Spanish firm Gamesa eyes solar power business in India

Image: Raju Patil for Forbes India

Ignacio Martin, Executive Chairman, Gamesa

Gamesa Corporación Tecnológica of Spain is a late entrant into the Indian wind energy market, but has grown rapidly to overtake well-entrenched local and global players. It has become the market leader in just five years. Gamesa chairman Ignacio Martin, during a recent visit to the country, told Forbes India what the government should do to reignite demand for setting up windmills and offshore wind generation. He also talked about the Spanish company’s plan to enter the solar power business.  Excerpts from the interview:    

Q. You entered India in 2009, but have already garnered a 37 percent market share. Today, India accounts for 27 percent of your global revenues…
Our India operation has been amazing so far; reaching the No 1 position in just five years is not easy. Our success can be attributed to the fact that we add value to the whole chain: We do promotional development with our own land bank, have manufacturing facilities producing blades, turbines and towers, and also offer operations management or after-market servicing. Our presence across the entire value chain is unique and has given us this privileged position.

We believe that demand for wind turbines in India will increase significantly in the future. We are expanding our facilities and pushing our suppliers to enhance their capacities, too. So far, we have invested $250 million, and plan to invest another $150 million in the next few years. With the potential that India offers, we are going to analyse additional opportunities in the market.

Q. What are these?
The government of India is pushing for solar power in a big way. We already have expertise in this area, so why not enter the solar energy sector? We have the knowledge, engineering procurement and construction (EPC) capabilities, and we also produce inverters. We already have a presence in most parts of the solar value chain.

We have a lot of ideas. India has the necessary political stability in place now. We are looking at our future here with a lot of enthusiasm.

Q. Is your foray into solar motivated by the slowing down of wind power installations in India?
No. Wind power installations declined because generation-based incentives were withdrawn in March 2012. These incentives are critical for projects set up by independent power producers. They have now been restored and demand has started picking up.

The positive sentiment after the new government took over and its pronouncements and actions on the ground suggest that it considers power to be an important sector. And within that, it sees renewable energy as an important tool to overcome the power shortage in the country. The message is coming straight from the prime minister’s office. There is lot of action on the ground.

Q. What should the Narendra Modi government do if it wants to promote wind power in a big way?
Everything related with permission (bureaucracy) should be improved. Infrastructure, in terms of transmission lines and roads to provide the necessary logistics, needs to be created. The government must also stringently enforce the renewable power purchase obligation, which is part of the Electricity Act but not adhered to. If that happens, there will be a secondary market for the sale of electricity. Today, wind power generators are forced to sell to state electricity boards, which are not in the pink of health. This affects the bankability of the projects. A secondary market will open up a new wave of further investments.

We also need a long-term policy of seven to 10 years so that people can make investments, undertake wind studies and get the necessary permits/approvals. This takes three to four years, but by then, the policy changes.

Q. Do you intend to leverage the ‘Make in India’ initiative?
Our strategy is to produce as much as we can in India. Our local content is 80 percent, and that is significant. Our immediate challenge is to increase this to 100 percent. Once we achieve that, we will be more than happy to take advantage of this initiative as Gamesa has reliable and high quality suppliers in India. We can use India as a base, just like China, to meet global demand, but after satisfying local needs.

Q. How is India warming up to offshore wind generation?
The government is serious about it and has announced that the first offshore wind farm will come up in Gujarat. An MoU (memorandum of understanding) has already been signed and work has started. We will be bidding for the project. The potential for offshore wind power is huge. We do not know the exact quantum yet, as studies are still underway.

Q. Are we near saturation point of the wind energy potential on land in India?
Not at all. The known potential is 6 lakh MW and we (all wind energy companies in India) have tapped 25,000 MW so far. There is plenty of room for growth and we need to accelerate the process. Any amount of electricity will be insufficient for the kind of growth India will be seeing in the future.

Q. Where do you see Gamesa in India five years down the line?
We will reinforce our market leadership with some diversification into the solar energy sector. In a country where millions of people do not have access to the grid, there are tremendous opportunities.

Q. How is the wind energy sector performing globally?
It is performing as per our expectations. There is growth, but it’s not as big as previous years. We are talking today about 44 GW of new installations per year. Over the next three years, we are looking at about 9-10 percent growth. A lot depends on whether the production tax credit, a subsidy in the US, is continued or not. If it is renewed, this trend will continue, otherwise global demand will be affected. Nevertheless, the good news is that there is support for clean energy in Europe and China. As you may recall, China recently signed a significant agreement with the US to cut green house gas emission by 2030. This should translate into more demand. Another potential growth driver is the offshore business—installing wind turbines in the sea. This is a very promising sector mainly in Germany, the UK, Netherlands and Belgium, apart from China and India.