Companies

CESL will get ₹600-700 crore infusion from EESL: Mahua Acharya

Kuwar Singh New Delhi | Updated on February 24, 2021

Mahua Acharya, CEO of CESL

Convergence Energy Services plans to solarise village-level feeders across India

Convergence Energy Services Ltd, the newly-established subsidiary of state-owned Energy Efficiency Services Ltd, will receive a capital infusion of ₹600-700 crore from its parent company to kick off its asset-heavy business operations.

In an interview with BusinessLine, climate finance expert Mahua Acharya, who has been appointed as CEO of CESL, spoke about the new firm’s strategy and goals. Excerpts:

Time for radical power sector reforms

What is CESL’s initial capital base? What will be your fund-raising strategy?

The first step is to immediately capitalise CESL from the parent company, EESL. We will probably be capitalised at ₹600-700 crore. Going forward, we are going to become an asset-heavy business. Convergence has inherited solar assets and an electric mobility business from EESL. I’d like to bring the two together.

EESL to implement country’s first decentralised 100 MW solar convergence project in Goa

At the intersection of these two lies battery storage, which is also heavy on capital expenditure. So, Convergence will be an asset-heavy company.

For additional funding, I would go back to the parent company, but I can imagine that offering nicely-packaged public-private structured solutions will be very attractive to private players in the market and also to EESL because it reduces the parent company’s financial burden of pouring money into an asset-heavy business.

I would like to offer investment opportunities that are packaged decently. There’s no shortage of money, only a shortage of well-structured projects that are bankable. I would like to use this platform to get there, and then leverage additional money from third parties.

How will you make batteries affordable?

A single battery provides more than one service, from charging your car, stabilising the grid, soaking up cheap power from solar plants. An ideal scenario is to have multiple revenue streams for battery storage.

We can either wait for battery prices to come down or we can intervene now and test out a few things on a pilot basis.

We are in discussions with BSES in Delhi on the battery storage units that they need, some of which can be made commercially viable with about 10 per cent subsidy.

The answer is to partially subsidise the battery. Another solution that’s a little further away is the use of carbon credits. If a certain battery solution were to soak up solar power in the daytime, make it available in the evening, when discoms would have used coal to fill that gap, it is directly eligible for carbon credits. That portion of carbon finance is structured well, and can easily bring down the price of batteries by 30-40 per cent.

Both the partial subsidy and carbon credit would have to come from international finance. We have started discussions with European and Asian sovereign entities and we’re in discussion with a few buyers of voluntary carbon credits who are looking for this kind of peak power transformation asset. Bilateral and multilateral bodies have the technology funds that can provide partial subsidy. It’s a bit difficult to get aid for India, but it’s not difficult to get multilateral investments, for example, from the Green Technology Fund that is managed by the ADB and the World Bank. I’m looking quite keenly at them.

What projects are you working on right now?

Convergence inherited a distributed solar business in Maharashtra from EESL. These are solar farms of 0.7-1MW each, stationed near the sub-stations and they feed power into the agricultural feeders.

We’ll be scaling that up from 200 MW to 1.5 GW. With that we’ll be able to cover at least 50 per cent of Maharashtra’s sub-stations, basically solarise these agricultural feeders.

We plan to solarise village-level feeders across India.

We have signed an agreement with Goa for the development of 100 MW of solar power, but in an integrated package where we will also change the pump sets and provide energy-efficient domestic lighting.

How can small-scale solar farms be economically viable?

It takes discoms about ₹6 to provide one unit power to farmers, out of which ₹4 is subsidised by the State. They are still left with a ₹2-shortfall.

Convergence is coming in at the point of feeders that have agricultural pumps connected to them, and replacing that with electricity at ₹3 per unit. Private players don’t find it interesting to go patch by patch across the State, finding land that is sitting with the government and dealing with the hassle with O&M.

O&M is a hassle for us too, but as a public government entity we get to optimise unused land.

How does your strategy change if the Centre’s push for discom privatisation materialises?

Right now, we are targeting discom-owned land. If that doesn’t work, then we’re targeting government land. Even as a public sector company, it’s quite tough to get land. It may become a little harder if discoms are privatised. But the upside is that privatised discoms will be more incentivised to reduce this cost on their grid.

Are there other projects in the pipeline?

We are developing a cash-for-clunkers fund for replacement of ICE two-wheelers with e-bikes. If you’re a motorcycle owner, you would be incentivised to turn in your old motorcycle for a new e-bike.

If all goes well, we’ll have the fund ready in two-three months, for replacing 10,000 motorcycles on the road. It will depend on which State and city will sign up, because there’s skin in the game involved on their part as well. Goa, for example, is very keen.

How would you ensure consumer choice?

Our sensitivity, especially in the two-wheeler business, will be a lot more on consumer choice. The cash-for-clunkers fund will respond to all products in that category in the market.

Published on February 24, 2021

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