NTPC Green Energy IPO: Is the Hype Justified?

NTPC Green Energy Introduction

NTPC Green Energy Limited is a wholly-owned subsidiary of NTPC Limited, established in April 2022. The company focuses on renewable energy projects, including solar and wind power

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Brief About NTPC Green Energy

History of NTPC Green Energy

Company was incorporated as “NTPC Green Energy Limited”, a public limited company under the Companies Act, 2013, pursuant to a certificate of incorporation dated April 7, 2022, issued by the Registrar of Companies, Delhi and Haryana.

Summary of the business of NTPC Green Energy

NTPC Green Energy is a wholly owned subsidiary of NTPC Limited, a ‘Maharatna’ central public sector enterprise. NTPC Green Energy is the largest renewable energy public sector enterprise (excluding hydro) in terms of operating capacity as of June 30, 2024 and power generation in Fiscal 2024. (Source: CRISIL Report, September 2024). NTPC Green Energy renewable energy portfolio encompasses solar and wind power assets with presence across multiple locations in more than six states which helps mitigate the risk of location-specific generation variability. NTPC Green Energy operational capacity was 3,071 MW of solar projects and 100 MW of wind projects across six states as of August 31, 2024.

Verticals of NTPC Green Energy

• Sale of solar Energy
• Sale of Wind Energy

Machinery/Plants/Factory

Capacity Utilisation

Customer concentration

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Supplier concentration

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Revenue breakup

Product wise break-up

Subsidiary companies of NTPC Green Energy

Industry Outlook

Overview of Renewable Energy sector in India

Renewable sources are a clean source of energy as they do not burn like fossil fuels, preventing the release of pollutants into the air. Increasing use of RE would help avoid carbon emissions, and thereby, restrict global warming. Further, the wide availability of these resources makes them less susceptible to depletion unlike conventional sources of energy. While there are multiple renewable sources that can be utilised, including solar, wind, small hydro, biomass, and bagasse remain key sources.
Installed Renewable energy capacity in India

Renewable energy installations (incl. large hydro) have increased fivefold to ~191 GW as of March 2024, as compared with ~63 GW as of March 2012 (source: MNRE), led by various central and state-level incentives. As of March-2024, installed grid connected RE generation capacity (incl. large hydro) in India constituted ~43% of the total installed generation base in India. This growth has been led by solar power, which has grown to ~82 GW from merely ~0.09 GW over the discussed time period (i.e., from March 2012).

Overview of RE capacity additions

With the increased support of the Government and improved economics, the RE sector has become attractive from an investor’s perspective. During fiscals 2018 to 2024, India added around 76 GW of RE (incl. large hydro) capacities. The installed RE (incl. large hydro) capacity has grown from 114 GW in fiscal 2018 to 191 GW in fiscal 2024 at a CAGR of 8.9%. Solar segment led the capacity additions with cumulative additions of ~60 GW followed by wind ~12 GW during the same period. The other RE sources added ~4 GW during the same period. Historical RE Capacity additions in India

RE Capacity additions in India compared to major economies

Globally, India ranks fourth in total RE capacity, wind as well as solar installations. India has become the second largest RE market in the Asia Pacific region after China. As per IRENA RE capacity statistics 2024, during 2023, China added ~298 GW of RE capacity followed by USA with ~31 GW of RE capacity. During the same period, Germany added around 18 GW whereas Brazil added 17 GW of RE capacity. As per MNRE, India added ~15 GW during the fiscal 2023. Thus, as against the 63% of the global RE capacity added by China, India added around 3% during the fiscal 2023.

RE Consumption in key Indian states

With declining tariffs and government push for RE, most of the RE states have added significant RE capacity and are also purchasing RE power to meet the energy demand. However, the RE penetration in Indian states varies substantially from state to state. In the Top 10 RE Rich States, the RE penetration is higher than national average. The following table summarises the share of RE consumption in total power consumption. The share of RE in most of the States is increasing.

Trend of RE consumption in total electricity consumption in key States

Growth drivers for Solar sector in India Declining module prices and tariffs
The global average solar module price, which constitutes 55-60% of the total system cost, crashed 73% to $0.47 per watt-peak in 2016 (average for January-December) from $1.78 per watt-peak in 2010. In fact, prices continued to decline to $0.22 per watt-peak by end-August 2019, owing to technology improvement, scale benefits and a demand-supply gap in the global solar module manufacturing industry.

CRISIL MI&A Consulting expects that post the reapplication of ALMM; the domestic module prices are expected to inch up on a quarterly basis as demand for domestic module grows. However, the fall in cell prices will mean that the domestic prices will still be 10-15% down on year in fiscal 2025 to Rs 0.21-0.23/wp. On the other hand, the international module prices are expected to register a higher fall of 20-25% owing to oversupply.

Fiscal and regulatory incentives

The Indian government has been offering a variety of incentives to encourage the development of solar power plants.

PM Surya Ghar Muft Bijli Yojna: For further sustainable development and people’s well-being, the Central Government in February 2024 launched the PM Surya Ghar: Muft Bijli Yojna. This scheme has a proposed outlay of Rs. 750 billion and aims to light up 10 million households by providing up to 300 units of free electricity every month.

CPSU Scheme: The Central government introduced the CPSU scheme Phase I in 2015 to promote the set-up of 1,000 MW grid-connected solar PV power projects by CPSUs and government organisations with Viability Gap Funding (VGF). Further, the Central Government in March 2019, approved implementation of CPSU Scheme Phase-II for setting up grid-connected Solar PV Power Projects by Central and State PSUs, Government Organisations, with VGF support of Rs 85.8 billion, for self-use or use by Government/ Government entities, either directly or through Discoms. The maximum permissible VGF was initially two tranches and was kept at Rs 7 Mn/MW which was subsequently reduced to Rs 5.5 Mn/MW for third tranche. Under this Scheme, the Government has so far sanctioned about 8.2 GW capacity of solar PV power plants to various entities. Ability of CPSUs to execute the scheme at ground level and consumer awareness will play key roles in success of the Scheme.

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Annual Bidding Trajectory: MNRE has prescribed an annual bidding trajectory for RE power bids to be issued by Renewable Energy Implementation Agencies (REIAs). Bids for 50 GW per annum RE capacity, with at least 10 GW per annum Wind power capacity, are to be issued each year from 2023-24 to 2027-28. This is expected to help in achieving the targets specified for 2030. Bids of 35.51 GW have been issued by four REIAs (SECI, NTPC, NHPC & SJVN) in fiscal 2024 till December 2023.

National Solar Mission: Central-level allocations under NTPC Vidyut Vyapar Nigam Limited (NVVN) Batch II, Jawaharlal Nehru National Solar Mission (JNNSM) Phase II Batch III and IV have been almost entirely commissioned.

Operational support to execute solar projects

Apart from providing incentives, the government has lent significant support to the solar power sector for execution of projects.

Solar parks and ultra mega solar power projects: One of the most important initiatives by the GoI has been setting up of solar parks in the country. To overcome the land and transmission related challenges, the scheme for

“Development of Solar Parks and Ultra-Mega Solar Power Projects” was rolled out in December 2014 with an objective to facilitate the solar project developers to set up projects expeditiously. As on December 2023, 58 Solar Parks with an aggregate capacity of 40 GW have been sanctioned in 13 States in the country since the launch of the Scheme i.e. December 2014. An aggregate capacity of 10,576 MW of solar projects have been commissioned in 20 Solar Parks as of February 2024. The State-wise details are given below.

Favourable technology

Solar power is becoming increasingly attractive due to falling module prices and improving efficiency resulting from excess manufacturing capacity in China and technology advancements, respectively.

On the project development front, developers are exhibiting heightened preference for bifacial modules that typically have higher efficiency relative to mono-facial modules and are compatible with tracker technology. In 2023, the share of bifacial variant in module imports increased from 8% in Q1 2022 to 37% in Q4 2023. On the other hand, multi-crystalline modules are being phased out due to lower efficiency and higher degradation rate – share of import volume was negligible in 2023.
Currently, the solar PV market is dominated by monocrystalline silicon technology. Within monocrystalline technology, Mono PERC is an advanced version that employs dielectric passivation film on the rear surface of the cells which increases the efficiency levels. These cells are currently leading the market due to higher efficiency, cover less space, higher output in low light conditions and are available at competitive pricing.

In addition to process improvements, the development of new solar cell designs is essential for achieving further efficiency gains while simultaneously reducing material intensity and manufacturing costs. The p-type to n-type migration is currently underway and paving the way for new technologies – by end of 2023, n-type technologies including TOPCon, heterojunction (HJT) and back contact represented 42% of China’s total module manufacturing capacity (7% in 2022).

In addition, there are ongoing considerations for mass manufacturing of multilayer and tandem silicon-perovskite or silicon-CdTe hybrid solar panels. These innovative solutions have the potential to significantly increase cell efficiency, surpassing the 30% mark, while maintaining competitive production costs and promise to make solar power an even more compelling and sustainable energy solution in the years to come.

Green Hydrogen and green ammonia push

India has announced a target of energy independence by 2047 and a net-zero by 2070. Green Hydrogen is expected to play a substantial role in achieving these goals. The production of Green Hydrogen using renewable energy sources like solar, wind, and hydropower can provide energy security, reducing dependence on fossil fuels and ensuring a stable and reliable source of energy. Hence, India has launched the National Green Hydrogen Mission with an outlay of Rs. 197.44 billion with a target of 5MMT production capacity of Green Hydrogen per annum. Green hydrogen push from the government will likely push for the installation of solar energy for consumption.

In July 2023, SECI has issued a tender for selection of green hydrogen producers for setting up 450,000 TPA production facilities for green hydrogen in India under the SIGHT Scheme (Mode-1-Tranche-I). Moreover, in July 2024, MNRE notified guidelines under SIGHT Scheme (Mode-1-Tranche-II) with a capacity of 450,000 TPA. SECI has already issued tender for Tranche-II which is expected to be concluded by the end of September 2024. The Government of India has already initiated pilot scheme for use of hydrogen in shipping, steel and transport sector.

The Green Hydrogen Mission will have wide ranging benefits- creation of export opportunities for Green Hydrogen and its derivatives; Decarbonisation of industrial, mobility and energy sectors; reduction in dependence on imported fossil fuels and feedstock; development of indigenous manufacturing capabilities; creation of employment opportunities; and development of cutting-edge technologies.

Outlook on Solar capacity additions in India

Solar sector growth in India primarily spurred by robust government backing, demonstrated through an aggressive tendering strategy. Some of the key catalysts include technological advancements, affordable financing, supportive policies, thrust on go-green initiatives/sustainability targets, cost optimisation due to increased grid electricity tariffs, subsidy initiative (specially in rooftop solar) and various incentives such as ISTS charge waiver.

CRISIL MI&A-Consulting expects 137-142 GW of solar capacity additions over fiscal 2025-2029. This will be driven by additions under:

• NSM: The entire NSM Phase II Batch II Tranche I of 3,000 MW has been commissioned. Under NSM Phase II, Batch III, and Batch IV, SECI through its state specific VGF has tendered out ~7 GW of capacities, most of which has been completed.
• Other central schemes: SECI has also started tendering projects outside the JNNSM Batch programme. It has initiated the ISTS scheme, wherein projects are planned for connection with the ISTS grid directly. Under this, SECI has already tendered and allocated ~35 GW (including hybrid).
• State solar policies: ~24 GW of projects are under construction and are expected to be commissioned over the fiscal 2025-2029. Based on tendered capacities by states at the end of June 2024, a further ~24 GW capacity of solar projects is expected to be up for bidding over the same duration.
• PSUs: The CPSU programme under JNNSM has been extended to 12 GW in February 2019. The government is also encouraging cash-rich PSUs to set up renewable energy projects. Group NTPC (NTPC Limited) has commissioned 3,618 MW as on 30.06.2024 and outsourced projects are 5,273 MW. Similarly, under construction capacity is 9,214 MW for the Group and 8,810 MW on outsource basis. It has a target of installing ~60 GW of renewable energy capacities by fiscal 2032. Similarly, NHPC Limited had allocated 2 GW of projects in 2020, while the Indian Railways has committed to 20 GW of solar power by 2030. Other PSUs such as NLC India Limited, defence organizations, and governmental establishments are also expected to contribute to this addition.
• Rooftop solar projects: CRISIL MI&A-Consulting expects 20-22 GW of rooftop solar projects (under the capex and opex mode) to be commissioned by fiscal 2029, led by PM Surya Ghar Yojana and industrial and commercial consumers under net/gross metering schemes of various state.
• Open-access solar projects: CRISIL MI&A-Consulting expects 13-15 GW of open-access solar projects (under the capex and opex mode) to be commissioned by fiscal 2028, led by green energy open access rules 2022, sustainability initiatives/RE 100 targets of the corporate consumers, better tariff structures and policies of states such as Uttar Pradesh and Karnataka, which are more long term in nature.
• Push for Green hydrogen: Production for green hydrogen is expected to start from fiscal 2026 with production of 0.5-1 million tonnes of production. The government has set the target production of 5 million tonnes of green hydrogen by 2030. As per announcement, we expect 2.0-2.2 MTPA of green hydrogen to commission which can lead to further upside of solar capacity of 32-37 GW, by fiscal 2029. However, since developers may tie-up via grid / open access and not go to the captive route generation under this segment will remain a monitorable.

Overview of Wind sector in India Evolution of Wind Power in India

India has a vast wind energy potential, estimated at 695.5 GW at 120 meters above ground level (AGL) as per estimates by the National Institute of Wind Energy.

India has the fourth largest installed wind power capacity in the world, with ~46 GW as of 31 March 2024. Wind power accounted for nearly 10.4% of India’s total installed utility power generation capacity. India’s wind power installed capacity increased at a CAGR of approximately 7% from 26.8 GW in Fiscal 2016 to 45.9 GW in Fiscal 2024. Wind power capacity is mainly spread across the southern, western, and north western states of India. Leading states in wind power installations include Tamil Nadu, Gujarat, Maharashtra, Rajasthan, and Karnataka. Wind capacity additions

Wind power has witnessed healthy capacity addition of ~3.25 GW in Fiscal 2024. In fiscal 2023, ~2.28 GW wind power capacity was installed on the back of commissioning under several schemes that have been pending – SECI Tranche IV, V and VI. The rising trend of hybrid power (solar plus wind) projects coupled with moderation and stabilisation in key commodity prices has also supported growth.
State-wise wind capacity additions (MW)

The top five states (Gujarat, Tamil Nadu, Karnataka, Rajasthan, Maharashtra) make up ~84% of the installed wind capacity (as of 31 March 2024), with some regions within these states accounting for most wind power projects. Since April 2021, ~80% the new capacity additions have happened in 3 states – Gujarat, Tamil Nadu, and Karnataka.

The weighted average discovered tariffs for allocated capacity of competitively bid projects for FY24 is Rs 3.4/kWh as against Rs. 3.1-3.3/kWh tariff required for earning 10-13% equity IRRs. The weighted average tariff of allocations in FY 2023, have averaged at Rs 3.0/kWh, providing an indication that developers are factoring in

increased commodity costs and other execution related risks. The latest auctions held in Feb 2024 recorded a weighted average tariff of Rs 3.63/kWh.

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Outlook for capacity additions

CRISIL MI&A-Consulting expects capacity additions to grow over the next five years led by pipeline build-up under existing schemes and new tendering schemes, improvement in technology, thrust on green hydrogen, renewable generation obligation and mixed resource models (RTC, hybrid, FDRE etc.). However, incremental challenges pertaining to wind-site/land availability, grid connectivity, and viability at low tariffs due to elevated capital cost pose challenges for the sector.

Led by India’s ambitious clean energy targets declared under NDC, focus on clean segments such as wind is expected to continue coupled with a healthy pipeline existing in the segment. The government policy to tender 10 GW wind capacity annually till fiscal 2028 will further boost the capacity additions. The Central Government is also contemplating for renewable generation obligation (RGO) mandating thermal power generators to generate certain % of their additional capacity from renewable energy. Capacity additions over the long term will also be driven by increased hybrid tenders, storage and new business model-based tenders. Central government allocations under relatively strong off-takers such as SECI and PTC, reduces risk and would support developer interest. State allocation, on the other hand, has slowed as several states have instead signed power sale agreements (PSAs) with PTC and SECI for procurement of wind power to help fulfil their non-renewable purchase obligation targets.

Key factors to drive wind energy capacity additions

• New tender opportunities
  • New opportunities have emerged in the wind sector in India with SECI tendering projects including hybrid, round- the-clock, peak power supply and FDRE projects, all of which require a mix of resources, including wind.
• Improved technology
  • Newer wind turbines are being launched that have higher rated capacity and higher hub height (120 -140 m), which can be set up at low-quality wind sites. Technological advancements have allowed players to set up windmills in states/sites with lower wind density. Based on our estimates, for every 100-bps change in PLFs, equity IRRs improve by 100-150 bps. Innovations in blade technology with lower weight which allows for building longer blades with lower mass. These improvements in technology will enable lower levelised cost and capacity additions outside the windy region, thereby driving capacity additions.
• Large-scale central allocations
  • Post competitive bidding of 1 GW by SECI in February 2017, SECI further allocated ~15 GW (excluding cancelled contracts) of capacities over March 2017-Feb 2024 through wind only schemes. MNRE has outlined further plans to tender 10 GW of capacity each year by RE Implementing Agencies (like SECI, NTPC, NHPC, SJVN). This bodes well as central sector PPAs have lower counterparty risk compared with PPAs directly with discoms. The latter are known to delay payments to developers and have poor financial ratings, while SECI and PTC are better rated and provide various payment security mechanisms (LCs, payment security fund and SECI, NTPC, NHPC, SJVN being party to the tripartite agreement).
  • Major payment security mechanisms to de-risk investment in renewable energy inter- alia include Letter of Credit (LC); Payment Security Funds and Tripartite Agreement (TPA) between Ministry of Power, RBI and State Government (if applicable). These instruments are invoked in case of delays/default in payment to Renewable Energy Generating Companies and have been further strengthened by the notification of the Late Payment Surcharge Rules, 2022.

Upward revision in RPO targets

The MoP provided a new RPO long-term trajectory for wind energy till fiscal 2030 which proposes target of 0.67% for wind in fiscal 2025, increasing consecutively to 3.48% in fiscal 2030 for wind.
Revised Wind RPO trajectory

Most states in India have set lower RPO targets (pan-India avg. non-solar RPO target in fiscal 2023 is 8.9% vs 10.50% required as per MoP), resulting in higher compliance vis-à-vis the set targets. To meet the increased targets, states would have to procure more RE either via the REC route (which still leads to capacity additions) or via competitive bid out capacities. Waiver of ISTS charges by CERC for all projects set up until fiscal 2025 also enables states with low RE potential to procure from more able states. However, RPO compliance is dependent on strict enforcement by regulatory authorities. Amendment to the Electricity Act, 2003 has been proposed to include stricter provisions on penalty for non-compliance; however, this is yet to be passed.

Accelerated depreciation

Historically, particularly in fiscals 2015 and 2016, accelerated depreciation (AD) had been a key driver for capacity additions. However, going forward, CRISIL expects capacity additions under this mode to be restricted only to large conglomerates in other unrelated business but seeking tax breaks. While AD was halved to 40% from April 2017 onwards, it will continue to support additions in open-access segment.

High industrial tariffs in select states

In states such as Maharashtra, Karnataka, Tamil Nadu, and West Bengal, where industrial tariffs are high (Rs 6- 6.5/unit), wind power is an attractive option since generation cost is about Rs 3.0-4.0/kWh. Capacity can be set up via the open-access mode, i.e., bilateral agreements directly with consumers such as commercial/industrial entities.

Movement of the project capital costs and O&M costs

Increase in prices for key commodities (4% and 26% y-o-y rise in cement and steel prices, respectively, in fiscal 2022 and further increase of ~3% and 4% in fiscal 2023), along with supply chain disruptions due to Russia- Ukraine crisis, contributed to cost escalations and higher capital cost for wind projects. Further, the shift in trend of larger size turbines of over 3 MW has further increased cost pressures. In fact, the commodity price surge has been one of the principal reasons for stagnation of growth in the industry as it has translated into lower project returns, which has impacted project commissioning since the second half of fiscal 2022. CRISIL MI&A- Consulting expects key commodity prices to reduce by 5-7% during fiscal 2025. This is expected to reduce the capital costs by 2-3%.

Expected investment in wind segment

CRISIL MI&A Consulting expects wind power capacity additions to grow over the next few years, mostly driven by green hydrogen, central and state allocations, and a pent-up pipeline. The previous change in the bidding mechanism has caused a slowdown in the industry due to a significant fall in tariffs, where both bid response and profitability for OEMs have dropped, however, new bidding guidelines along and increased tendering till FY28 to boost prospects in the sector. CRISIL MI&A Consulting expects wind capacity additions of 34-36 GW over fiscals 2025-29, entailing investments of ~Rs 2.75-3.0 trillion over the period.

Overview of Wind Solar Hybrid sector

Overview of Indian wind solar hybrid market

WSH is fast becoming the preferred RE option in India. Although the MNRE has not yet set a generation target, the nascent sector has received strong support from SECI and several state governments. There are two types of WSH projects — pure-play ones and those with storage. There are also projects that may come up under the government’s RTC power scheme, which has a mandatory 51:49 blend of RE and thermal.

India has introduced RTC generation tenders, including hybrid tenders to strengthen clean generation combining solar, wind and storage technologies. The MNRE introduced the National Wind-Solar Hybrid Policy on May 14, 2018. The main objective of the policy is to provide a framework for the promotion of large grid-connected wind- solar PV hybrid systems and efficient utilisation of transmission infrastructure and land. It also aims to reduce the variability in renewable power generation and achieve better grid stability. As on April 30, 2024, hybrid projects of aggregate capacity 15022.82 MW are under construction in the country. It is expected that India will witness 15-17 GW of WSH capacity addition in the next five years (fiscal 2025 to fiscal 2029), of which around 6-7 GW will be from wind.

Key growth drivers

Wind Solar Hybrid segment in India is experiencing rapid growth, driven by several key factors:

• Potential: India has around 696 GW (120 m hub height) wind potential and around 750 GW of solar potential. Currently only around 10% of the potential is developed and balance 90% of the potential yet to be exploited. This provides huge opportunities for wind and solar development.
• Geographical advantages: India’s coastline provides high wind speed as well as excellent solar potential. State such as Gujarat, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh have excellent wind as well solar potential. Such an advantage provides a great opportunity for hybridisation. Depending on the project requirements, the hybrid projects can be co-located or located in different locations also making it more flexible even if natural resources are located in different places.
• Complementary resources: Wind and solar sources complement each other. Due to their inherent characteristics, they generate power during different times of the day as well as seasons. Wind power is at its maximum during nighttime whereas solar power is available only during the day. Therefore, for 24X7 supply, they complement each other and hence WSH projects provide more reliable power and can be used for round- the-clock (RTC) supply.
• Resource optimisation: Co-located WSH plants can help in resource optimisation. With optimum land utilisation and infrastructure sharing, the wind and solar resources can be optimally utilised leading to better CUF as well as cost optimisation. With energy storage facilities, the WSH plants help in better grid management and higher penetration of renewable energy into existing power systems.
• Policy push: Government of India’s policy push has also helped the WSH segment. With increased ROP targets, VGF funding, PLI schemes, solar park schemes, simplified land allocation has helped both the resources (wind and solar) to thrive.

Constraints in setting up hybrid power plants

• Lack of good sites
  • WSH projects require wind and solar plants to be co-located to inject power into the same pooling station. This means the ideal location should have good irradiation and experience high wind speeds. But such locations are hard to find, especially as all major windy areas with strong grid evacuation facilities have been saturated. Hence, the industry has demanded that wind and solar plants of a WSH project be allowed to operate from different locations. This will also help bring down tariffs owing to better plant optimization levels. The only advantage of co-location is better optimization of transmission infrastructure. However, CRISIL MI&A Consulting believes the advantage from reduced tariff (when wind and solar units are located separately) is much higher than the benefit of improved transmission capacity optimization (with co-location).

Grid balancing requirement poses implementation risks

Developers are required to balance the grid before injecting electricity generated from a co-located WSH plant. This means they need to simulate the ideal wind and solar generation mix from the plant, in order to optimize the hybrid curve. This may lead to additional implementation risks for a developer.

Optimal sizing

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The size of the WSH plant differs from state to state depending on the resource availability. Optimal sizing of storage is also a pertinent question. Overloading or oversizing may lead to underutilisation during the peak generation period (daytime in summers or night-time in monsoons) resulting in storage capacity remaining unutilised or idle.

Higher tariff

The average tariff for WSH projects is Rs 3.15-3.20 per kWh today — higher than solar tariff, which has dropped to Rs 2.55-2.56 per kWh in recent bids, and comparable to wind tariff, which has remained sticky at Rs 3.40-3.75 per kWh. And although cross-subsidising costly wind power with low-cost solar will provide some price cushion at the lower end, the pricing needs to be attractive to make WSH competitive.

Review of Large hydro Power generation in India

Overview of historical hydro capacity additions

In the last 6 years (fiscal 2018 to December 2023) India has added only ~2,432 MW large hydro capacity. Central sector has led the capacity additions with commissioning of 600 MW of Kameng HEP, 330 MW Kishanganga followed by Private sector with 99 MW of Singoli Bhatwari HEP, 100 MW Sorang HEP, 180 MW Bajoli Holi HEP, 113 MW of Rongnichu HEP.

Outlook on hydro capacity additions in India

CRISIL MI&A Consulting expects 15-16 GW of hydro power capacities to be commissioned (out of 18 GW presently under construction) over fiscals 2025-29 as against ~2.5 GW added during fiscals 2018-24. CRISIL MI&A Consulting further believes the central sector (NHPC and NTPC) will lead capacity additions in hydro power with 5-6 GW additions, followed by the state sector (Andhra Pradesh, Tamil Nadu, Himachal Pradesh, Uttarakhand) amounting to 4-4.5 GW and about 4 GW would be installed by other JV utilities such as SJVN, THDC, etc. Several private projects with aggregate capacity of 1.59 GW are also in advance stages of construction and are expected to get commissioned by fiscal 2026-27.

Investments by hydro power giant NHPC rose by a staggering 52% to Rs 108.57 billion in fiscal 2024 from the revised estimates of Rs 71.29 billion for fiscal 2023. This is expected to provide the much-needed push to hasten the completion of hydro projects.

Expected annual hydro capacity additions

Key issues/ challenges in hydro power projects in India
The development of hydro power projects faces difficulties in land acquisition, lack of infrastructural facilities like road and communication, environment and forest issues, resettlement and rehabilitation problems, paucity of funds, longer gestation period, geological surprises, inter-state aspects, non-availability of hydrological data, security restrictions in border areas, lack of adequate skilled manpower and contractual problems.

Hydropower projects involve submergence causing the displacement of project area people. The rehabilitation of project affected people is also a major issue. Further, getting forest and environment clearances also delays the project. Many hydropower projects with common river systems between adjoining states are held up due to a lack of inter-state agreements and disputes on water-sharing.

Hydro projects require higher upfront costs to address greater complexities in design, engineering, environmental and social impact mitigation, etc. Most hydro projects take at least 5-6 years to construct which increases the interest during construction. Although the operating cost of hydro projects are minimal, and the project life is longer but there are other multiple factors that make hydropower difficult to finance. The technical challenges in hydropower development often result in time and cost overrun, posing additional risks for financiers. Delay in cash inflows increase uncertainty and risks, resulting in higher risk premium on financing charges.

Hydropower projects are mostly located in remote areas which do not have adequate demand for electricity. This creates the requirement for developing enabling infrastructure for power evacuation. It also requires the development of associated infrastructure such as roads and bridges in the area.

Overview of Small Hydro sector

Hydro Power projects are classified as large and small hydro projects based on their sizes. In India, Hydro Power plants with capacity of 25 MW or below are classified as Small Hydro. As per MNRE, the estimated potential of small / mini hydel projects is 21,133 MW from 7,133 sites for power generation. Of the total 21.1 GW of potential, over 60% lies in these five states namely, Karnataka, Himachal, Arunachal Pradesh, Jammu & Kashmir and Uttarakhand which includes over 45% of the total 7,133 sites.
As of fiscal 2024, the installed capacity of SHP is 5003.25 MW. In the last 5 years only 410 MW of capacity was added at a CAGR of 1.8%. Of the total potential, only 26% has been tapped so far.

Energy storage

Overview of energy storage technologies

Energy storage technologies can be broadly divided into four segments – mechanical, electromechanical, chemical, and thermal storage. However, only a few technologies are available on a commercial scale worldwide. Technologies such as pumped hydro storage (PHS), lithium, and sodium batteries are available commercially and are being used for different applications. Other technologies such as compressed air, flywheel, thermal and hydrogen storage, have yet to demonstrate their commercial viability at scale.

Pumped Hydro Storage Project (PHSP) is the most widely used and commercially available means of energy storage technology in India. However, the total installed capacity of PHSP is minuscule (~4% of the exploitable potential) in the country.

Pumped hydro storage projects in India Potential of PHS in India
The identified potential of PHS in the country is about 124 GW (comprising 114 PHSP). However, the operational capacity of PHSP is merely 4.7 GW, which indicates the large potential growth in this segment.

Overview of PHS projects in India

As on May 2024, India has an installed capacity of 4.75 GW of on-river pumped storage projects in operation. Currently, out of the 8 pumped storage schemes with aggregate installed capacity of 4.75 GW, only 6 schemes with aggregate installed capacity of 3.31 GW are being operated in pumping mode.

There has been limited traction for PHS projects which is evident in tendering activities. As compared to renewable energy sources, the tendering for PHS projects is very low. PHS projects have their own challenges which is also reflected in negligible capacity addition in last 5-6 years, largely on account of limitations in identification of suitable sites, relatively complex implementation, long gestation period and high capital cost that make viability a major issue. The guidelines released by the MoP in April 2023 will address many of these issues. However, traction in PHS projects will depend on steps to make tariffs attractive to discoms and mitigate implementation risk to fuel private sector participation.

PHS projects with aggregate capacity of 61,060 MW, which are at different stages of development are distributed among 12 States as shown in the below figure. Of these 10 States, over 60% of capacity is expected to be installed in two states, namely, Andhra Pradesh and Maharashtra.

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Battery energy storage

Battery Energy Storage Systems (BESS) is another form of storage technology which has gained traction in the last few years. It has a very high energy density making it appropriate to offer ancillary services. More importantly, BESS can be installed easily, requires less time for setup, and can be used for a wide range of grid support

activities, such as energy time shift, distribution deferral, and energy arbitrage etc. The technology is yet to achieve its full potential to provide grid support services, and comes with high investment cost and changing technology, and therefore has associated risks. Further, batteries would require replacement or disposal after 7-10 years, depending upon usage.

List of key players in ESS segment

Green Hydrogen

Different types of hydrogen
Hydrogen, the universe’s most abundant element, is making waves as a clean energy source for a sustainable future. Hydrogen can be classified into different types based on its colour, which is often an indication of its production method, purity, or intended use and also use of fuel for production of hydrogen.

Green hydrogen is produced from renewable energy sources, such as solar, wind, or hydro power, through electrolysis of water. This process splits water molecules into hydrogen and oxygen, without generating any greenhouse gas emissions. Green hydrogen is considered a clean and sustainable energy carrier.

National Green Hydrogen Mission

Green hydrogen mission and policy

The National Green Hydrogen Mission was approved by the government on January 4, 2022. The mission aims to make India a leading producer and supplier of green hydrogen in the world. The mission would result in development of green hydrogen production capacity of at least 5 million metric tonne per annum with an associated renewable energy capacity addition of about 125 GW in the country. As per Central Government, the targets by 2030 are likely to bring in over Rs. 8 trillion investments.

The initial outlay for the Mission is Rs.197.44 billion, including an outlay of Rs.174.9 billion for the Strategic Interventions for Green Hydrogen Transition Programme (SIGHT) programme, Rs.14.66 billion for pilot projects, Rs.4 billion for R&D, and Rs. 3.88 billion towards other Mission components. Under the SIGHT, two distinct financial incentive mechanisms have been proposed, one is targeting domestic manufacturing of electrolysers and the other for production of Green Hydrogen. The Mission will also support pilot projects in emerging end-use sectors and production pathways.

Management of NTPC Green Energy

Promoters & Board of Directors

• Promoters are the President of India, acting through the Ministry of Power, Government of India and NTPC Limited.

Board of directors

Share Holding pattern

Ipo details of NTPC Green Energy

The NTPC Green Energy IPO took place in November 2024. Here are the key details in table form:

Object of the issue

(in ₹ million)

Financial of NTPC Green Energy

Key Performance Indicators of NTPC Green Energy

(₹ in million, except ratios & %)

Assets & Liabilities of NTPC Green Energy

(₹ in million)

Profit & Loss of NTPC Green Energy

(₹ in million, except %)

Cash Flow of NTPC Green Energy

(₹ in million)

Capital structure of NTPC Green Energy

(₹ in million, except ratios)

SWOT ANALYSIS of NTPC Green Energy

• Strengths
  • Strong Parentage: NTPC Green Energy is a wholly-owned subsidiary of NTPC Limited, one of India’s largest power companies.
  • Significant Operational Capacity: The company has an operational capacity of 3,071 MW from solar projects and 100 MW from wind projects.
  • Round-the-Clock (RTC) Projects: NTPC Green Energy is a frontrunner in developing RTC renewable energy projects, including one of the world’s largest RTC RE projects of 1.3 GW.
  • High Credit Rating: The company enjoys a high credit rating from leading Indian rating agencies, similar to India’s sovereign ratings.
• Weaknesses
  • Reliance on Offtakers: NTPC Green Energy is heavily reliant on its top 9 offtakers for a significant portion of its revenue.
  • Geographical Concentration: The company’s operating renewable energy projects are concentrated in Rajasthan, which poses regional risks.
  • Negative Cash Flows: The company has experienced negative cash flows from operating, investing, and financing activities in recent years.
• Opportunities
  • Expansion Plans: NTPC Green Energy aims to achieve a target of 60 GW by FY32, providing significant growth opportunities.
  • Government Support: The Indian government’s focus on renewable energy and favorable policies can benefit the company’s expansion plans.
  • Technological Advancements: Investing in new technologies can improve efficiency and competitiveness in the renewable energy market.
• Threats
  • Economic Downturns: Economic instability can affect project funding and demand for renewable energy, impacting revenue.
  • Regulatory Changes: Changes in environmental and safety regulations can increase compliance costs and affect operations.
  • Intensifying Competition: The renewable energy sector is highly competitive, with many players offering similar services, which can impact market share and profitability.

Peer Comparison with NTPC Green Energy

(in ₹ million, except otherwise)

(in ₹ million, except otherwise)

Risks in NTPC Green Energy

• NTPC Green Energy operating renewable energy projects are concentrated in Rajasthan. Any significant social, political, economic or seasonal disruption, natural calamities or civil disruptions in Rajasthan could have an adverse effect on our business, results of operations and financial condition.
• NTPC Green Energy Power Purchase Agreements may expose us to certain risks that may adversely affect our business, results of operations and financial condition. Further, our revenue from operations are exposed to fixed tariffs, changes in tariff regulation and structuring.
• Restrictions on solar equipment imports and wind turbine generator imports and other factors affecting the price or availability of solar equipment, may increase our business costs.

• The renewable energy market in India is at a relatively early stage of development and trends in the renewable energy industry are based only on limited data and may not be reliable.
• NTPC Green Energy have incurred substantial indebtedness, and an inability to comply with repayment and other covenants in our financing agreements could adversely affect our business and financial condition.

(₹ million except ratio)

Litigation involved in NTPC Green Energy

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