IEEFA report: NTPC plays central role in India’s energy transition

Formerly known as National Thermal Power Corporation, the Indian state utility NTPC is now showing itself to be the principal supporter of the government’s green energy push.

According to a report by the Institute or Energy Economics and Financial Analysis (IEEFA), NTPC has turned into India’s prime off-taker of the rapidly expanding private renewable energy generation sector.

NTPC, which provides about a quarter of India’s electricity, is among the top 10 coal-fired power generators in the world, ranking third in coal-fired capacity and seventh in generation.

However, with its strong balance sheet that underpins renewable power off-take, the drive to cease imports of thermal coal and its development pipeline getting greener, the utility has taken a major role in India’s ongoing redesigning of its electricity-generation system.

“Despite its deep historical connection to coal-fired electricity generation technology, NTPC has recently moved to the forefront of India’s energy transition and stands to be the country’s key new energy enabler,” said Tim Buckley, the lead author of the report and IEEFA’s director of energy finance studies, Australasia.

Solar cheaper than coal
As the downward trend for the solar tariffs in India continues, harvesting sunshine has become the cheapest way of generating power in India’s coal-dominated market.

In a landmark energy turning point, record low Indian solar tariff bids accepted in 2017 (INR 2.44 ($ 0.037)/kWh), mean that solar tariffs are now lower than NTPC’s average tariffs for its existing coal-fired fleet (INR 3.20/kWh), reads the report, titled NTPC as a Force in India’s Electricity Transition: Leading the Way Towards a New Energy Economy.

“It is clear that renewable energy offers a cheaper way to provide power,” Buckley said. “Importantly, solar is now cheaper than coal-fired power even before taking into account the externalities of coal (pollution, emissions and water use) that hold back the nation’s development.”

Major utilities in business-model transformation
The report notes that major utilities in many countries are at various stages of reshaping their business models amid rapid technological innovations. While early movers such as Enel SpA of Italy and NextEra Energy in the U.S. have become transition leaders, others have lagged.

NTPC must ensure it does not follow the well-worn path towards shareholder value destruction taken by E.On and RWE of Germany and Engie in France, the report states, adding that by beginning their transition too late these companies have significantly underperformed financially.

Global capital inflows and ambitious goals
In the light of its ambitious national target of reaching 170 GW of renewable energy capacity by 2022, of which 100 GW is to come from solar, India’s clean energy boom has attracted numerous overseas investors, including Goldman Sachs, JP Morgan, Morgan Stanley, Macquarie Group, Sembcorp, Enel, EDF, Engie, SoftBank and Brookfield.

According to the IEEFA report, NTPC would do well to focus its foreign investments on renewables rather on coal-fired projects, as both the utility and the country itself are set to benefit from the renewable energy rollout and further pursuit of the clean energy goals.