Renewable energy adoption by India's C&I sector: A necessary shift for sustainable growth

As India progresses in its transition to a greener economy, the commercial and industrial (C&I) sector will need to emerge as a critical player to enable this shift. This sector, which accounts for ~50% of the energy demand of the country, is increasingly fueling its growth trajectory with sustainable energy practices, reflecting a fundamental commitment to environmental responsibility, and contributing to energy security of the country. This movement by the C&I sector is driven by compelling economic, environmental, and regulatory factors.

Renewable energy: An imperative for C&I growth

The Indian C&I sector, a critical driver of India’s economic growth, is seeing its energy demand growing at 10% CAGR, while also evolving in its mix of sources. Traditional reliance on fossil fuels is giving way to increased adoption of renewable energy, motivated by the objectives of reducing cost, mitigating energy cost volatility, while reducing carbon footprints. Companies making this shift will also likely possess tangible and intangible competitive advantages in domestic and global markets.

The business rationale for renewable integration

The integration of renewable energy into the C&I sector's energy mix is not just environmentally prudent; it's economically beneficial. Adoption of renewable energy can lead to substantial savings on energy bills, particularly for energy-intensive industries. Utilizing storage such as PHP and BESS could also enable the offset of higher peak hour charges of up to 1.2 times under Time-of-Day tariffs, taking effect April 2024 onwards.? The economics of Round-the-clock renewable energy are even more compelling now, given the continuing cost decline of solar and wind energy, and the recent rapid decline of energy storage technologies, such as BESS and PHP.

The volatility of fossil fuel prices, especially in the current geopolitical environment, poses a significant risk to businesses, impacting operational costs and profit margins. Renewable energy, with its lower and more stable cost structure and through their PPA structures, offers long-term predictability in energy costs and therefore, a hedge against this volatility. This long-term price stability enables better financial planning and risk management for businesses.

Finally, renewable energy adoption aligns with global sustainability trends driven by investors, regulators, indeed all key stakeholders. Indian C&I players making this transition can meet the expectations of international partners and consumers increasingly prioritizing Net-Zero commitments.

Navigating the regulatory landscape

India's regulatory and policy environment has been a catalyst for the renewable energy sector's growth, with policies specifically designed to facilitate the C&I sector's transition to green energy, including the Electricity Act, ISTS Waiver and GNA Rules, to name a few. Initiatives such as open access policies, empowered by the Green Energy Open Access Rules, allow small and large consumers of electricity to purchase power directly from producers, bypassing traditional utility channels. This not only enables businesses to secure renewable energy at competitive prices but also fosters a more dynamic and competitive energy market.

Further regulatory reforms, including the simplification of approval processes and incentives for renewable energy investments, have significantly improved the ease of doing business in this sector. These reforms have been instrumental in attracting domestic and international investments, propelling the growth of renewable adoption by the C&I sector across the country.

Challenges and opportunities ahead

Despite the clear benefits and strong regulatory support, the transition to renewable energy in the C&I sector faces several challenges. Issues such as grid integration, reliability of supply, and the initial capital outlay for renewable installations can pose barriers to adoption. Moreover, the availability of land for large-scale solar and wind projects and the challenge of securing long-term financing are significant hurdles that need to be addressed.

However, these challenges also present opportunities for innovation and collaboration. Advances in energy storage technologies, for example, are making renewable energy more reliable and grid-friendly. New financing models, such as green bonds and renewable energy service company (RESCO) models, are providing more accessible funding options for renewable projects.

Conclusion

The C&I sector's pivot towards renewable energy is a cornerstone of India's broader energy transition. This shift, driven by a confluence of economic, environmental, and regulatory factors, is not just transformative for the sector itself but also for the country's energy landscape. As India continues to advance on its path to sustainable development, the synergy between the C&I and renewable energy sectors will play a pivotal role in shaping a resilient, competitive, and green economy. The journey is complex and fraught with challenges, but with continued policy support, technological innovation, and strategic investments, the potential for impactful change is immense.