With increased spotlight on solar and wind energy sectors in India major renewable energy player is looking to exit the biomass power sector.
Bombay Stock Exchange and National Stock Exchange-listed renewable energy generator Orient Green Power Limited has announced plans to sell off its biomass power business. The biomass power business is making loss dragging the entire company which includes several wind energy assets as well.
The company is on track to sell a 20 megawatt cogeneration plant in the state of Maharashtra. The power plant which uses sugarcane residue as fuel for power and heat generation will be sold off to a host sugar mill. Another biomass power plant of 10 megawatts will be sold off in Rajasthan.
Losses in the biomass power sector increased sharply over the years as scale of operations and revenues dwindled. The company shelved a plan to de-merge and list the biomass power business.
Orient Green Power reported revenue of ₹78 crore ($12.1 million) and loss of ₹81 crore ($12.6 million) last financial year. The company also has an outstanding debt of ₹193 crore ($29.9 million).
The company believes that the loss-making biomass power business is dragging the wind energy business. Among all the renewable energy technologies biomass and biofuel cogeneration have received less attention from the government, regulators and project developers.
India has announced specific targets as well as market mechanisms for wind and solar power sectors but not for biomass and biofuel cogeneration. Both, wind and solar power sectors have moved from feed-in tariff regime to competitive auctions but other technologies, including biomass, haven’t. This has made solar and wind power far more attractive to utilities as auctions have reduced their tariffs to cheaper than those of most thermal power plants.
Therefore, it makes complete sense for developers like Orient Green Power to reduce their liabilities and focus on technologies that find favour from the government and as well as the market.