Could ReNew's Shift From Wind To Solar Plus BESS Mark A Critical Turning Point For Wind?

ReNew Energy, which announced its Q3 results yesterday, made some key announcements in its analyst call, of which, a decisive shift away from wind to BESS and Solar plus BESS stands out. The announcement stood out even as wind PLFs had improved significantly over last year for the firm, but the increasing uncertainty of weather patterns over the past few years has simply made the business too unpredictablke for the firm. 

The firm will not be alone in making the move, as BESS costs as reflected in bids in recent months have become competitive vis a vis Wind Energy in India, with the added attraction of being much more dependable.  As projects actually come up on the ground and start delivering, a good show might place even more pressure on wind energy in India. Thus, despite healthy order books, wind energy firms will not rest easy as they await formal starts to some planned projects. With no respite for wind energy costs, a further drop in BESS costs, however unlikely it might seem right now, will ring alarm bells on the viability of wind energy in India. Keep in mind that offshore wind has already been a virtual non-starter so far, with indications clear that solar will be making up the difference on any miss on targets for 2030 from wind energy, both onshore and offshore.   

For ReNew,  a big highlight of Q3 was the continuing outperformance of its solar manufacturing operations, which continued to deliver strong profitability. It is on track to have 13 GW of manufacturing capacity divided between 6.5 GW modules, and 6.5 GW of cell manufacturing, including 4 GW of cell manufacturing under construction.     

How BESS Is Trumping Wind

Speaking during the call post its Q3 results, Sumant Sinha, Founder and CEO  said "for our complex projects, we have decided to replace part of our wind of those projects with more battery energy storage systems, or BESS, and solar capacity. We have reduced, therefore, the wind capacity in our committed portfolio from 2.5 gigawatts to approximately 850 megawatts, effectively taking total portfolio to 19.2 gigawatts, which is inclusive of approximately 1.5 gigawatts of batteries. This pivot enables us to lower CapEx, reduce execution risk as well as more accurately forecast our future cash flows owing to less volatility in the weather patterns. "

Explaining the reasons in more detail, Sinha added that " when we bid out some of these projects, at that time, price levels were, for BESS, were significantly higher than where they are right now, and also for solar. So in general, with prices of BESS coming down substantially, the ability to firm up power through solar plus BESS has actually improved. And therefore, to get to the right solutions that are desired by the customers, we require essentially less wind from an overall new configuration standpoint. So that is one reason that the amount of wind has decreased.

The second thing also is that, as you know, we've had experience in wind where PLFs have been unfortunately lower than expected over the last 7 years or the last 5 years. And we don't know exactly when that trend will reverse. It may reverse next year, it may take a little longer. But fundamentally, the variability in wind is a lot higher than it is in the case of solar. And execution also in general, because a lot of the execution in solar is in Rajasthan where it's easier to get land, and a lot of the execution of wind is in sort of Deccan, Central India, which a lot of it is agricultural land, it's usually harder to get. And so therefore, to do a similar amount of capacity is easier in solar than it is in wind.

And so for all 3 reasons, which is related to change of price in BESS, change of the issue of wind variability and the issue of easier execution in solar, we have, therefore, tried to reduce the amount of wind in our portfolio going forward. And so in the close to about 7 gigawatts of now capacity of PPAs that we have, we have reconfigured those projects as we are allowed to under the terms of the bid, of the various bids, and we are now, therefore, trying to go for a higher amount of solar plus BESS. There is, of course, still close to 1 gigawatt of wind, but is down substantially from 2.5 gigawatts that we had earlier."

No Plans for BESS Manufacturing 

Sinha diavowed any plans to get into BESS manufacturing, giving multiple reasons for the call.

One is that there is no restriction at this point on imports of batteries from China -- or cells from China that can be imported at a much cheaper level than you can manufacture domestically. 

The second reason he gave was was that, on the technology front, technology moves a lot faster in the case of batteries. And so it just requires a lot more expertise to be able to get into the understanding of the right cell technologies and so on.

Finally, with a lot of the cell manufacturing in the country driven by the EV industry, a market the comoany is not considering at all if it was to consider BESS production.

We believe the firm will reconsider its views possibly in a few quarters, as the probability of duties or protection from Chinbese imports rears its head as more and more Indian firms actually start making cells by Fy 27. Plus, the potential for BESS applications across home, C&I and utility segments could be much higher than forecast if poverall power prices trend up, as seems likely.    

Losses From Curtailment

The firm highlighted the losses from curtailment as a systemic loss that requires a broader regulatory push.  However of the total loss it incurred on account of the combined issue of curtailment and transmission unavailability, it said that approximately about 30% or 35% was being compensated back because ReNew has GNA - a permanent GNA. Where it has a Temporary GNA, it has had to absorb those losses.   The firm informed analysts that at any given time, it has between 500-700 MW of its portfolio on T-GNA.