Improved U.S.-India relations coupled with an aggressive White House push to advance the clean energy transition, ahead of China, is unearthing fertile ground for Indian energy companies to grow their U.S. presence.
At least half a dozen of India’s leading renewable energy companies have made plans this year to invest in and/or build energy facilities in the U.S. to capture some of the $369 billion in tax incentives offered in the 2022 Inflation Reduction Act.
Daniel Dus, chief executive of ACME Cleantech Solutions, a subsidiary of Gurgaon, India-based ACME Group said, “When we look at where to invest dollars right now, our stated objective is to invest 40% of corporate dollars in developing assets outside of India, and the U.S. is at the very top of our list.”
“That is directly due to the Inflation Reduction Act, and other Biden policies,” he said, citing also the 2021 Infrastructure Investment and Jobs Act.
Daniel Dus
Daniel Dus is the CEO of ACME Cleantech Solutions Pvt. Ltd, subsidiary of India’s renewable giant, … [+]PHOTO CREDIT: ACME GROUP
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ACME plans to break ground in 2025 on a 1.6 gigawatt (GW) solar facility and integrated green hydrogen and ammonia facility in Port Victoria, Texas.
The company plans to produce 1.2 million metric tons per year of hydrogen that can be sold or converted to ammonia for the global market as early as 2027.
Because of pollution reduction mandates on the shipping industry, ACME is considering offtake agreements with shippers converting to ammonia-based engines and fuel, including bunker fuel. Offtake agreements are pre-construction deals between buyers and sellers to secure a market for the builder and supply for the buyer.
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“That is a massive amount of ammonia as a fuel hat will be in demand globally,” Dus said.
For its green hydrogen, ACME expects to receive the U.S. government’s highest subsidy for hydrogen production—$3 per kilogram of green hydrogen produced.
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Dus calls the tax incentive from the new law “absolutely critical,” without which “Our project would not exist. It’s quite simple,” he said.
The IRA tax incentive has “driven our commitment to invest tens of millions of dollars in the development of this asset,” Dus said.
ACME is also reaching for the solar investment tax credits in the IRA. “IRA has a bunch of great bells and whistles for us,” Dus said.
The company is investing $120 million to prepare for construction. Once itbreaks ground, it expects to spend $750 million on construction.
“We’ve had nothing but open arms and a welcome reception as an Indian investor and developer,” Dus said.
ACME also has closed over $2 billion of financing in the last 30 days for green hydrogen projects in Oman and India.
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The ACME Group has set up the world’s first integrated pilot project for the green hydrogen and … [+]PHOTO CREDIT: ACME GROUP
The Biden administration has said the IRA is intended to spur economic growth and curb climate change.
In November, the U.S. Department of Treasury made it clear that while the new law aims to increase clean energy investment across the country, it aims to drive clean energy expansion in areas that have “historically relied on fossil fuels for employment and wages.”
Other India-based renewable giants—Adani Group, Gensol Engineering, Vikram Solar, ReNew Energy Global, and Waree Energies—are also planning projects in the U.S. and specifically Texas and otherfossil fuel producing states. Collectively, they are pouring billions of dollars into the U.S. economy.
Resetting the Relationship
In June 2023, President Biden welcomed Indian Prime Minister Narendra Modi for an official state visit, the first for India in nearly two decades. That gave Indian companies with a renewed sense of certainty about a closer relationship with the U.S.
Official State Visit Of Indian Prime Minister Modi To The U.S.
WASHINGTON, DC – JUNE 22: President Joe Biden and Indian Prime Minister Narendra Modi embrace during … [+]GETTY IMAGES
Lucrative deals were signed, including multi-year, multi-billion-dollar agreements in the defense to the energy sectors.
The two governments agreed to build upon climate initiatives from years earlier, such as the India-U.S. Climate and Clean Energy Agenda 2030 Partnership. During the state visit, India joined the U.S.-led Minerals Security Partnership (MSP), to create critical energy minerals supply chains.
U.S. Trade Repreentative Katherine Tai and the Indian government erased lingering trade disputes, and the U.S., seemingly overnight, became India’s largest trading partner.
Amid the diplomatic overtures, regalia and celebration, many on both sides felt euphoric.
It also helped that in July 2023, after Prime Minister Modi left the U.S., Energy Secretary Jennifer Granholm and India’s Minister of Petroleum and Natural GasGAS -4.4% met in Delhi.
They established a public-private Energy Storage Task Force to scale and hasten deployment of hydrogen technologies through the public-private Hydrogen Task Force.
They also launched the U.S.-India New and Emerging Renewable Energy Technologies Action Platform (RETAP) to accelerate development of clean energy technologies.
Officials from the Indian Embassy in Washington told Forbes that the goal is deployment and scale.
RETAP will focus initially on green hydrogen, wind energy, and long duration energy storage, but it will also explore geothermal, ocean and idal energy.
Embassy officials said, “Bilateral cooperation in energy between India and U.S. continues to grow like never before.”
Officials noted another bilateral boost between the U.S. and India on energy when India hosted the G20 in Delhi in September. “As President of [the] Clean Energy Ministerial 2023 and Mission Innovation, India is looking ahead to strengthen the bilateral partnership,” embassy officials said.
Energy Cooperation Accents Trade Opportunity
Chris Tucker, Senior Managing Director and Global Leader of Energy and Natural Resources at FTI ConsultingFCN 0.0% said, “There’s a perception that the U.S. is so much further along than India, but there’s a lot that the former can learn from the latter.”
India has one of the largest synchronous power grids in the world, and it’s “arguably in a lot better physical position to bring on new sources of renewables than the one we’ve got” in the United States, he said.
“I think the opportunity is that there’s a lot to be leared from each other, especially around speed and scale,” Tucker said. “Because without scale, none of this actually matters in the end. And for India, the world’s most populous country, scale is everything.”
“The state visit was historic and clearly intended to further cement the bilateral relationship on all fronts – strategic, defense, and trade, although trade has fallen short,” said Mark Linscott, a nonresident senior fellow with the Atlantic Council’s South Asia Center.
Linscott was assistant U.S. trade representative (USTR) for South and Central Asian Affairs and assistant U.S. trade representative for World Trade Organization (WTO) and multilateral affairs, coordinating U.S. trade policies for the WTO.
According to the USTR, the U.S. has 14 trade agreements with 20 countries. However, it trades outside of a formal trade agreement with 75, including India.
“More needs to be done on the trade front to match the progress that’s been made on the strategic front,” Linscott said.
owever, Linscott said the U.S. energy sector has been “quite open” for India, so lack of a trade deal between the two is not currently a hurdle.
Wind in China’s Solar Sails
As the U.S. tries to diversify the clean energy supply chain with Indian solar, China still dominates photovoltaic (PV) module manufacturing, accounting for nearly 80% of global production. A PV module converts sunlight into electrical energy.
Solar PV capacity in the US reached 111.5 GW in 2022 with a steady increase throughout the Trump and Biden administrations. However, China has about three times the solar PV capacity the U.S. has.
China is the largest producer of solar energy. The U.S. ranks second.
According to the Solar Energy Industries Association, solar demand and use in the U.S. is up. Most of that growth has been in the utility sector, followed by the residential market.
The trade group, which represents the broad swath of solar stakeholders, attributes the growth to sustained federal support, espcially the Investment Tax Credit, which has reduced the cost of solar technology, increased capacity and demand.
SEIA said 45% of all new electric capacity added to the grid this year has come from solar, which now represents 5% of U.S. electricity production, a huge increase from a decade ago when it was 0.1% in 2010.
Because of this demand, the Biden administration is trying to find resources where it can, outside of China; the President’s fair-trade policies restrict U.S. companies from importing materials from China.
This is where India comes in.
“Accelerating the transition, creating the supply chain, and not becoming more dependent on China,” is the intention of the IRA, said Chris Guith, senior vice president at the US Chamber of Commerce Global Energy Institute in Washington.
Global investment in renewable energy, electric vehicles (EVs) and battery storage technology has leaped to its highest, the International Energy Agency said in its World Energy Investment 2023 report which gives a full picture of 2022 and some view of 2023 investments globally.
Global investment in renewable power in 2023 is expected to total about $695 billion with EV and battery storage technology rising to $129 billion and $37 billion, respectively.
Much of that investment is coming from India and the Middle East, namely Saudi Arabia, United Arab Emirates, Oman. Brazil is also investing heavily.
Raising Rupees through the Sun
According to a Mordor Intelligence report, the solar PV segment in India is expected to have the biggest market share of all renewable energy over the next several years.
India’s installed solar PV capacity was just over 66 GW in 2022, a 31% increase from nearly 50 GW in 2021 thanks to new installations for utility projects, the cost of solar modules decreasing and support from the Indian government, which encourages renewable power generation across the country. Installed solar capacity is expected to increase to 191 GW by 2028.
By decreasing its fosil fuel imports and powering the subcontinent with its own renewable energy, India naturally strengthens its currency, the rupee, against the US dollar, Dus said.
That’s an incentive in and of itself to expand to the U.S. market.
“A lot of folks in the US have had a conception of India in the past that it is a little sleepier than the reality of India on the ground today. India is absolutely exploding. The economy is exploding,” Dus said.
“The amount of infrastructure being built out domestically, the quality of folks being graduated from top schools is absolutely world class. The United States is becoming more and more aware of that, which helps deepen the relationship. There is nothing but tailwinds here,” he said.