“The world’s largest solar award”: can India make it happen?

JP Casey 28 September 2020 (Last Updated September 25th, 2020 16:47)

Adani Green Energy has won a $6bn contract to install 8GW of solar power across India by 2025. Is the “world’s largest solar award” achievable, and how is Adani uniquely positioned to deliver on this lofty ambition?

“The world’s largest solar award”: can India make it happen?
“In today’s world, climate adaptation cannot be considered independent of economic development priorities and both job creation, as well as decarbonisation, must be simultaneous objectives,” said Gautam Adani. Credit: Prashanth Vishwanathan, via Bloomberg Finance

It’s no secret that India is one of the world’s most energy-hungry countries. A 2019 report from BP estimated that India’s share of global primary energy demand could double to 11% by 2040, with Indian primary energy consumption set to increase by 156% over the period. However, that same report noted that coal would be the driving force behind meeting this vast demand, with the fuel accounting for 58% of the country’s energy mix, underpinning a 116% increase in net carbon dioxide emissions over the next two decades.

Yet India is not blindly zigging when the rest of the world is zagging, investing in fossil fuels at the expense of all other power generation. Energy major Adani, well known for its coal business, has also invested heavily in solar power projects, with its clean power wing Adani Green Energy winning a contract from the Solar Energy Corporation of India (SECI) to provide 8GW of solar power over the next five years. The $6bn deal will also see Adani agree to a 25-year power purchase agreement that the company dubbed “the world’s largest solar award”, as it looks to move away from its reputation as a fossil fuel giant.

Yet without the kind of international collaboration often seen in large-scale power purchase agreements, there remain questions as to whether Adani can deliver on this ambitious target.

Big investment and long-term targets

The project is certainly impressive, both for its scale and its longevity. Beyond the $6bn investment in 8GW of new solar projects, Adani plans to develop an additional 2GW of solar cell manufacturing capacity, and invest $15bn in renewable energy projects over the next five years. The new solar installations will come in stages, with the first 2GW of power set to come online by 2022 and the remaining power to be installed in increments of 2GW until 2025.

The company will also construct a single-site generation project with a capacity of 2GW, which is set to be the largest single-site solar facility in the world, and bring the total volume of renewable power capacity under construction or contract at the company to 15GW. With Adani targeting 25GW of clean power by 2025, this latest investment is a major step towards reaching that target.

These projects are perhaps all the more significant considering Adani’s background as one of the world’s largest coal miners. The company boasts close to three billion tonnes of coal reserves in India alone, and its overseas projects are headlined by the $1bn Carmichael coal mine in Australia, a 10 million tonnes per annum operation that has come under considerable criticism for its potential environmental impacts . Adani’s solar projects are expected to displace 900 million tonnes of carbon dioxide, a vast figure that overshadows negatives such as the 240,000 tonnes of carbon dioxide expected to be produced annually at the Carmichael mine.

The company’s chairman, Gautam Adani, was pleased with the deal, announcing that: “we are indeed honoured to be selected by SECI for this landmark award.”

“In today’s world, climate adaptation cannot be considered independent of economic development priorities and both job creation, as well as decarbonisation, must be simultaneous objectives.”

Encouraging economic indicators have underpinned many of these initiatives, with the recent strong financial performance of Adani’s renewables business suggesting that these green programmes can support, rather than detract from, economic gain. The firm posted revenues of $339.8m in the 2020 financial year, a 24% increase over the previous year, while its sales of units of power increasing by 13% over that period.

Adani’s unique position

The sheer scale of Adani’s project is evident when compared to other large-scale renewable power purchase agreements. Last year, Google announced plans for the largest corporate power purchase agreement in history, of 1.6GW, while Microsoft has partnered with Sol Systems to invest around $50m into 500MW of new solar projects in the US; impressive figures, but ones that are overshadowed by what Adani plans to install in just the next two years.

A key difference between Adani’s plans and those of other major companies is the presence, or absence, in Adani’s case, of partnerships. While Google has sourced its power from Texas to Taiwan, and Sol Systems will be tasked with funding, developing, and operating the projects as part of its agreement with Microsoft, Adani has been able to rely on its own coffers for financial resources, and its own experience and infrastructure for the building and operation of power generation facilities. The company’s background in energy, albeit fossil fuels and mining, sets it apart from other large companies in this regard, and makes it well-positioned to transition to a clean energy mix without relying on external support.

Of course, the downside to this approach is a potential lack of flexibility for Adani, as the company is unable to construct and manage solar facilities in parts of the world beyond its influence. International power purchase agreements often see electricity generated in one region and sold to another, so the areas with the most efficient means of energy production can supply those with the greatest demand for energy; for instance, Transport for London plans to use these deals to deliver a zero-emission tube network by 2030.

Adani is fortunate, then, that the regions where it has significant influence are some of the most viable for large-scale solar power generation. While India does not have the most sunlight hours, with up to 2,000 hours per year, there is still enough sunlight to comfortably power large-scale solar generation. Figures from Sunwatt India suggest that even at a low solar panel efficiency of just 10%, domestic solar power could still be up to one thousand times greater than domestic energy demand in 2015. As a result, the combination of Adani’s background in energy and geographic location means it could be uniquely positioned to deliver on this most ambitious power purchase agreement.