It’s incredible what is happening in India. The clean energy transition is in full swing and promises to transform a country that still relies on coal for more than half its energy into a global leader in renewable energy technology. And, as a symbol of this massive transition, one of the world’s biggest renewable projects is literally rising out of the ground in Pinnapuram, a rural corner of south-eastern Andhra Pradesh.
The scale is hard to fathom: Pinnapuram is a 1.68 GW pumped storage hydroelectric (PSH) facility which can effectively transform 4,000 MW of intermittent solar and wind energy into firm and schedulable power. Greenko, its developer and a company in which ORIX holds a 20% stake, is constructing two reservoirs, including a 49-meter-high dam, boring seven tunnels, assembling turbines, switchgear and thousands of other components.
Back at its headquarters in Hyderabad, Telangana, Greenko has set aside a dedicated ‘war room’ to monitor drone footage of the construction site to ensure everything is on track.
Size, however, is not even the most notable aspect of this project. What makes Pinnapuram a world first is the integration of the three different types of clean energy and, in particular, the use of closed-loop PSH for storing power – rather than a battery array, or not having any storage capacity at all.
Energy generated by the wind and solar farms will be used to pump water uphill from the lower to the upper reservoir at the rate of 1 billion cubic feet in nine hours. Once needed, the water is released downhill, driving hydroelectric turbines, with gravity doing the work. As a closed-loop system, it will not need any river water once the lower reservoir has been filled initially, eliminating any local environmental impact.
By integrating this storage capability, Pinnapuram can compensate for the intermittency that plagues conventional renewable energy projects whenever the wind does not blow or the sun does not shine, allowing it to guarantee customers round-the-clock electricity.
Mission possible: reliable renewables
That, in a nutshell, is the mission of Greenko, one of India’s largest clean energy companies. “We are committed to transforming renewable energy into a dispatchable and controlled medium through digitization, decentralization and storage solutions,” states Mahesh Kolli, President and Joint Managing Director. “This way we can support India’s economy-wide shift toward a carbon neutral electricity mix.”
Mr. Kolli and his partner, Anil Kumar Chalamalasetty, Chief Executive & Joint Managing Director, founded Greenko in 2006, at a time when India’s economy was expanding so rapidly that demand for power was outstripping its considerable fossil fuel reserves and it had started to import coal. The two men, cognizant of India’s natural wealth of sun, wind, water and land, saw a huge opportunity to meet some of that demand from more sustainable sources.
The key, which they understood as experienced entrepreneurs, was to take advantage of proven, domestic technologies and resources in order to be able to produce their renewable energy at grid parity – in other words, for the same cost as thermal power – from the get-go. “We decided at the outset that we would never demand green premiums from policymakers”, says Mr. Kolli.
Greenko started with hydro power since this was well-established and already close to economic parity with coal. Four years later, it added wind and then, around 2016, solar, as economies of scale and improvements in technology turned them competitive. Today, the company has an installed capacity base of 7.3GW, with over 100 projects spread across 15 Indian states, able to generate over 20 billion units of renewable energy annually. A further 8GW of PSH is under construction or active development.
Once they had solved the cost problem, Greenko’s management focused on improving quality. Because of solar and wind’s intermittency, they discovered that adding more than around 10% of renewables to the electricity mix actually increased overall costs as more expensive, marginal power sources had to be kept on standby. A second issue was that the country’s industrial base, from steel to chemicals, was not willing to trust ‘unreliable’ renewable electricity at all and so was not decarbonizing rapidly enough.
Pump up the storage
The solution to both problems was to add storage to the mix, to make renewables ‘dispatchable’ -- as reliable and flexible as coal or gas. Greenko’s particular answer, from 2019 onward, was to introduce closed-loop PSH, as at Pinnapuram. Not only does PSH provide much longer duration than batteries, which are more commonly used; it is also cheaper, allowing Greenko to deliver dependable electricity at a cost of $60-70 per Megawatt hour, compared to $100-$200 per MWh in the US or Europe, estimates Mr. Kolli.
It will enable Greenko to become the first operator globally to deliver carbon-free energy to the grid that did not need backing from a thermal power source – and to do so at a highly attractive price. “This was a huge technical and commercial benchmark that put Greenko on the map – including for us”, says Mike Nikkel, Senior Managing Director and Deputy Head of the Energy & Eco Services division of ORIX, who worked with a team of ORIX people on the group’s investment into Greenko in 2021.
Customers have noticed too. ArcelorMittal has established a strategic partnership with Greenko to build a 975 MW solar & wind facility, also in Andhra Pradesh, that will guarantee at least 250 MW of uninterrupted renewable power via the integration with 200 MW of storage from the Pinnapuram PSH. The steelmaker gets a reduction in electricity costs and a 1.5m tons per annum cut in its CO2 emissions. In return, it has signed a 25-year offtake agreement, providing Greenko with guaranteed long-term cash flows.
“These kinds of decarbonization pathways are transformative for us and the whole country,” says Mr. Kolli. India already has the world’s third-largest electricity market, some 410 GW. Now that renewables are turning dispatchable they can capture a larger slice of this.
Going green to support hydrogen
Its expertise in renewables is naturally leading Greenko to provide round-the-clock low-cost renewable energy in support of another type of carbon-free energy: green hydrogen (and green ammonia), which is produced by using renewable energy to power electrolyzers that split water into hydrogen and oxygen.
Amidst a global investment boom in green hydrogen projects, including in India, it is worth remembering that almost all the hydrogen being used in industry today is still ‘grey’ (produced from LNG in a process that emits carbon dioxide); and that in order to make the green variety economical, its cost must be reduced far below the current $6-8 per kilogram. In reality, hydrogen and ammonia offer another alternative way to transport and utilize green power. The market is large with a global demand of at least 100 MTPA of Green Hydrogen annually by 2030.
The USA is doing so with incentives: the recently passed Inflation Reduction Act offers tax breaks worth up to $3/kg for new production. Countries from Australia and Chile to parts of the European Union are trying to do so by scaling up and building hydrogen hubs. Meanwhile, by providing its pumped storage concept to hydrogen producers, Greenko estimates that green hydrogen can be produced for $3/kg without direct subsidies – making India one of the world’s lowest-cost producers.
Given the growing demand for hydrogen from hard-to-abate industrial sectors that require heat as well as power in their manufacturing processes, this promises to become a huge market – as much as $35 billion annually in India alone, reckons Mr. Kolli.
A new kind of cloud storage
Adding up all its expansion plans, Greenko is on a path to operate 50 gigawatt hours (GWh) of energy storage by 2027, which can absorb the output of ~60 GWh of solar and wind. Pinnapuram, with some 10 GWh of storage capacity, is the first of four such large integrated projects, to be followed by three more in the Indian states of Karnataka, Madhya Pradesh and Rajasthan.
With all that energy coursing through its storage facilities and transmission lines, the group has built a digital platform that links these with its data centers, to manage those complex flows. Its founders, who cut their teeth in the technology industry, now provide this platform to customers and third parties, helping them manage their electricity needs in real time. “We are aiming to become the Amazon Web Services of energy storage,” says Mr Kolli, “And we think as a midstream operator, as a kind of market maker connecting users and producers of energy, we can play a central role in India’s energy transition.”
A huge plus is the national electricity grid – the largest single frequency grid in the world – that allows electrons to flow throughout the country at a low cost, with no need for generators and off-takers to be geographically close.
Racing into the future
Taking advantage of all these opportunities requires capital, of course. Greenko plans to invest $5 billion into infrastructure over the next 4 years, and despite being one of the lowest-cost PSH in the world, Pinnapuram on its own will cost nearly $1.2 billion. This is where being a privately owned company with high-quality, stable shareholders willing to take a long-term view is very handy, even essential. Alongside ORIX and the founders, Greenko’s other investors are two of the world’s most respected sovereign wealth funds: Singapore’s GIC and ADIA from Abu Dhabi. Notably, Greenko is one of a very few investments where Singapore GIC owns a majority share. And ORIX and GIC have a strong relationship.
“I really value our stable partnership. We are completely aligned”, says Mr. Kolli, noting that he sees a large difference between the support of ORIX and the more transactional aims of the energy transition funds and banks that regularly approach the company. Greenko may ultimately choose to do an initial public offering, but that step is still a few years away.
Meanwhile, it is taking a leaf out of the book of other ORIX companies in terms of investing in the local communities where it operates, contributing to health and education programs as well as supporting local infrastructure. Most notably, Greenko has recently agreed to become the title sponsor of the first Formula E race to be held in India – in February 2023, in its hometown of Hyderabad. The winning car was designed by France’s luxury marque DS Automobiles, which stands for ‘Different Spirit’. That very much applies to Greenko itself.
