Why JSW Energy is living in a fool’s paradise by denying Solar’s ascension in the Global Energy Industry

JSW Energy is one of India’s largest private power producers and is part of the Jindal owned JSW conglomerate. The company has been fortunate not to get into the problems being faced by the rest of the Indian power industry, as it did not build gas power plants or bid for large thermal power plants. This has allowed the company to buy power assets on the cheap from other distressed power producers. However, the company’s recent statement about thermal and solar power may make its investors think twice about investing in the company. Even as the whole world including India make a major shift towards renewable energy, the company is still banking on building new thermal power plants.

It is to be noted that solar prices in India are starting to converge with thermal power and may go lower than all other energy sources in the near future, given the big advancements being made continuously in solar panel technology.

The recent statement by its CEO – “Every developed nation in the world has developed on the basis of thermal power so it’s unfair for them to expect that India should try and develop on the basis of green power” makes no sense.

Stone age did not end because of a lack of stones and the thermal age will not end, just because coal is finished. It will end due to the availability of better substitutes and technology (read solar energy). Technology has changed almost every industry rapidly and you can’t expect a template of the past to create a success in the future. It is like saying that communication in the developed nations developed because of telephone landlines, so India also built landlines instead of focusing on mobile communication. Besides being competitive on costs, solar energy is non polluting and non killing like thermal power.

Though thermal power will be needed by poor nations like India for some more time, it does not make thermal power good. Every power producer needs a renewable energy strategy, as thermal and other polluting power sources are being phased out by public pressure and government taxes. Just banking on thermal power is one of the most foolish things you can do today, given the huge risks of running a thermal power plant for 20-25 years.

The CEO of JSW says that solar energy tariffs are not viable. Though I would say that some of the bidding has been a bit irrational in India, saying it is not viable is nonsensical. In various parts of the world, solar is being bid for ½ the prices what they are being bid in India. Abu Dhabi saw a price of around 2 cents/ unit, while Mexico saw 3.5 cents/ unit, so how come the Indian price of around 6-7 cent per unit is not viable?

I would be very careful of putting my money in this stock where the CEO does not have the facts of his industry right and is even going public with these facts.