"Doing Solar Without Battery Makes Limited Sense", Says Ratul Puri, Chairman, Hindustan Power

"I'm a strong believer in distributed generation. India is blessed with a high degree of solar radiation across most of the country. The idea of building solar entirely in Gujarat or Rajasthan and then building long transmission lines to take that power to the point of consumption doesn't make sense in the long run."

Ratul Puri, Chairman of Hindustan Power, believes India's clean energy transition now hinges less on generation capacity and more on building the supporting ecosystem. In this conversation with BW Businessworld, he discusses why battery storage is becoming indispensable to renewable energy, the case for distributed generation, the rationale behind domestic manufacturing policies such as ALMM, the impact of AI-driven power demand, and the policy reforms needed to accelerate India's energy transition while ensuring long-term investor confidence.

Battery storage in India has gained a lot of attention recently in the solar conversation. We have states like Rajasthan scaling aggressively. Does storage finally make commercial sense in India, or are the economics still dependent on policy support?

I think eventually battery is crucial, it's the key that opens the renewable chain, it's the key that will unlock the opportunity that exists within renewables. Doing solar without battery makes limited sense for India. Today, when the sun is not shining or the wind is not blowing, we are effectively firing up thermal power plants. Those plants are backed down during the day and brought back whenever there is lower solar or wind generation. We also have an evening peak, which means we are building thermal capacity to service that demand while backing it down during solar hours. That significantly adds to the overall cost of the grid. Storage is vital, and I believe India needs to push storage even if it appears uneconomical today. It is certainly more economical than building a new coal-fired power plant, a new coal mine, the rail infrastructure between the two and the transmission infrastructure, only to back that capacity down for several hours every day.

Storage will be the most significant investment India can make over the next five to ten years to enable the energy transition. Electricity is the future of energy, and we are seeing demand rise across residential, industrial, commercial, transportation and data centres. Without storage, solar and wind, I don't think India can meet the aspirations of its 1.4 billion people. Storage is still expensive, but costs have come down sharply over the last two years. Battery costs have fallen by more than 60 per cent, while overall system costs have declined by around 35–40 per cent. We now need to create scale and learning capability, just as we did with solar, and eventually build domestic manufacturing. The West Asia conflict has shown us that for something as vital as electricity and energy, we need domestic supply chains.

Today, storage is viable for time-shifting energy. It is certainly cheaper to do that using batteries than by building a coal-fired power plant and backing it down during solar hours. Coal-fired power is still cheaper than solar plus battery, but if the choice is between a thermal plant that sleeps during the day and wakes up at night versus solar plus battery, then solar plus battery is the better combination.

When we talk about solar and even wind, there is increasing discussion that India is running out of commercially viable solar land—not just wastelands, but land that actually makes economic sense. Has land availability become the next major bottleneck for renewable energy growth?

I don't believe so. Firstly, I'm a strong believer in distributed generation. India is blessed with a high degree of solar radiation across most of the country. The idea of building solar entirely in Gujarat or Rajasthan and then building long transmission lines to take that power to the point of consumption doesn't make sense in the long run. Today, the government has effectively socialised the cost of transmission, but that's not sustainable forever. Eventually, market economics have to come into play. If you look at the real delivered cost of energy, rather than just the cost of land, distributed generation across states makes much more sense.

There is sufficient non-productive, non-irrigated land available in every state that can deliver lower-cost energy than building solar only in Rajasthan and transmitting it across the country. Yes, land may be cheaper and easier to acquire there, but once you factor in transmission costs, local generation can be more economical. I don't believe land is running out. Land acquisition in India is certainly a challenge because of land records, litigation and disputes, but that's part of the developer's job. A developer has to identify the right combination of sunlight, land and grid connectivity. That's where value creation lies.

People often say you could generate enough energy for the world from a relatively small area in the Sahara Desert. While that may be true in theory, you still have to transmit that electricity to where it is needed. The same principle applies within India. You can live with slightly lower solar radiation or somewhat higher land costs if you're saving substantially on transmission. I believe there is enough barren or low-productivity land across states to support India's renewable energy ambitions. The focus should be on delivering the lowest-cost energy to consumers, and in many cases that means generating power closer to where it will be consumed.

India recently strengthened the ALMM policy to boost domestic manufacturing, but developers have spoken about higher costs and supply disruptions. Has the policy delivered more benefits than challenges so far?

I think if, as a nation, we want to build domestic capacity and domestic supply chains, we have to encourage domestic manufacturing. ALMM and domestic content requirements are an important part of that. Every industry needs some time to stand on its own feet. If you protect domestic industry for a period, you will see capacity coming in. If you look at module manufacturing, India has built very large manufacturing capacity in a short span of time—probably the second or third largest in the world by all accounts. That has happened because of positive policy support from the government. You need to handhold industry, give it a runway to achieve scale and become competitive with China and other global manufacturers.

Now the government is stepping further back in the value chain, and I think that's the right approach. Are there challenges? Absolutely. Today, sufficient cell manufacturing capacity does not exist in the country. Developers with large project pipelines are finding it difficult to secure cells, and the entire supply chain is under pressure. But that's how markets work. Manufacturers who invested early in cell capacity are benefiting today because they took the investment risk. Domestic cell prices have risen sharply, creating enough profit incentive for more companies to invest. I believe that within the next year and a half to two years, significant additional cell manufacturing capacity will come up.

Yes, this has been a challenge for developers and it could slow the pace of solar capacity addition in the near term. But in the long run, it will drive investment in domestic cell manufacturing, and that's good for India. We want to build cost-competitive domestic supply chains, but we have to handhold our own industry for some time. It cannot be never-ending protection. You have to let the industry grow, gain experience and then compete globally on its own. That's why I believe the policy has been positive for India, even though it has undoubtedly created short-term challenges for developers.

When we talk about energy consumption, one of the biggest expected demand drivers is artificial intelligence, data centres and industrial electrification. Is India's renewable and grid infrastructure ready for this next phase of demand growth?

I think AI is real. It's clear that it's happening. As a nation, we have a great opportunity because one of the biggest bottlenecks in creating data centre capacity anywhere in the world is the availability of electricity. Eventually, AI comes down to processing power, energy and algorithms. Of those, the two real bottlenecks are GPU capacity and energy. India has an opportunity to attract a significant amount of data centre and compute capacity because intelligence is moving closer to the edge. As inference-related computing grows, capacity will move closer to where consumers are. At the same time, creating new capacity in markets like the US, Europe and Japan is becoming increasingly difficult. That creates an opportunity for India.

Is the grid a bottleneck? Yes, it is. But the grid is also being built out. In fact, these transmission constraints should encourage more distributed renewable generation. If you're setting up a large data centre in Maharashtra or Andhra Pradesh, you would want a local supply chain and generation capacity located nearby rather than depending on power transmitted over long distances. In the longer term, you're better off having the solar plant closer to the load centre than relying on transmission lines that operate at only around a 20–23 per cent plant load factor and remain underutilised for much of the time. I believe these bottlenecks will eventually get addressed because demand itself will drive investment. As data centres expand, they will encourage the creation of local renewable generation and strengthen regional power infrastructure. That's the direction India should move towards.

Renewable energy tariffs have become increasingly aggressive in recent auctions. Is the industry prioritising growth over profitability, and does that pose a long-term risk for the sector?

Certainly, competition is intense. Generally, tariffs today are not remunerative on a risk-adjusted basis. At the same time, there is a significant amount of global capital looking to fund the energy transition, and some of that capital is finding its way to India. That's one of the reasons we've seen such a large build-out of solar capacity over the last five years. I do believe that, in this phase of growth, developers are pricing projects too aggressively without factoring in all the risks. The cycle won't always remain favourable. Today, you have ALMM changes, supply constraints, rupee-dollar fluctuations, higher shipping costs and overall inflation. I don't think many developers fully built these factors into their calculations. While you can't predict every event, such as geopolitical disruptions, you would normally factor in exchange rate movements and inflation while bidding.

We've seen similar cycles in transmission and thermal power. Developers bid aggressively, returns don't materialise, and eventually the sector consolidates. The financially disciplined developers emerge stronger because they haven't taken risks without adequately pricing them. I don't know if there's a simple solution because you still need a competitive bidding process. Perhaps there is a need to strengthen the implementation framework, particularly the penalties for projects that are not executed. That may encourage developers to build a more realistic assessment of risk into their bids.

If there was one policy intervention the government could implement over the next two years to materially accelerate India's clean energy transition, what would it be and why?

I don't think this applies only to clean energy. It applies to building India's infrastructure overall. Stability of policy is a crucial aspect. It is the government's job to make policy interventions and change policy when required, but I believe there is a need to make those interventions less frequent. We need a longer horizon when it comes to policy, along with a proper grandfathering period. If the government decides to change a policy, it should announce it today but make it effective three or five years later. That gives developers and investors enough time to plan for the change instead of having to react immediately.

The second issue is dispute resolution. India needs to address the time it takes to settle commercial disputes. This is particularly important in the energy sector. We created separate regulatory bodies and dispute resolution mechanisms through the State Electricity Regulatory Commissions, the Central Electricity Regulatory Commission and the Appellate Tribunal, but there are still significant bottlenecks in these forums. I think India needs to improve dispute resolution across the board—both in the courts and within the regulatory system. Policy stability and faster dispute resolution go hand in hand. Both reduce risk for investors, and lower investor risk ultimately translates into lower tariffs and makes India more cost competitive.

About Ratul Puri:-

Ratul Puri is the Chairman of Hindustan Power, an integrated power generation company with a strong presence in renewable and transitional energy generation. Over the years, Ratul Puri has been involved in the development of large-scale energy infrastructure projects that support India’s growing power requirements and its transition toward cleaner energy sources.

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