Reliance to upend the Indian renewable sector

05 July 2021 |

Reliance Industries Limited (RIL), a diversified conglomerate and India’s largest private company by market cap (valuation: INR 14 trillion, USD 190 billion), has announced stunning plans to enter clean energy sector. The company would invest INR  750 billion (USD 10 billion) in the next three years – INR 600 billion (USD 8 billion) to produce solar modules, storage batteries, hydrogen electrolysers and fuel cells, and INR 150 billion (USD 2 billion) in “value chain, partnerships and future technologies.” In addition, the company aims to “establish and enable” at least 100 GW of solar energy by 2030 primarily through rooftop solar and decentralised solar installations in villages. The company, an international scale oil&gas, telecom and retail player, has also committed to become a net zero emitter by 2035.

The four giga factories would be set up in Jamnagar, Gujarat with infrastructure and utilities support from RIL’s existing facilities. The solar module factory would be fully integrated from polysilicon-to-modules. The company would also set up dedicated teams to provide “end-to-end” project construction and finance solutions to: i) large renewable plants across the world; ii) MSME system integrators for deploying residential and business-scale systems. Other details are not available at this stage. We try to interpret the announcement and its likely impact on the sector.

What is the real game plan?
We believe that RIL is going to be primarily focused on manufacturing and offering end-to-end solutions direct to consumers. The 100 GW installation target seems most likely aimed at C&I, SME and residential consumers using the company’s own products, operational and financing ability.

We believe that RIL would stay away from the hyper competitive utility scale project development business except for developing captive capacity for feeding its other businesses. Bulk of the action would therefore come in rooftop solar and off-grid solar businesses. The company could provide a major fillip to these markets by addressing key pain points for consumers and rolling out highly competitive solutions integrated with low-cost financing.

Are the plans credible?
Coming from a company with unmatched financial and operational might of RIL, the announcement has to be taken seriously. FY 2021 turnover and net profit stood at USD 64 billion and USD 6.7 billion respectively. The company has successfully created some of the world’s largest integrated oil & gas, infrastructure and telecom facilities from scratch in record times. RIL is also believed to stay very close to ruling central and Gujarat state governments with a uniquely influential role in policy making, very crucial in the heavily policy dependent energy sector.

RIL’s foray into telecom services in 2016 is an instructive case study. The company upended a mature sector by offering complete digital solutions at super low prices backed by an INR 1.5 trillion (USD 15 billion) pan India network with last mile fibre infrastructure. In just four years, it crushed leading incumbents like Vodafone, Aditya Birla and Tata to become the largest industry player with a 35% market share.

But some parts of the plan including 100 GW installation target appear less realistic. Hydrogen and fuel cell manufacturing vision is expected to take longer time in view of the nascent state of this sector. We also believe that the company would struggle to establish a clear toehold in international markets.

Can RIL compete against Chinese giants?
RIL may have a competitive edge over its Indian peers. The true challenge would come from across the border. In all target businesses, the world’s top producers are (likely to be) predominantly from China. Despite its strengths in infrastructure, supply chain and financing, RIL would find it difficult to compete with them on technology and production scale. This is where the company’s ability to shape government policy would come handy. It would rely on protectionist moves like BCD on solar modules to overcome cost or technology disadvantage and thrive in the domestic market.

What does it mean for other players?
RIL’s entry into module manufacturing should be devastating for all current and aspiring players. The company could realistically set up a 10-15 GW integrated capacity and sell modules at prices 20% below domestic competition to dominate the market. No other player could even come close to competing with RIL on backward integration and scale.

We do not expect any material change in the utility scale project development business. Most rooftop solar and other distributed solar players – combined annual market size of about 2,000 MW – are anyway very small at present. They would mostly benefit from the massive tailwinds created by RIL’s entry into the business.

With its new energy plans, RIL is bowing to pressure from the international financial community and signalling a strategic change of direction away from fossil fuels. Notwithstanding the company’s motivations, its entry into renewables is a game changer for the sector.

Recent reports

A business case for renewable energy certificates for Indian companies to meet RE 100 targets

C&I consumers account for 53% of power consumption but only 6% of this requirement is met from direct procurement of renewable power. In face of m...


A business case for rationalisation of Green Tariffs in India

Only about 6% of total C&I demand is met from direct procurement of renewable power. In face of multiple challenges faced by established routes li...


India Corporate Renewable Brief | Q3 2022   

Our latest edition of quarterly report provides a detailed regular update on key trends and developments in the C&I renewable market....

Buy Report Download Executive Summary

India PV Module Intelligence Brief | Q3 2022   

This report captures quarterly trends in module demand and supply, import and domestic production volumes, supplier market shares, break-up by technol...

Buy Report

India Solar Compass | Q3 2022   

This report provides a detailed update of all key sector developments and trends in the quarter – capacity addition, leading players, tenders and po...

Buy Report Download Executive Summary
Award winnig research
We use cookies to offer you an optimal user experience and collect information on website usage.