According to Bloomberg New Energy Finance, companies purchased a total of 13.4 GW of clean power globally in 2018, which was a record amount of clean power procurement through PPAs in a year (see figure 1).1 The US was the single largest market, with 8.5 GW deployed, while India, although farther behind, emerged as the second largest corporate PPA market, deploying 1.3 GW.
In 2018, the annual corporate PPA capacity addition in India passed the 1 GW mark for the first time. The number and breadth of companies that are switching to renewable energy in India is worth noting. The list of corporate buyers adopting renewable power included global technology providers (Adobe, Microsoft), automotive manufacturers (Volvo, Mahindra), food and beverages companies (United Breweries, Coca Cola) and airports (Bangalore, Cochin).
The logic underpinning the rapid growth in and broadening customer base of renewable power comes down to two factors. The first factor is sustainability. While most companies have always viewed clean energy favorably, in the last two years, more and more large companies have begun to make tangible progress on renewable energy. Whether or not they are signatories of global campaigns such as RE100, most leading companies today are aiming for anywhere from 50 to 100% reliance on renewable electricity within a defined timeline. The second factor is economics. Depending on the location, companies can source renewable energy at a 15 to 40% discount on industrial grid tariffs in India.
Reductions in wind and solar costs are making them competitive with thermal generation in many geographies. Renewables reached grid parity – when a renewable source of energy costs the same as a conventional source of energy – about two years ago in India and many other countries, and have now gone beyond. In India, companies bid for solar and wind projects at well below the average cost of coal power procured by the National Thermal Power Corporation (NTPC), the national power generator.
Utilities worldwide, including in India, may face obstacles in moving immediately to cheaper and cleaner generation technologies. However, private electricity users can usually move faster than utilities. Given that solar power is
economical, scalable and relatively less dependent on location across India, it has taken the lion’s share of corporate renewable procurement volumes. Wind power is a distant second for new capacity additions.
Solar power adoption by companies can take two forms: rooftop solar, where the solar capacity is deployed onsite and net metering is used to manage power supply and demand; and utility-scale solar, where an offsite project is set up and the public grid is used to wheel power to the corporate buyer under an open access mechanism.
Given the economics, companies in India see the adoption of rooftop solar as an obvious solution. But there are limits to the capacity each consumer can install: depending on a facility’s size and power consumption, rooftop installations can typically supply only 10-15% of industrial facility demand, even less for a commercial building, hospital or data center. Increased
demand for renewables has led companies to purchase power from utility-scale, open access or offsite power, which can meet 50-80% of a facility’s power consumption. Rooftop solar, which is less dependent on state policy, is commercially viable in all major states across India. Volumes across states in 2018 were well distributed.