India’s power demand is expected to surge by over 7% annually until FY35, according to Nikhil Bhandari, Co-head Asia Pacific Natural Resources and Clean Energy Equity Research at Goldman Sachs. While the evolution of renewable energy in the country has been a “beautiful journey”, it’s time for India to navigate the complexities of grid stability and rising power demand, the green energy expert suggested.
“I think beyond three to five years, we are also seeing energy deficit opening up, meaning a full day deficit also opening up against a 7% plus power demand CAGR (Compound Annual Growth Rate). And for that, we need to look at other reliable round-the-clock options too. Thermal may need to coexist alongside renewable and storage,” he said during a conversation with NDTV Profit on Thursday.
Renewables and hydropower accounted for nearly 80% of new power capacity additions over the last eight to nine years. “Or put it another way, roughly 45% of our power capacity mix now is renewables and hydro. China was there about a couple of years ago.”
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Bhandari cautioned that the key debate now is whether this rapid, renewable-heavy expansion can continue unabated. The primary concern is about the grid's ability to handle the variable nature of solar power.
“During the day, as the sun is shining, we are creating a lot of renewable power. And at that point, the base load, which is the coal utilisation rate, has to be dropped because the coal plants are not designed to be up and down so much that we can bring them down in the morning and we can bring them back in the evening,” the renewable energy sector analyst underlined.
While some adjustments are being made, bringing coal utilisation down from 80% to 60% during peak solar generation is already happening. Pushing beyond these limits without significant investment could lead to "curtailment issues," where available renewable power is wasted because the grid cannot absorb it.
On the question of whether thermal and renewable energy need to coexist, he said, “I think they will be coexisting with a 10-year view.”
A pressing challenge is the need for massive battery storage to support renewable energy. Goldman Sachs estimates that India will require over 500 gigawatt-hours of storage by 2032, with batteries accounting for 400 gigawatt-hours.
“Batteries are the more immediate bottleneck. That is a highly consolidated industry globally. Companies that can manufacture cells locally will be at an advantage or will be able to command a better return on their investment,” he said.
“Depending upon the horizon period, battery is more immediate, thermal is more medium-term. And resolving the distribution electrification is, again, a medium-term and important area for investors to focus on,” Bhandari added.
On investment themes, Bhandari advised focusing on integrated renewable energy solution providers over standalone solar module or cell producers, which face increasing competition.
“I believe companies that can do end-to-end polysilicon to module to power end-to-end integrated solution providers will be a more sustained business model here. In particular, those who can resolve polysilicon and battery cells,” he said.
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