Management Discussion & Analysis 1. Industry Developments by International Renewable Energy Agency (IRENA). Share Global Power Sector of renewables in new capacity additions rose considerably The global power sector is on the cusp of a major for the second year in a row, accounting for more than 80% transformation with new energy sources and new players of the capacity additions, with solar and wind accounting Overview entering the arena of energy supply. Nations, corporates, for 91% of the renewables. As per International Energy individuals across the globe are rising to the cause of Agency (IEA) World Energy Outlook 2020, renewables climate change, and are consciously opting for greener are expected to overtake coal as the primary means of sources of energy, resulting in the rising share of producing global electricity in 2025. renewables in the debate on power sector’s transition While the general sentiment is against coal globally, coal portfolio mix. The COVID-19 pandemic has further projects are unlikely to be halted overnight. The global stimulated the debate on power sector’s transition from coal plant pipeline remains concentrated in the Asian fossil fuels to cleaner energy sources. Additionally, electric economies, mostly in China. Coal capacity expansion is vehicles, digitalisation, battery storage, cyber security, expected to face an overall squeeze, with global financiers Our Emphasis on Value big data analytics, hydrogen fuel are some of the key increasingly withdrawing from coal projects and global emerging trends that could profoundly define the way capital focusing on Environmental, Social and Governance the global power and renewable markets operate in the (ESG) norms as an investment criterion. Even non-power coming years. companies are not unscathed by this transformation. The COVID-19 pandemic brought about unprecedented The lucrative renewables market has garnered interest changes in 2020 to the power sector worldwide, with among oil and gas majors as well, with many increasingly significant demand disruptions, supply chain bottlenecks, investing in green energy, prompted by revenue decline in fuel prices, changes in energy consumption diversification, future-readiness and government profiles, asset sales and acquisitions. It imparted the worst regulation on carbon emissions. Declining oil prices and Our Value-creation Paradigm ever impact delivered by any crisis on the global economy rising share of renewables in the global primary energy and the power sector. Global Gross Domestic Product mix is promoting the increased energy transition of oil and (GDP) posted the biggest decline of -3.3% as per IMF April gas companies into renewables. Many have announced 2021 report in the past 20 years and the power demand huge renewable plans while foraying into other segments contraction of 1% was the sharpest registered in more such as retail power and gas distribution and Electric than 50 years. Power demand is likely to recover slowly Vehicle (EV) charging. from the COVID-19 disruptions, driven by developing economies such as China and India, which have shown Reduction in costs of newer technologies is helping growth resilience and a steady increase in power demand, greater penetration of such technologies and shifting the following the easing of lockdown measures. While the power profile towards more variable capacities. The same extent of demand revival in 2021 remains to be seen, is leading to rising flexibility needs for power systems. the roll out of vaccines and policy support-led revival in Coal and gas fired power plants are currently the main economic activities (6% world GDP growth projected for source of flexibility in many systems, with additional Reports Statutory 2021 by IMF) create grounds for the recovery of power contributions from hydro and nuclear. Energy storage demand in most countries. systems are gaining strength, as evidenced from the rising number of new solar projects that come with battery With an increasing number of nations responding to storage, lower costs, improved performance indices and the challenge of climate change, the energy landscape policy support are creating opportunities for battery is undergoing change, with greater focus being lent to storage market. The global energy storage market grew cleaner sources of energy. More than 100 countries have significantly even in the pandemic year, achieving record pledged carbon neutrality by 2050 and many more such installations of 5.3 GW in 2020 from 3.4 GW in 2019, led by commitments are on the horizon. Similar announcements China, and followed by the US and Europe. It is expected on the corporate front have gathered pace worldwide. Be to grow substantially in the next couple of years, with the it energy companies or those in the IT/technology space, Asia-Pacific region accounting for more than 50% of the Statements Financial both utility and non-utility companies are undertaking global market share. 100% carbon free initiatives. EV have been in the spotlight for a while now and Falling costs of wind and solar power are making way are witnessing significant growth owing to growing for increased investments in renewables that are now environmental concerns and the rising demand for the preferred mode for energy generation and sourcing. sustainable and energy-efficient transportation. Renewable capacity addition has beaten all previous Governments across the world have introduced various records, with more than 260 GW being added in 2020, schemes to incentivize EV purchase over conventional exceeding 2019 growth by 50% as per the report released vehicles. Strong demand for EVs in a tough year was a #Futureready: Empowering customers for tomorrow’s world 161 Management Discussion & Analysis bright spot in the automotive industry. Sales grew by Indian Power Sector 39% to 3.1 million units in 2020, compared to a 14% sales India’s power sector witnessed many successes in the decline in the total passenger car market in the year. recent years, including energy access being extended to Several car manufacturers are announcing new EV targets millions of households, the adoption of energy-efficient and this is encouraging industry participants to invest in LED lighting by most households and expansion of the EV supply chain, including large power utilities and renewable power sources, led by solar. However, the oil majors who are investing in EV charging infrastructure COVID-19 crisis has complicated the efforts to resolve through acquisitions. This market segment is also other pressing issues that loom large across the power attracting a lot of start-ups with new innovative charging value chain. Among these are reliable power supply, solutions. the ailing financial health of Distribution Companies Green hydrogen is the next level of technological (Discoms) and rising pollution levels. advancement that is gaining traction. This has captured The year 2020 was marked by one of the biggest health the attention of political and market players, given the challenges faced by the world. It impacted all segments immense role it can play in energy transition. Recognising of the economy, and the power sector was no exception. its potential to disrupt the energy sector, some countries India’s demand for power fell significantly by 8.5% in the have already set ambitious targets to advance their green first half of FY21 but picked up pace in the second half hydrogen strategies. The global race to develop this of the fiscal, with the easing of lockdown measures. In nascent and costly technology gathered momentum with fact, the country recorded the highest ever peak power 2021 witnessing over 30 countries release their hydrogen utilisation of 190 GW in FY21. roadmaps. As per a Hydrogen Council report, there are more than 200 large-scale projects for a combined $ 300 India’s growing urban population, revival in economic billion of proposed investment through 2030. Around $ 80 activities in the coming quarters after a sizable billion of this amount has gone into advanced planning population gets vaccinated and its quest for affordable, or has passed a final investment decision or has gone clean and reliable power provide a huge scope for to projects that are under construction or have been continued growth in power demand. commissioned. Scaling up of projects with the right policy The coal sector is set for revival in 2021, buoyed framework in place, could help in faster decline of costs, by improving economic activities, although the making green hydrogen a strong contender among green government’s thrust on renewable energy sources technologies. continues and the need for clean energy appearing to be Decarbonisation of power systems is resulting in more pressing than in pre-COVID times. The Government decentralised power generation, which is making of India is focussing on renewable energy growth in digitalisation essential to serve varied needs. The three alignment with sustainability and carbon emission Ds – Decentralisation, Decarbonisation and Digitalisation reduction targets. It plans to raise renewable energy – are driving transformation of the energy sector, creating capacity from targeted level of 175 GW in 2022 to 450 GW opportunities for new business models like Energy-as- by 2030. Even India’s coal behemoth, Coal India Limited a-Service (EaaS), which is likely to further disrupt the (CIL), and its largest thermal power PSU, NTPC Limited, utility sector. The future of power utilities is not about are diversifying into cleaner energy technologies.