India needs to review Green Hydrogen policy in view of incentives offered by other countries: Sumant Sinha of ReNew Power

The incentives and subsidies being planned by other countries for green hydrogen manufacturing are going to pose a stiff challenge for India if it does not review its strategy, said ReNew Power's chairman and chief executive officer (CEO) Sumant Sinha. In an exclusive interview to Moneycontrol at the India Energy Week 2023 in Bengaluru, Sinha also said that from focusing only on renewables, the company now intends to also help corporates with their decarbonisation strategies.

Edited excerpts from the interview:

At the India Energy Week's inaugural ceremony, the prime minister said going ahead, India’s energy growth would be the highest in the world. We have done a lot of things in different segments of energy, whether it’s hydrocarbons or clean energy. What are the gaps that still need to be plugged?

There are some fundamental issues in India. As you know, India is probably the biggest fossil fuel importer. We do about $150 billion or more of energy imports every year. We even import things like coal and so on. I would say that the whole energy sector in India needs a lot of work, which the government is certainly targeting to do, in terms of decreasing our imports and increasing our energy security.

Renewables is just one aspect of it. But I think, downstream, things beyond renewables—green hydrogen, for example—hopefully, will allow us to decrease this dependence on imports. I think it will take many decades for us to work on that and the prime minister, of course, has set a target of 2047 to become energy independent. This is going to require trillions of dollars of investments.

The global markets continue to be volatile. A lot of industry experts at India Energy Week seem to think that 2023 would be exceptionally volatile as well and it will be tough for energy importing countries like India. What is your perspective on this and do you think that at least the global cues would settle down this year?

My sense is that the energy transition is not going to be a smooth one, it is going to be bumpy. Oil prices already were very volatile earlier, given the demand-supply issues. Now add to that the whole issue of potential demand changes on account of renewable energy coming in as well. That is going to increase the volatility of oil prices. And then, of course, the global geopolitical situation, growth in China, all of those are things that are going to cause a lot of uncertainty.

Oil prices are extremely elastic, so you will see a lot of up-and-down movement. And that is going to put pressure on a country like India, which is a big oil importer. I think the long-term solution is that we should wean ourselves off oil as quickly as possible. But that is a mammoth task. Today, economies are based almost entirely on fossil fuels. The whole mobility sector is based on fossil fuels, a large part of power generation is based on fossil fuels. So we need to do a tremendous amount of work on the user industry side and on the generation side.

Hence, I believe this is going to be a multi-decadal task. It’s not going to happen overnight. But until at least we are able to decrease that dependence, it is always going to be subject to price volatility. And that’s always going to be a bit of an Achilles’ heel for the Indian economy.

Achilles’ heels sounds alarming enough, but there are a lot of things happening in India that give hope. One is the green hydrogen mission. The government has already announced a policy; the nitty-gritties are being worked out. What are the gaps that you think need to be plugged?

It is great that the government is pushing the whole green hydrogen policy so significantly. It’s great that they’ve announced the National Green Hydrogen Mission and they’ve actually allocated money behind that. But clarity on how that money is going to be allocated, will there be mandates on users of grey hydrogen to shift to green hydrogen within India to create a domestic market, are things that still need to be worked out. The separate policies rolled out by the states are also going to be significant for the industry to set up plants.

Having said that, I think the world is putting a lot of incentives behind green hydrogen, and the renewable industry in general, in their respective countries. The US has announced the Inflation Reduction Act and the European Union has also unveiled its Green Deal Industrial Plan.

Looking at the global environment, what are we doing right now that can help the green hydrogen story?

The issue really is the export market, where we really have to compete with other parts of the world and that is a moving target because, as I said, other countries are changing their own policies quite substantially to expand their incentives and subsidies. Hence, I think India is going to have to respond to that as well in some way.

We, as companies based in India, will be looking at developing projects in the country and essentially finding export markets. And in some cases, India will certainly have an advantage because of our geographic location and our trade linkages, and so on.

But I think if you really want to achieve the target of 5 million metric tonnes, out of which a large part has to come from the export market, I think that could be a little bit challenging.

ReNew Power has tied up with engineering major Larsen & Toubro (L&T) and Indian Oil Corporation Ltd (IOCL) in India for green hydrogen, and you have also signed up with the government of Egypt to set up a plant there, which is likely to be an $8-billion plant. How are you looking at developing green hydrogen under ReNew?

In India, we have announced a joint venture with L&T and IOCL. All of us bring complementary skill sets to develop the green hydrogen ecosystem in India. We certainly want our joint venture to be the preeminent green hydrogen player in the country.

As far as the international market is concerned, as I said earlier, it certainly could be the case that other geographies are better to export, let’s say markets like Europe and so on. And so as a company, you just have to be prudent and look at some of those opportunities as well, to make sure that if they end up being competitive, then you have a leg in there as well. Egypt is not the only market we’re looking at. We’re looking at other markets as well.

I think Egypt was first off the block. But we are still about 12 to 18 months away from a firm investment decision. Right now, we’re still doing a lot of feasibility studies. That will take some time to play out. But the reality is, green hydrogen eventually is going to be a globally tradable commodity and, therefore, you have to go to geographies where you can get a competitive cost of production.

When you started the company, you were upbeat on solar. The story has changed significantly and you have had a first mover’s advantage in green hydrogen. Where do you see ReNew Power in the next five years?

We’ve had a pretty phenomenal journey over the last 12 years. Look, nobody could have forecast how the whole market was going to evolve. The important thing for us is to keep executing well, keep making sure that our core business, which is the Indian renewable energy business, grows well. So that is really going to be our first effort.

Beyond that, what we’re finding is that now corporates are becoming very keen on moving on their own net-zero journeys. Therefore, there’s an opportunity for companies like ours to really broadbase our product footprint a little bit and maybe our geographic and customer footprint also. So, just from targeting utilities in India as potential buyers from us, we’re also now targeting corporates.

Corporates have different requirements. They have requirements around hydrogen and derivatives of hydrogen. They have requirements around some other decarbonisation products. Those are things that we’re looking at and we’re trying to see how we can position ourselves really as a decarbonisation player in this whole evolving climate change space as we go forward.