India’s renewable energy sector is set to become a battleground for the country’s top billionaires.
On June 24, when India’s richest man, Mukesh Ambani, announced his clean energy business, many heads turned to the country’s second-wealthiest man Gautam Adani who has had a strong presence in the renewables space for many years. Everyone was keen to know what Adani’s next moves will be to achieve his ambition of becoming India’s largest clean energy player by 2030.
The share price of Adani Green Energy, the renewables business of the Adani Group—which has gone up by around 850% over the last year—fell following Ambani’s announcement, perhaps due to fears that the company’s future growth would be under pressure.
The rivalry is being pitched despite the fact that Ambani’s ambition as of now is just to meet 100 GW of prime minister Narendra Modi’s green energy target of 450 GW by 2030 with an investment of $10 billion (Rs75,000 crore) over the next three years.
Industry experts say they wouldn’t be surprised if Ambani’s Reliance Industries becomes the ace player of India’s green energy industry in a short time. And besides the direct competition from Ambani, experts say, Adani will also have to deal with competition from firms that will thrive under Reliance’s shadow.
“Reliance is expanding its base in domestic manufacturing of solar cells, modules, battery storage, among other things and this will strengthen India’s input to clean energy. This will not only help Indian firms to be lesser dependent upon imports but will benefit other players in the availability of domestic products at much better prices,” explained Vibhuti Garg, energy economist at the US-based Institute for Energy Economics and Financial Analysis (IEEFA).
Adani’s renewable business
The Adani Group has five major companies: Adani Enterprises, Adani Green Energy, Adani Gas, Adani Ports and SEZ, and Adani Power.
Of these, Adani Green Energy has the largest market capitalisation at Rs1.7 lakh crore.
Founded in 2015, Adani Green Energy has a portfolio of 15,390 MW of renewable energy and a presence across 11 states in India. Currently, the company has a capacity to generate 3,023 MW of solar energy, a wind power business with an operational capacity of 497 MW, and an under-construction hybrid power project which will generate 2,290 MW of power.
Some experts believe that the company has a first-mover advantage that will help it compete against Ambani’s new business.
Adani Green Energy has also forged important international partnerships. For instance, in May it entered a deal with the SoftBank Group to buy its $3.5 billion renewable power business in India. With this, Adani’s firm will have 25 GW renewable power capacity by 2025.
The Adani group is already the largest solar power operator globally, owing to its acquisition of a solar project worth $6 billion, in June last year. Over the years, the group acquired projects of Lanco Infratech, GMR Group, Avantha Group, and AES Corporation, which contributed to its journey to becoming India’s largest thermal power company.
Adani and Ambani in India’s renewable energy sector
The concerns about Ambani’s new venture hurting the Adani Group’s ambitions are stemming from the way Reliance Group succeeded in the telecom space.
When Ambani announced his telecom foray with Reliance Jio in 2016, the general perception was that it will become just another player in the industry. But the five-year-old company has not just created a customer base of 400 million subscribers but has also rooted out some of the biggest players of the sector, giving them a run for their money.
Just a year after its launch, Reliance Jio severely impacted the revenue of its competitors by offering freebies. And while firms such as Bharti Airtel somehow braved the competition, the other two big players, Vodafone and Idea, were forced to join hands to create a new entity in order to barely survive.
Meanwhile, concerns are also rising that the two billionaires together could create a duopoly that might be hard to break.
“This must be guarded against. For India’s energy transition to deliver maximum benefits to the economy, open and transparent competition among a larger set of players is essential,” said Ashish Fernandes, CEO of a Bengaluru-based Climate Research Group Climate Risk Horizons . “To have the industry consolidate to just a couple of giant players is not healthy in the long run.”