Infrastructure & PPPs in India - Q1 2023 Update - Power & Energy Transition
YOG INFRA Q1 2023 insights
INDIA is making significant headways in energy transition. Recent highlights include excellent uptake of sovereign green bond issuances by the Central Bank, National Green Hydrogen Blueprint, tax incentives for pumped hydro projects and large fund allocation in the latest Union Budget. India has a very favorable & encouraging policy as a key enabler for energy transition, attracting large investments from international players.
Read more about key developments in Infrastructure and PPPs in India in power & clean energy transition sector our latest insight.
This is first publication on a 2-part insight series on India.
INDIA APPROVES USD 2.4 BN NATIONAL GREEN HYDROGEN BLUEPRINT
The Indian government approved a National Green Hydrogen Mission with an initial outlay of INR 197.4 Bn (USD 2.4 Bn). The total proposed spending comprises INR 174.9 Bn for a Strategic Interventions for Green Hydrogen Transition program, INR 14.6 Bn for pilot projects, INR 4 Bn for research and development (R&D) and INR 3.8 Bn for other expenditure. The Ministry of New and Renewable Energy will formulate guidelines for its implementation.
Key targets, expected to be achieved by 2030, include:
Development of at least 5 MMT annual capacity of green hydrogen production and an associated renewables capacity addition of about 125 GW
More than INR 8 Trn in total investments
Creation of more than 600,000 jobs
Cumulative reduction in fossil fuel imports of more than INR 1 Trn
Abatement of nearly 50 MMT of annual greenhouse gas emissions
The government also plans to facilitate a public-private partnership framework in R & D.
INDIA’S GREENKO TO DEVELOP USD 1.2 BN PUMPED STORAGE
Indian renewables energy company Greenko Group will develop an INR 100 Bn (USD 1.21 Bn) pumped storage project (PSP). The PSP, in the Neemuch district of the Indian state of Madhya Pradesh, will have a daily storage capacity of 11 GWh. It is expected to be commissioned by December 2024 and will be connected to the inter-state transmission network. Greenko currently operates more than 500 MW of wind and solar projects across five districts of the state.
US AGENCY PARTNERS INDIAN STATES FOR CLEAN ENERGY PROJECTS
The US Trade and Development Agency (USTDA) has signed a renewables partnership agreement with India. The Interstate Clean Energy Procurement Program (ICEPP), which will be funded by the USTDA, will advance the development of clean energy infrastructure in 8 Indian states, and includes training public procurement officials.
The US Trade and Development Agency (USTDA) is working on around 200 projects that will unlock investments worth USD 37 Bn in India. The focus has been on renewable energy and spreading broadband connectivity in 16 states. The projects that are being developed in the country can be financed by private, public sector, and multi-lateral banks.
The USTDA has also signed agreements with eight state governments under an inter-state clean energy procurement partnership. The goal of this exercise is to train officers about the importance of procuring high quality infrastructure while assessing lifecycle cost analysis, and best value.
US-BASED BRIGHTNIGHT TO BUILD 100 MW INDIA RENEWABLES PROJECT
US-based renewables developer BrightNight is developing a 100 MW wind-solar asset in Maharashtra state, to supply electricity to commercial and industrial customers. The Optima project will cost an estimated USD 100 Mn and BrightNight will finance it with 70% debt and 30% equity. The project has secured grid connectivity and the company is targeting to commission the facility by the first quarter of 2024.
The company has identified the country as a core market and is developing a portfolio of more than 1 GW.
INDIA TO DEBAR RENEWABLES DEVELOPERS FOR PROJECT DELAYS
India will exclude renewable power companies from government contracts for between 3 and 5 years if they do not meet project completion deadlines, as the country looks to speed up green power projects. If any renewable energy project is not completed by the prescribed date of completion, then its bank guarantee should be encashed and the developer blacklisted after asking to show cause. The blacklisting will be for a period of 3 to 5 years. The blacklisting was in accordance with the government's General Financial Rules and would apply to all tenders.
India needs to install more than 40 GW of capacity annually - about 2.5 times the rate of addition in 2022 - to achieve its commitment to increase its non-fossil fuel capacity to 500 GW by 2030. Renewable energy installations have been hit by disruptions in equipment supply, due to heavy import duties on solar equipment. The country had set a target to achieve 175 GW in renewable energy capacity by 2022 but failed to meet that objective. Green energy capacity currently stands at 121.55 GW.
INDIA PROPOSES TAX BREAKS FOR PUMPED STORAGE HYDRO PROJECTS
India's Ministry of Power is proposing to provide incentives like offering land at concessional rates, easy environment approval and tax breaks in a bid to encourage pumped storage hydro-power projects.
8 projects totalling 4.7 GW are operational while 4 projects of 2.7 GW are under construction and 24 projects adding up to 26.6 GW have been allotted by states, which are under development. A proposed National Electricity Plan indicates that 18.8 GW of pumped storage projects and 51.5 GW of five-hour battery energy storage systems are needed to integrate the planned addition in renewables capacity till 2032.
To reap the long-term benefits and socio-economic development of states due to hydropower projects.
The State Government shall consider reimbursement of SGST on hydropower project components.
States may exempt land to be acquired by off-the river PSPs from payment towards stamp duty and registration fees.
Government land, if available, may be provided at a concessional rate to the developers on an annual lease rent basis.
Storage is an intermediary system where energy is stored and released later. In line with the principles of double taxation avoidance, power from PSPs may be suitably considered to avoid double taxation.
JAPAN'S IHI AND ACME PARTNER FOR GREEN AMMONIA
Japanese heavy industry manufacturer IHI Corporation will begin joint studies with Indian renewables developer ACME Group to examine the feasibility of producing and using green ammonia derived from clean energy.
Most ammonia on the market currently is derived from fossil fuels with emitted CO₂ during production. The technologies for the production, storage and transport of ammonia have already been established and are expected to be rapidly implemented in society.
IHI is also studying ammonia co-firing in thermal power plants in India and will contribute to the early implementation of fuel ammonia in society and the reduction of global environmental impact by providing high-quality infrastructure, demonstrating various models of ammonia use and promoting the construction of fuel ammonia supply chains to meet future increases in demand.
EUROPEAN INVESTMENT BANK TO FINANCE INDIA HYDROGEN PROJECTS
The European Investment Bank (EIB) has agreed to join the India Hydrogen Alliance. The lending arm of the European Union will boost its support for large-scale green hydrogen hubs and projects in the public sector in the South Asian country with an indicative funding of EUR 1 Bn (USD 1 Bn).
The EIB is exploring a credit facility with the Indian government to provide investments in key public sectors supporting the development of the green hydrogen industry. The industry, national government and state authorities, the EIB is exploring how the bank may play a role in supporting India’s National Hydrogen Mission. The India Hydrogen Alliance is an industry-led coalition of global energy and industrial companies focused on commercializing hydrogen technologies and systems to build net-zero carbon pathways.
ABU DHABI DEVELOPER PLANS INDIA GREEN HYDROGEN PROJECT
Abu Dhabi-headquartered Ocior Energy is planning to build a green hydrogen and ammonia project in the Indian state of Gujarat, to produce 1 Mn tonnes (MMTPA) of the gas each year.
Ocior signed a memorandum of understanding (MoU) with the Gujarat state government to invest INR 400 Bn (USD 4.8 Bn). The project will be developed in two phases - 100,000 MMTPA initially and another 900,000 MMTPA. Later Ocior will also develop the renewables sources required to power the production facility. The plant is scheduled to start operating by 2030. The company will spend between 12 to 18 months on early development, following which it will start a process to arrange equity and debt financing.
The company announced a 1 MMTPA green ammonia plant in India's Odisha state. Ocior aims to have a capacity of 4 GW of sustainable green hydrogen by 2030 from 4 projects in India.
UNION BUDGET ALLOCATES USD 122 BN TO INFRA IN UNION BUDGET
The Indian government stuck to its plan to spend more on infrastructure, allocating a record INR 10 Trn (USD 122 Bn) to the sector, an increase of 33% over the previous year. Sitharaman proposed a long-term programme to transition to clean power, emphasizing battery storage and green hydrogen, and offering financial support to achieve the targets. Combined with the proposal to introduce a green credit programme, it ensures the right amount of push for attracting sustainable finance.
Sitharaman’s other proposals include:
Setting up an Urban Infrastructure Development Fund, for which the government will set aside INR 100 Bn every year.
An outlay of INR 350 Bn for transitioning to net zero carbon emissions by 2070:
Establishing inter-state power transmission for 13 GW of green energy with an investment of INR 207 Bn.
Produce 5 Mn tonnes of green hydrogen by 2030.
Cities to be incentivised to improve creditworthiness for issuing municipal bonds.
Granting a year's extension of interest-free loans totaling INR 1.3 Trn to state governments for infrastructure development.
An outlay of INR 100 Bn for setting up 500 compressed bio-gas plants.
INDIAN AND SCOTTISH INDUSTRY ASSOCIATIONS EXPLORE GREEN HYDROGEN OPPORTUNITIES
The Federation of Indian Chambers of Commerce & Industry and the Scottish Chambers of Commerce are exploring project opportunities in green hydrogen. A virtual roundtable organized by the two industry bodies paves the way for interaction between Indian and Scottish companies. India has set a production target to produce 5 Mn tonnes of green hydrogen annually by 2030 and aspires to capture 10% of the market share in global exports of the fuel and its derivatives.
CIP PARTNERS INDIAN DEVELOPER FOR 1.8 GW RENEWABLES
Copenhagen Infrastructure Partners has entered into a framework agreement through its Copenhagen Infrastructure New Markets Fund I (CI NMF I) with Viviid Renewables Private Limited, an Indian developer and BOP contractor, to develop more than 1.8 GW of renewable energy projects in India with a primary focus on onshore wind projects.
The partnership will initially focus on the development of two onshore wind projects with a combined capacity exceeding 500 MW, with additional projects expected to be developed and constructed through successor CI NMF funds. Viviid will contribute projects from its extensive development pipeline to the partnership, as well as deliver key development activities up to Final Investment Decision as well as providing design, engineering, procurement, and construction services. CIP will lead offtake sourcing, general procurement activities and the financing process while leveraging Viviid’s local experience.
INDIAN RENEWABLES NBFC GETS INFRA FINANCE COMPANY STATUS
The Reserve Bank of India (RBI) has granted an ‘Infrastructure Finance Company (IFC)’ status to Indian Renewable Energy Development Agency (IREDA). It was earlier classified as ‘Investment and Credit Company (ICC)’ With the IFC status, IREDA will be able to take higher exposure in RE financing. The IFC status will also help the company to access a wider investor base for fund mobilisation, resulting in competitive rates for fund raising.
The recognition of IREDA as an IFC will increase the investors’ confidence, enhance the brand value, and generate a positive outlook in the market. The grant of IFC status is a recognition of IREDA’s 36 years of infrastructure financing and development with focused development of Renewable Energy. With IFC status, IREDA will keep contributing towards Govt. of India’s target of 500 GW installed capacity of non-fossil fuels by 2030.
INDIA'S TATA POWER UNIT SIGNS PPA FOR HYBRID PROJECT
Tata Power Renewable Energy Limited (TPREL), a subsidiary of Tata Power and one of the major renewable energy players in the country, signed a Power Purchase Agreement (PPA) with Tata Power Delhi Distribution Limited (Tata Power-DDL), for 510 MW hybrid project. The project will save on an average of 1540 MUs of CO2 emissions annually for Tata PowerDDL, a joint venture between Tata Power and Govt. of Delhi, that supplies electricity to a populace of over 7 Mn in North Delhi. The PPA has the capacity bifurcation of 170 MW solar and 340 MW wind power. Located in Karnataka, it is one of the largest hybrid projects in the country and will be commissioned within 24 months from the PPA execution date.
IFC INVESTS USD 50 MN IN INDIA RENEWABLES FINANCE VENTURE
A new funding is set to spur India's renewable energy capacity and help improve access to climate finance, with International Finance Corporation (IFC) investing INR 3,750 Mn (about USD 50 Mn) in a sustainability-linked bond (SLB) issued by Tata Cleantech Capital.
The SLB will help Tata Cleantech Capital Limited (TCCL), a joint venture between Tata Capital Limited and IFC. The company will work towards scaling up on-lending towards renewable energy projects and diversifying into energy efficiency and e-mobility sectors over the next 3 years.
India's updated Nationally Determined Contributions aiming to reduce the carbon intensity by more than 45 % by 2030 from its 2005 levels, IFC estimates the country will need around USD 403 Bn in renewable finance by 2030 to achieve its renewable targets.
Projects Announced – Renewable Energy – Q1 2023 India
Projects Awarded – Renewable Energy – Q1 2023 India
Source: YOG INFRA analysis, Public available information
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