Can Reliance do for renewables in India what Jio did for telecoms?

India’s fossil fuel giant Reliance Industries (RIL) is switch to renewable energies, with company chairman Mukesh Ambani announcing a rupee 75,000 crore ($ 10 billion) investment plan on June 24. India’s solar industryy, via Reliance, is making a huge bet on competition with China, while the Indian firm’s entry into the sector could even signal the end of the oil age.

In India, industry experts believe Reliance’s announcement put the renewable energy sector firmly in the spotlight. “It is very encouraging to see how large Indian companies are making commitments and channeling investments into the clean energy space,” says Vibhuti Garg, energy economist at the Institute for Energy Economics and Financial Analysis ( IEEFA) based in the United States. Garg further suggested that Reliance’s announcement would also encourage other companies to invest in the sector and take the new energy path seriously.

Reliance’s renewable energy announcement sent shock waves through the energy industry, as did the company’s aggressive move to mobile internet with its Jio platform and devices in 2016. Jio now dominates the market and has ambitious 5G plans. Reliance hopes its renewable energy strategy will lead to similar dominance.

Will RIL’s new venture become a success on par with Jio’s?

“The company’s vision with the launch of the new energy business was to aim to bridge the green energy divide in India and the world, similarly to bridging the digital divide in India in 2016. [with the launch of its telecom business Reliance Jio]Says lawyer Sonam Chandwani, managing partner at KS Legal & Associates.

In 2016, with the launch of Reliance Jio, the telecoms arm of the subsidiary of RIL Jio Platforms, Ambani changed the dynamics of the telecoms sector in India. Less than a year after its launch, due to its ultra-affordable data prices, India is said to have become the first consumer of mobile data worldwide.

Following Reliance’s entry into the industry, the average data consumption by an Indian user rose to 11 gigabytes of data per month. This success came at a price – the fierce competition that Reliance unleashed in the telecommunications industry in India.

Thanks to its cheap data prices and plenty of freebies, in just five years of existence, Reliance Jio has boasted of having expanded its mobile subscriber base to 414.9 million in February 2021, with the added 4.2 million new users in just one month. At the same time, its competitors Bharti Airtel and Vodafone Idea added 3.7 million users and 650,000 users respectively.

Ambani’s new energy challenge

Here is Ambani’s three-step plan to replicate Jio’s success with renewables:

  • Hyper-integration: By integrating scientific knowledge with technological innovation to build and operate integrated systems.

  • Robust business model: By building a model that catches the irreversible upward curve in demand for green energy in India and globally, and the downward curve in the cost of its production.

  • Scalable Capability: Improving the efficiency, performance, and lifecycle of assets and operations to achieve total system optimization and profitability.

Meanwhile, Ambani’s Reliance is not the first company in India to focus on the green and renewable energy sector in a country still heavily dependent on coal. In 2019, from April to December, private companies invested around 37,000 crore rupees ($ 5 billion) in renewable energy.

On June 22, state-owned NTPC, India’s largest energy conglomerate, announced that it double its renewable energy capacity at 60 GW.

Likewise, in March, Adani Green Energy signed a contract to acquire a 100% stake in SkyPower Global’s 50 MW solar power project in Telangana. This agreement will bring its operational renewable capacity to 3,395 MW and the total renewable portfolio to 14,865 MW. In the same month, India and the United States restructured their strategic energy partnership to focus on cleaner energy sectors, including biofuels and hydrogen production.

“Companies that still rely heavily on fossil fuels have seen shareholder value erode, and so increasingly there is pressure from the board of directors to invest sustainably,” Garg explained. of the IEEFA.

The future of the renewable energy sector in India

India’s nascent renewable energy sector is full of opportunities and continues to grow. With an installed renewable energy capacity of 94.43 GW (as of February 2021), it has attracted investments worth $ 42 billion since 2014, according to the Indian Brand Equity Foundation (IBEF), the agency public export promotion.

According to the IBEF, India could see investments of around $ 500 billion in its new energy industry by 2028. By 2040, the IBEF also reports that around 49% of total electricity in India will be produced by renewable energy, with more efficient batteries used. to store electricity, which will reduce solar energy costs by 66%.

However, if that happens, using renewable energy instead of coal will save India 54,000 crore ($ 8.4 billion) per year.

Meanwhile, despite the announcement of a $ 10 billion investment, industry experts believe Reliance could do better.

“Given RIL’s past investments in the petrochemicals and telecommunications sectors, the magnitude of this announcement is relatively small,” said Ashish Fernandes, CEO of Climate Risk Horizons, a climate research group based in Bengaluru. . “However, this is an indicator that big business is starting to understand that the era of fossil fuel expansion is ending much faster than expected.”

Stressing the need to take green energy more seriously, Fernandes warned investors in the coal, oil and gas sector against any further investment in fossil fuels.

“These are outdated investment plans that need to be reconsidered in light of rapid changes in the energy economy,” he adds. “Continuing to push for the doomed fossil fuel investments will have serious negative repercussions on the Indian economy.”

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