Sembcorp Energy is Hunting for 2.64 GW Coal-fired Power Project in Andhra Pradesh

Amidst news that Sembcorp Energy India Ltd (SEIL) is hunting for a suitor for its 2.64 GW coal-fired power project in Andhra Pradesh, Vipul Tuli, Managing Director, SEIL, said the company was definitely not exiting India and its commitment to the country and renewables is stronger than ever before.

SEIL is part of Sembcorp Industries, a SGD $23 billion energy, marine and urban development group headquartered in Singapore. The company has successfully commissioned three Solar Energy Corporation of India Ltd (SECI) wind projects totalling 800 MW (Tamil Nadu and Gujarat). “We have always said that we have a global carbon target...The growth is going to be renewables,” Tuli added.

BusinessLine caught up with Tuli on the challenges facing India’s renewable space and how prepared the consumer should be for higher tariffs as the days go by. Excerpts:

We have always said we have a global carbon target and because of that we are not growing in thermal. The growth is going to be renewables. Besides, we believe in capital recycling, which is always part of our strategy. We are not here to sell our projects and will continue to remain in the driver’s seat of our projects. But, we may invite other financial partners to share in the projects.

Today, all our assets in India are 100 per cent owned. On a capital investment basis, we have over ₹30,000 crore of investment, debt plus equity. The shareholders have been investing for seven years continuously now. So the focus is on seeing some dilution, release of some money and reinvestment.

Having completed our SECI projects, we are clear that we will be growing significantly in the renewable energy sector. The exact plans will be spelt out soon — both for thermal and renewables. We are back on the growth path and capital recycling will be done.

The land model has to change when we do projects of this scale. The old land model was almost 100 per cent on government land. Over time, the country has ran out of appropriate land for wind energy. Unlike solar wherein one can go a few kilometres around a spot, for wind, the developer has to be at a specific spot. The transition has been difficult and not all States will have enough government land to offer for developing renewable energy projects.

So the cost of private land will be built in the timelines and tariffs and also factored in when bids come. The SECI model was also a game changer, as it ensured payment security and managed the demand interface with States better.

Suzlon did 500 MW and Gamesa 300 MW. They were the key suppliers to us and they have a largely indigenous supply chain.

The country’s demand portfolio is such that power is required at night. Late at night and in a situation wherein the wind does not blow, it is only thermal that serves. Even as renewables keep growing, a balanced mix will be required.

We have taken a carbon target, so we would grow accordingly. We are looking at the new bundled bids. It is a good thing for us because it matches the demand need of the customer. We have to recognise that 90 per cent of the power in India is not renewable and this will be so till storage picks up. So, we have to find a way to balance both.

Even within renewables, hybrid is the future because solar can give you a 25 per cent plant load factor (PLF); this means that it can supply power only for 25 per cent of the day. Wind can give you higher at around 40 per cent. If you add solar and wind together, because they are complimentary, maybe you can get 60 or 70 per cent.

Clean coal is now largely a matter of willingness to pay. So as and when there is a policy directive regarding the emission levels, and the customers are willing to pay the higher prices, clean coal will happen.

Other than pumped hydro, at an India grid scale (going from 200 GW to a 300 GW grid), there is no storage technology. This is why everyone is trying to crack that issue — get more solar during the day, wind in mid-afternoon and maximum in the evening. For the rest of the day, it is conventional. During days of sudden drops of solar and wind, thermal steps in.

An investment of nearly ₹10 lakh crore has been made in the conventional power generation segment. The fixed cost for this has to be paid because an idle plant will not survive. Until storage issue is cracked, you either have to pay high battery costs or fixed costs for thermal.

Time-of-day tariffs is a must. We have it partially because it is reflected in the spot market tariffs. But that is just 10 per cent of overall market. Long-term time-of-day tariffs and contracts are required. One or two pilots have been done, but more of those are needed.

Fundamentally, while the focus is on wholesale tariffs, the real action is on consumer tariffs. This is because the average cost of purchasing electricity (for the Discom) today is more than ₹3.50 to ₹3.75 a unit. The average cost of distribution is at least ₹2 a unit. That means that the average tariff is closer to ₹6 a unit. But, the average consumer tariff is around ₹4.50 a unit. In developed economies, the consumer tariff is around ₹25 a unit.

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