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Consolidation likely in renewable energy sector in India: E&Y

In  this interview with CNBC-TV18, Sanjay Chakrabarti, Partner and National Leader – Cleantech, E&Y gave his views on the renewable energy sector in India and his thoughts on Suzlon being on the block.

Q: The first question that I want to put to you is about the overall macro environment for the renewable energy, the clean energy sector? Should people sort of look at this story as one of an exit by a company which has seen the overall environment decline and worsen and that the market for renewable energy has seen a drastic change and therefore in some ways this is a exit which does not bode well for other similar companies operating in this sector?

A: In my view if you talk about the macroeconomic position as far as renewable energy is concerned – and I will really stick to that because that’s what I think I would be more comfortable to comment on – is that we see a significant increase in terms of the potential that is there in the Indian renewable energy sector. We believe that the investment would be atleast upward of USD 10 billion.

So India is a very attractive market in general and the drivers are very clear. We are lagging behind our overall 11th plan as far as the electricity generation installation is concerned. Energy security is obviously a key concern. At the same time the international thrust on carbon emission is there. So these are really the external drivers.

At the same time, I would say the government has taken some very strong steps whether it is the generation based incentive as far as wind is concerned, the entire national solar mission, the way it has run so far and also the renewable energy certificate policy that’s been recently kind of notified, which makes India very interesting and attractive market.

It obviously also means therefore that once it becomes an attractive market, you are going to see a lot of people wanting to invest into India. So in my view India is a very interesting play as far as the renewable energy sector is concerned.

Q: Is there a sense that you are picking up that there will be a further round of consolidation in this particular sector perhaps more companies getting involved and some sort of consolidation happening over the next year or so?

A: At this stage it is too early to comment on how the sector will go on. At the end of the day, this sector specifically requires a significant capital investment and as the industry evolves, wherever there is high capital intensive industry you tend to have consolidation at the end of the day. How fast it will happen, how will the situation emerge is something that will only emerge in 3-4 years horizon at the least.

 As Panchabuta has observed, there has an emergence of  a number of successful IPP developers for renewable energy in India and some of the larger players include the publicly listed Orient Green Power to private equity backed AuroMira Energy and London stock exchange listed Greenko and KSK Energy Ventures, India among others. There are numerous wind specific  IPP developers like CLP India, Acciona EnergyClenergen, based out of Florida is a recent entrant in the biomass based IPP space, rapidly signing on new projects. Such IPPs apart from implementing green field projects are often looking for brown field potential projects that they can acquire. They are also acquiring  just completed assets as a mode of asset aggregation value play. This is an exciting space in India where there is a lot of interest being generated and commissioned projects are able to attract excellent valuations when they become target for acquisitions.

One comment

  1. Renewable energy is a very interesting and attractive field for power sector savvy people who are concerned about the energy need of their country and globally elsewhere.In India also its need is being felt by government and people.The thrust that is required is not visible in neither the players nor government.This I say because the incentives and policies required to attract business houses to pour money in any new business are still not attractive. This is evident from the fact that the targets set are slipping.
    As in the case of telecom,fast reforms and greater incentives are required in energy sector also to meet the growing demand challenges and environmental targets.

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