“What is important is the intent; Capability can be built”, Shilpa Urhekar, Sterling & Wilson Renewable Energy

Shilpa Urhekar is one of those rare professionals in the solar sector who have seen the sector evolve from its tentative origins, when a MW-sized project was a milestone, to the current shift, when GW-sized ambitions are at par for the course. The former Indian Air Force squadron leader has been involved with establishing module manufacturing plants, to distributed solar and rooftop solar, before her current role as the National Head for the domestic EPC business at Sterling and Wilson Renewable Energy. With the focus clearly on large utility scale projects at Sterling and Wilson, the present role comes at an opportune time, with the firm seeking a much larger footprint in India, and backing that intent with some significant project wins in recent months. Group Editor Prasanna Singh met up Shilpa Urhekar, National Head, India Renewable EPC Business Sterling & Wilson Renewable Energy for an interaction….

How is 2023 looking for you? What can we expect to see?

Let’s talk about the big picture and then come down to the solar industry. I think the targets we have set for ourselves, the 2070 net zero especially is a very ambitious target. These require a very holistic approach towards the renewable energy sector. If I have to talk about the policies required, let me touch upon 3-4 things.

Let’s start with EVs. EVs are going through a transitional phase, where their charging infrastructure is the biggest bottle neck. Charging infrastructure is key for EVs to take to the highways. That’s when the real transition will come in. Are we securing the backend supply chain? Even as we talk about the technology and the battery, do people know that it takes two and half times more copper for an electric vehicle? Do we have our copper supplies in place? Chile and Peru are the two countries who have 40% of copper supply. Do we have rest of the minerals that we put in the battery technology locked up and reserved? These are the things we need to look at when we talk about EVs.

Then we come to Hydrogen, where so much is talked about and the right steps have been taken, in terms of the (Green Hydrogen) Mission and the policies. All of this is pressing the right buttons. Let’s break it down in smaller building blocks. The code that has not been cracked yet, is the storage and transportation. What is the industry thinking about. There has to be a push which needs to happen in these directions. A brainstorming, a framework which will define a milestone wise breakdown of each and every step which will go towards building a smaller block of the big hydrogen storage challenge.

I personally believe that the green hydrogen story goes through the lens of blue and grey hydrogen. I say that because the existing infrastructure that is available for the blue and grey hydrogen is out there, use it. Building a national value chain for green hydrogen will require help. It will have to piggyback on the existing infrastructure, so take that route. How to integrate blue, green and grey hydrogen. Hydrogen requires a lot of handholding. So just having the policy in place is not going to help. These are the building blocks you need to look at when you are building the story.

Then you come to the third building block of renewable energy, i.e., storage. In this year’s Budget, touching upon the PLI, viability funding for 4 GW is a good step.

We shouldn’t ignore pumped storage. Pumped hydro storage is one technology which has got such good potential in India. I was reading the IEA report, it has got around 120 GW, around 100+ sites where the potential that exists in India and we have only around 5 GW installed across 7-8 sites. With the flexibility pumped storage provides, grids can actually utilize pumped hydro as a balance to integrate renewables. So there needs to be an ecosystem with tariffs for pumped hydro. Pumped hydro doesn’t have to be established next to a river or stream etc. So closer to the grid is an option, flexibility is an option, utilising of existing infrastructure is an option. Like using transmission infra near dams.

Talking about the grid, will we be prepared for a higher share of renewables?

Grid is the subject everyone likes to talk about. But for renewables, its very important to have a grid that can have a two-way communication. There are 2 ways to do anything i.e., First you improve what you have, what your existing infra is. Which means your existing grid needs to be first improved, empower the discoms, all the regulatory commissions. The whole framework needs to be able to stand independently. Secondly, what you build new, build it the best. You need digitization, you need advanced technologies to build a smart grid. A Smart grid with batteries is on its way. But the discom reforms is the matter that remains urgent. It is something which will always be a bottleneck if we don’t address it today.

It seems the Electricity (Amendment) Bill which is still stuck in the Parliament was the best route for discom reforms. Now that is stuck, as we head into election mode in 2024…

What is important is the intent. Capability can be built. Intent is where building is required. What I see is electricity being a state and center subject has always been a subject in the crosshairs of the power centers. It’s important that the discoms are made to undergo structural reforms, organizational reforms, policy reforms and reforms which can integrate renewable energy. Let’s talk about good things first, we are a very complex country and power sector is one of the most complex in the world. But we have managed to integrate 50% renewable energy in such a dynamic power sector- capacity wise. That’s an achievement by itself. Today you look at the electricity availability, we are close to achieving 100% for every household. The deficiencies have gone down. The challenges of course they remain. There needs to be an incentive. PPCP(Public private customer partnerships) should be the new term for discom improvements. Every year they are making losses, because of which they can’t pay the generators, because of which they can’t invest in the infrastructure and are reluctant to integrate renewable energy and rightly so. Lets take one quick example, open access customers they keep switching between regulatory power and access power, how unstable does that make the grid. So obviously, discoms don’t have any incentive today to integrate renewables. One example of how to do the PPCP is mini grid. Allow the local renewable energy sources, supply locally and to the grid. Integrate that into a mini grid, supply power there and that way discoms can get a better power and local consumer is part of the bigger picture.

This whole BCD issue vs the domestic manufacturing issue. Where are we in the market today in terms of impact? Figures from CEA (Central Electricity Authority) indicate a clear slowing down of capacity build up.

This is a very good and relevant question. Since you have talked about CEA, let me pick that up. As per CEA , in Jan- December 2022 we have added 14.5 GW and what I see is that, most of the time, it has come from the 10 GW that got imported, (in March) pre BCD. It was in just one quarter that the GW got imported, this is where the number don’t reflect the reality. What we are seeing is most of the stranded projects, because of supply chain disruptions, COVID, project extensions which got billed in this year and these imports which helped them to get build.

We were clocking good numbers pre-COVID 2017-2018 was one of the highest additions and now post BCD era we have hardly added 2-3 GW and add to that all the commodity price rises, add to that the fuel and the logistics and supply chain price hikes. All to this put together, the additions have been slow.

Now coming to the manufacturing scenario. We barely claim out of one crisis and got into another i.e. the Russia Ukraine war. It’s scrambled the countries to run towards energy security than doing the renewable story, the right thing. That’s when prices started going up, pre-BCD there was almost a 15% hike in the module prices. Now the BCD comes in, now I am the developer I suppose, I have a signed PPA or I am about to sign but where is my sourcing. The BCD for the manufactures was supposed to be a good thing, and they were supposed to help me out as an Indian support system. What happened to them. They also faced this 25% cell tariff. So, their cost itself went up even as other parts of the BOS are also inching higher and imported. The Indian manufacturers had no other option but hike their prices. That’s where the decision dilemma came in and the fresh capacities could not be built. The uncertainty has also made investors jittery. Most of the top Indian solar industry developers have got investments from outside countries. Or there are PE funds that have set up firms here. Everybody now wants to slow down-they want to see where the module price is going. Module price increase affected us more because of the BCD. Coming to the global phenomenon, Indian manufacturers saw merit in exporting the module than supplying in India. Not only modules, invertors even. Thus capacity started becoming a strain. This is where the whole 2022 story rests. Even if we talk about March, we are hardly 45 days away I don’t see much capacity getting added.

How can the market get out of this rut?

The C&I market. We have already started seeing this, with the likes of Amazon coming in to purchase renewable energy. What will enable more firms to join is policies on open access, green energy rules and all of that. We also expect to see module price softening, which has already started happening. So post April, the commodity prices should also start stabilizing, plus the new capacity addition in the manufacturing towards the end of the year. I can’t put a number, but definitely C&I will lead the show in 2023.

Having learnt the lessons from aggressive bid tariffs, we expect far better progress now from developers.

With higher than expected demand growth, we have also seen prices on power exchanges trending higher or at comfortable levels for generators all of last year. Is that set to change dynamics in the future?

Yes. I come back to the term PPCP, because the more you involve the consumer side stakeholder, the more freedom you give him to trade or to choose. The better or more robust your whole system becomes. So definitely the trading market will improve there. But again, it has to be regulated. There has to be framework to set the target, you have to systemize it. All the limits like you have in your trading markets needs to be defined there. So it is there right now but they need to be evolved along with the renewable energy, its intermittent nature, then the storage getting added to the grids. All of these aspects will need to be incorporated into that framework for it to really last for longer and to see that growth.

Of the many policy proposals and drafts that are in the works, which one do you see as being most impactful for now?

The Green Open Access Policy with a start as low as 100kW is a game changer. If it actually gets followed through by the states, it’ll become a big incentive for the C&I to start taking open access seriously. Today they have so many constraints- their group captive approvals takes months together for even for initial approvals. And then there are huge penalties on the demand side. If the supply side schedule changes, DISCOMS levy huge penalties on them. I would believe that our industry would want to do the renewable option, but we have to facilitate it. We have to have that framework where they feel safe to invest their money into it. So again, coming back to states, if this has to be done, then the reforms, which I talked about earlier have to now come. So DISCOM is a state utility. Now, for any state and utility to be successful, it has to be separated out from the state. So, the state and the entity have to be separated out. Otherwise, there will always be the risk of political intervention.

And there has to come in accountability. There has to come in transparency, there has to be tariff regulation in a transparent manner. The fixed cost or variable cost component of the tariff is not known to consumers. So that is where the whole uncertainty sets in for open access. The second is regulatory commission. So, SRCs definitely need to be more empowered. They need to be given more independence, independent directors separated out from the whole state control.

What about Rooftop solar? Why do you think that hasn’t grown well?

Yes, we have lagged behind on rooftop solar, with just about 7 GW of installs in place. Here again, it is due to a lot of factors, especially state level policies. We don’t have a robust grid which can deal with the intermittence solar from rooftop levels.. Discoms are reluctant because they lose revenues, and can’t handle the instability.

Digitisation is key to allow for the kind of innovation we have seen elsewhere. In the US and other places, they can downscale or upscale output by controlling inverters. I always believe that any policy we make has to achieve the three Is to make it relevant. One is inclusivity, one is innovation, third is investment, and that’s where you get energy independence. That is why I appreciate the framework that has been created.

Does Sterling and Wilson have plans for the rooftop space?

We tried out the model of BOO (Build, own and operate) in rooftop. That model requires a sustained O&M and payment cycles, so we decided to move away from it and focus on utility scale.

So as compared to 2020, your existing portfolio has kind of skewed back towards India in terms of number of projects right ? Is that a conscious move, that you believe is sustainable now?

Definitely the India story is big. We all agree on that. So there is a big possibility that the India market will continue to have the largest share for the next two to three years at least. And that is primarily because of the whole partnership with Reliance plus the whole manufacturing story becoming viable. Plus the hope that the utility scale solar gets back on track.

How do you see the O&M market evolving, where you have a 7 GW portfolio of clients to run too? We have seen how large developers in India prefer their own O&M on the other hand?

It’ll remain as balanced as it is right now. Because O&M is moving faster towards AI based maintainance. Monitoring, digitization, and all of this. So it is easier to, and increasingly important to have direct control on the asset where your generation and your IRRs are really dependent on. When you don’t have the know-how, have a third party who’s accountable, who can be penalized and is knowledgeable And as in our case, has the global experience and brings the learning of EPC. So between developing the knowledge in-house, and going with an outside expert, I think the case is still strong for the latter, though the former cannot be underestimated.

Moving on to PSUs and their role in renewable capacity expansion. How do you see that part of the utility scale market?

PSU’s have the balance sheets, and importantly, the mandate to build renewable capacity. They will lead the way. Their commitment to building capacity is much higher, although they will not do it at losses. So they will make a big impression in the coming couple of years, 2024-25 onwards in a big way. They come with very strong fundamentals and are more cost conscious and efficient now.

How do you see Green Hydrogen supporting solar growth?

It will not be immediately taking a large space in the renewable capacity mix. That would depend on couple of things like, where am I sourcing the electricity from? So if I’m going to build it, I can always purchase green electricity, right? But if I’m going to build it near the green hydrogen plant, then there are mechanisms to integrate it. So it’ll again have to be a huge infrastructure in terms of evacuation as such. So the evacuation and the conversion will happen at source it may not have to go through the grid. But you can’t be 100% out of the grid, as you still will need the base load, creating the demand for the RTC (Round the clock) integration with the grid.

Since you mentioned RTC, are we ready to move to more of these, Hybrid renewable projects?

Yes, absolutely. Gujarat State has come out with a very good policy on solar, wind, hybrid open access. The policy beautifully lays down the another tariff structures, the open access charges that can be done. The framework forit. The charges like the long term banking. So that kind of open access to the consumer will promote RTC storage. Today a developer wants RTC, he has to actually go to three different suppliers, you know, solar supplier, manufacturer, and maybe a storage supplier as well. Plus he has to have a baseload. So when we come out with policies which are actually promoting a hybrid construction, like this policy (Gujarat) even lays down how the design of the plant should be, then we will have progress on RTC.

How Open is the market today for new EPCs?

There are two or three things a new entrant needs today. One is having a very strong technical understanding of the whole cycle. That is extremely important. Where we are going with the module technologies, for example. Where we are going with the tracker technologies, where is the storage bit fitting in. This big understanding of the renewable sector is key to being a good EPC, a successful EPC. The second part is, being able to balance or rather manage the large scale procurement. That is key. Sterling and Wilson for instance has deep experience in these areas, and is a very agile organization.

So from, Sterling and Wilson perspective, what’s the big expectation from 23?

So we are, we are very positive about this whole, C&I segment taking over. And a resolution of the GIB (Great Indian Bustard) issue as that will open up a lot of projects. The opportunities in the RTC market are also something we are looking at with optimism, and between these three, I think we will have much to target for 2023.

When do you see a developer buying the complete set of materials from Indian firms?

That is sometime away. When we were talking about what policies can do, getting the MSMEs and the SMEs to invest, in giving an incentive to invest into manufacturing the class B, class C components that go into a plant is important. Because, just making he modules or the cells will not be enough for true energy independence. With domestic content requirements becoming a requirement for PSUs especially, I think that will drive them to make in India, and enable a stronger local manufacturing ecosystem for all components in time.