comes down,” said Ranganath NK, the company’s managing director. “Ideally speaking we will not just explore 100% renewable but would like to be net positive in emissions right across our supply chain.”

What helps is that the solar power ecosystem in India is developing rapidly, making it easier for firms that aren’t aware of its nuts and bolts to take the plunge. “Awareness among companies has really increased a lot. That has kind of a cascading effect. They don’t have to spend a year going through the process of evaluating risks and vendors and so on. The decision-making cycle, sales cycle has reduced a lot,” Hines of CleanMax said.

Beer-maker United Breweries, for instance, put up solar panels at one brewery first, and then signed up for another six breweries in one shot. “This is becoming more common,” Hines said. IT services giant Infosys, which already gets around 43% of its power from renewables, is adding capacities totalling over 20 MW at all its campuses this year.

Besides, the sustainability bug has bit Indian firms.

In step with global trends, they are turning green and sustainable, with some like Infosys, automaker Tata Motors, and dairy company Hatsun Agro even making RE100 commitments—pledging to source all their power requirements from renewables. This April, in response to Apple’s announcement about being powered entirely by renewables, the CEO of digital payments firm Paytm tweeted saying “Going to do this @Paytm.”

Such ambitious statements from the top make a difference in getting the projects.

Hindustan Coca-Cola Beverages (HCCB), Coke’s biggest bottling partner in India, is a case in point. “At the end of 2017, HCCB was meeting 30% of its energy requirements through green and clean energy. Our new CEO Christina Ruggiero set us a target of meeting 40%…by 2018,” said Dinesh Jadhav, executive director of supply chain at HCCB. “We are only six months into the year…(and) on course to meet the target.”

The impediments

While the interest, economics, and resources are in place, regulatory hurdles and a lack of government support could still stall this newfound momentum.

For one, the policies of most Indian states are unclear when it comes to corporate use of renewable energy. An important element of rooftop solar power is net metering, a mechanism that lets users sell surplus power generated to the state electricity utility. And most Indian states don’t have net metering policies.

“We don’t have a battery backup. So, on Sundays and holidays, we are generating power, but it goes waste. Almost 16% of the power we are generating in a year is not getting utilised,” Sundaresan of Schwing Stetter said. The company can’t even provide free power to those who could use it, he added, due to the lack of rules.

As industrial users increasingly take to renewables, the already financially-stressed government-run power distribution firms lose a large chunk of high-paying customers. So, states have no incentive to promote green energy. For instance, companies that choose to buy power from private firms have to pay a host of regulatory charges called “open access charges” which include levies for using the state grid or a cross-subsidy charge to subsidise agricultural and residential buyers.

Nevertheless, corporate India’s shift towards sustainable power consumption is here to stay. “Overall, (not using clean energy) has become almost an exception. Companies are being asked…if they haven’t made some sort of pledge, why not?” said Hines.

June 25th, 2018 – Quartz Media LCC – by Sushma U N