30-40 GW of Open Access Green Energy Could be Added in 4-5 Years: Interview

BluPine aims to allocate about 10-15% of its total portfolio to merchant power projects

January 24, 2024


In an exclusive interview with Mercom India, Rahul Mishra, Senior VP and Head of Commercial & Industrial (C&I) at BluPine Energy, shared his views on the recent trends in the green energy open access market and the C&I energy transition in India.

BluPine Energy is a renewable energy solutions provider to the C&I segment, with a development portfolio of over 4 GW in solar, wind, and storage assets.

The company has earmarked ~1 GW of its capacity specifically for the C&I segment consumers, with the remaining to be allocated to utility-scale developments, greenfield initiatives, energy storage, and potential mergers and acquisitions.

Mishra spoke about the current opportunities and challenges the C&I segment consumers must consider when transitioning to renewables.

Here are the excerpts from the interview:

In which industrial segments has the green energy demand grown over the past few years and why?

The surge in green energy demand spans various industrial segments, driven by capacity expansion, economic growth, and evolving environmental targets. Notably, large process industries like steel and cement have witnessed a significant rise in green energy demand across all states. This increase is attributed to the capacity expansions these industries undergo and the stringent emission targets they must meet. As they expand, these industries require more energy and face heightened pressure to reduce environmental impact, leading to a shift towards renewable energy sources.

Another crucial area of growth is seen among new-age hyperscale consumers, particularly those managing data centers. These facilities require massive amounts of energy to operate, and as data usage and storage needs grow exponentially, so does their energy consumption. Recognizing the importance of sustainability and the need to mitigate their environmental impact, these data centers are actively transitioning towards green energy. In the foreseeable future, they are expected to be among the largest buyers of renewable energy.

What are the criteria a C&I consumer must consider when opting for open-access renewables in India?

When opting for open-access renewables in India, C&I consumers consider a few key factors to make informed decisions. This is crucial, especially with the notable expansion of C&I open access capacities in states like Tamil Nadu, Karnataka, Maharashtra, and Gujarat, collectively contributing significantly to India’s total capacities in this sector.

The regulatory landscape for open-access renewable energy differs considerably among Indian states. C&I consumers should comprehensively grasp how the power they plan to procure will be consumed or offset against their overall consumption. Energy settlement is pivotal for both the generator and the off-taker, necessitating a thorough understanding of regulatory intricacies and compliance requirements in the specific state in which they are operating.

choice of the energy generator is paramount. C&I consumers must evaluate factors such as the generator’s size, financial stability, and adeptness in navigating and complying with the Indian regulatory framework. Businesses must align with a generator boasting a proven track record of successful development and execution of renewable energy projects, as well as a demonstrated history of structuring complex solutions.

Open-access renewable energy projects typically entail enduring commitments. C&I consumers should anticipate engaging in extended contracts, potentially lasting for decades. Recently, there has been a trend towards more prolonged commitments, with some consumers now open to signing contracts spanning up to 25 years, a shift from the previous norm of 10-15 years. This extended partnership guarantees energy security and price stability and fosters sustainable project development for the consumer.

What are the usual challenges that stop C&I consumers from transitioning to green energy?

A primary obstacle hindering the transition to green energy is the regulatory framework, which frequently restricts the amount of energy sourced from renewable sources. These regulations differ among states and can substantially impact the extent to which C&I consumers can embrace renewable energy.

The energy market is slowly embracing hybrid solutions, where real-time settlement of renewable energy displaces a significant portion (around 70-80%) of current consumer consumption. However, the advancement and acceptance of these solutions are ongoing. The key to this evolution lies in the increased execution of power purchase agreements (PPAs) and the stabilization of energy exchange market volumes.

Achieving 100% displacement faces challenges without supportive banking regulations and economically viable energy storage solutions. Nevertheless, it is anticipated that in the next 2-3 years, advancements in energy storage technology will pave the way for a substantial shift towards renewable sources, allowing for a more significant displacement of conventional energy consumption.

How does BluPine plan to manage the RTC renewable energy demand for C&I consumers?

BluPine Energy has a strategic approach to managing the Round-the-Clock (RTC) renewable energy demand for C&I consumers.

To ensure a reliable energy supply, we intend to integrate solar + wind energy solutions. The complementary nature of these sources enhances stability and provides a continuous supply of energy, effectively meeting the real-time and continuous (RTC) energy demands of C&I consumers.

Recognizing the pivotal role of energy storage in managing RTC loads, BluPine Energy is committed to incorporating storage solutions into the energy mix in the future. Technologies like batteries will store excess energy generated during peak production, ensuring a consistent energy supply even during periods of low renewable energy generation, thus bolstering reliability and providing firmness of supply.

BluPine Energy aims to meet the energy needs of C&I consumers efficiently by optimizing our operating assets and actively engaging in the exchange market. This combined strategy enables us to address a significant portion (80-100%) of our clients’ energy consumption. By harmonizing energy generation from our assets and complementing it through market participation, we offer a flexible and responsive energy supply that meets the diverse demands of C&I consumers.

What is your take on the Open Access market outlook in the coming year?

The C&I market has rapidly evolved, witnessing significant capacity additions by independent power producers in the last 3-4 years. This growth trajectory is expected to persist, with an estimated 30-40 GW of C&I open access capacities projected to be added in the next 4-5 years.

This expansion is driven by an increased focus on climate change commitments. Corporations and their management teams are increasingly prioritizing the implementation of net-zero commitments, contributing to a substantial scale-up in renewable energy adoption.

Additionally, national-level policies in this domain are encouraging. Optimism surrounds expectations that regulations will become more streamlined and markets will increasingly support RTC load-following renewable energy projects tailored for C&I consumers.

How do you see merchant power projects evolve in India, and does BluPine plan to install more projects?

The development of merchant power projects in India is closely tied to the expansion of the C&I segment and the maturity of exchange markets. As the scale of the C&I business grows, the merchant power market is anticipated to become a significant by-product. The evolution of exchange markets, particularly in terms of volumes (currently at 6-8%), will be a crucial factor. When volumes rise towards the 20-25% range, the landscape for merchant power projects is expected to gain prominence.

In response to these market dynamics, BluPine Energy strategically plans to integrate corporate merchant power projects into our portfolio. Specifically, we aim to allocate about 10-15% of our total portfolio to merchant exposure. This decision aligns with our broader strategy to capitalize on market opportunities, diversify our offerings, and mitigate risks associated with the evolving energy landscape.

What is the most significant difference you see in developing utility-scale projects for DISCOM offtake vs projects under the open access model?

Developing utility-scale projects for DISCOM offtake compared to those under the open access model primarily varies in three aspects: regulatory understanding, influencing project planning and requirements; approvals and timelines, with DISCOM projects often facing more complex and lengthier processes; and the power settlement mechanism, involving distinct approaches in terms of approvals and operational processes. Navigating these differences requires a careful understanding of the regulatory environment and strategic planning for successful project implementation. Additionally, the timelines to execute open access projects once the PPAs with C&I customers have been executed are also more shorter compared to utility-scale projects.