The Next $1 Trillion Energy Boom: Solar, Wind, & Green Hydrogen | Sumant Sinha | FO568 Raj Shamani

Figuring Out with Raj Shamani

Sumant Sinha discusses the massive economic opportunity within the global energy transition and the critical importance of energy independen

Key takeaways

• The next trillionaire will likely emerge from the energy transition space by developing scalable, cheap new energy sources.
• AI data centers are a primary driver for future electricity demand growth.
• China has secured a global lead by indigenizing the entire clean tech supply chain, from raw materials to R&D.
• India's power generating capacity is expected to double by 2035 to meet rising industrial and AI needs.
• The US faces structural challenges in energy transition due to its fragmented seven-grid system compared to India's single national grid.

Main topics

• Energy Transition Economics
• AI and Electricity Demand
• Global Energy Geopolments

Notable quotes

The next trillionaire will be someone from the energy transition space, whoever figures it out.

Conclusion

The episode provides a strategic roadmap for understanding how energy

Transcript preview

Speaker 2 (0:00) The next trillionaire will be someone from the energy transition space, whoever figures it out. Do you agree? It's a massive opportunity for sure. Speaker 1 (0:07) If somebody develops a brand new energy source, which is cheap, which can be deployed at scale, that person will certainly become a trillionaire. Speaker 2 (0:15) Do you think the biggest problem in the AI world, it's not going to be chips, it's not going to be all of that, it's going to be electricity? It Speaker 1 (0:20) is because ultimately, electricity and more broadly energy drive everything around us. Speaker 2 (0:27) Sumanth Sinha, founder, chairman and CEO of Renew. If you want to understand why the next superpower could be the country that leads the renewable energy revolution, where the biggest opportunities in renewable energy are and how real this future really is, this episode is for you. And a country is not able to produce cheap electricity. What happens to them in next 20 years? Speaker 1 (0:48) Countries that continue to be energy dependent are always going to be at a slightly inferior position. So it's incredibly important for India. as a country to get to that point of having full control over our energy supply chain because everything else depends on that ai data centers your ability to export energy tell me what Speaker 2 (1:07) did china figure out 20 25 years ago to make this kind of infrastructure this kind of ecosystem and countries like india america fail to understand this i Speaker 1 (1:17) would say that the chinese were just very prescient very foresighted about the whole thing the us really has a lot of fossil fuels. And today, it's the largest fossil fuel exporting country in the world, which is, you know, an eye-opener for most people who think that maybe it's Saudi Arabia or Iran. And that is why the U.S. has taken a very strong turn towards doubling down on fossil fuels, where they're saying that all this renewable energy is hogwash. I don't really care for it. I don't even care about climate change. So I would say the U.S. is actually quite comfortable with fossil fuels. Economically, it will benefit from fossil fuel prices going up. Speaker 2 (1:51) Let's say if you were to advise the Prime Minister of India to make India the global leader in energy, what would be three things that you would ask him to do? So Speaker 1 (2:00) I would say number one, focus on developing the supply chain, including all the manufacturing of solar, batteries, etc. Protect it from... Chinese imports. Number two, move the user industry as rapidly to either green fuels or towards electric solutions. Give more subsidies for people to shift to electric cars. The third thing I would do is I'd really, really put a lot of effort behind building the grid much, much, much faster. Speaker 2 (2:25) Someone watching this is an entrepreneur in 20s, wants to start a business in India in the energy space. What is an exact problem or an exact business which you think can help them make large amounts of money? Speaker 2 (2:41) I have a small favor to ask you. I need you to subscribe to our channel. The more subscribers we have, the better and bigger guests we can bring and provide you more value through these conversations. And the full audio experience of this show is also available on Spotify, where you can follow us and listen to the new episodes as well. This episode is a part of the Mobius Foundation Sustainability Dialogue series. To know more about Mobius Foundation and its initiatives, check the link in the description below. Speaker 2 (3:16) Would you say this is something which is on my mind since a long time because I've been hearing a lot of conversations around it. Would you say that the most powerful country of the future will not be someone with most amount of oil, will be someone with the cheapest and the most abundant energy? Speaker 1 (3:36) Yeah, I would certainly say that. But in a lot of countries, oil is energy. And so therefore, the two are synonymous. Yeah. So let me give you a little bit of background. Okay. We tend to use electricity and energy synonymously or sort of interchangeably. Yeah. But the reality is that energy is broader than electricity. Okay. Energy is used for heating. It's used for cooling. It's used for... making different chemicals and so on. It's used for making cement, it's used for making steel. There are lots of industrial processes that it is used for. It is used for home heating and cooling. So it's used for transportation, whether it's cars or airplanes or ships, etc. Electricity, which we use to power our lights and our homes and so on, is just a small component of energy. So electricity actually accounts for only 20 % of all energy consumption. Okay. Okay. Energy consumption itself generates carbon emissions, which account for almost 75 to 80 % of all carbon emissions globally. And I'll talk about why carbon emissions is important because it obviously leads to climate change. Speaker 2 (4:52) Yeah. Speaker 1 (4:52) Right? So now what is happening is that when you look at... Speaker 1 (5:01) how did oil become or fossil fuels become a bad thing? They became a bad thing because while our entire economic system and our livelihoods are based on fossil fuels, because in the early 20th century, cars were electric in nature, then they got replaced by internal combustion engine cars. And our entire system then moved towards... a fossil fuel based economy, which was fine because nobody cared about carbon emissions. But starting in the late 1990s, early 2000s, it'd be, you know, that realization dawned that the more carbon that we're emitting into the atmosphere, the more we're converting the atmosphere into a giant greenhouse. And what happens inside a greenhouse? The sun's rays come in and the inside of the greenhouse gets warmed up. That's what's happening to the world right now. Because the carbon in the atmosphere converts the atmosphere into a greenhouse kind of a system more than it should. And so therefore, it's leading to higher temperatures. Now, when you have higher temperatures in the world as a whole, then, you know, we have these polar ice caps in the Arctic and the Antarctic. Yeah. Right. There's a lot of water that is made into ice that is sitting there. The moment temperatures start going up, that ice starts melting. And it leads to the rise in ocean levels. Now, can you imagine if in Mumbai, which is where we are sitting right now, if sea levels suddenly went up by one meter or thereabouts, it would actually be very disastrous for a lot of the colonies or people living on the coastal areas and so on. Secondly, it begins to change weather patterns. What happens if there was a disruption because of this higher temperature on the monsoons? It would impact India's entire agricultural production. If there's also higher temperature, it would start melting the glaciers faster than expected, which might lead to sudden flash floods at higher frequency than expected. Speaker 2 (7:07) It's already happening. It's already Speaker 1 (7:08) happening. And then eventually, when all the glaciers run dry, then what happens to our perennial rivers, the mighty Ganga and Yamuna and all those rivers that are part of India's history and tradition? and religion and you know that feed into the Indo-Ghanianist plane. So the costs of this change are not very well understood and can be absolutely disastrous, especially for a country like India, which has such a vast number of people. Speaker 1 (7:39) Now, the world as a whole recognized this and said, you know what, we got to do something about this problem. Because if this continues unchecked, then it can be really, really bad for the world as a whole. Plus, it'll lead to immigration of migration of people, wars, you know, could get fought. So all sorts of consequential changes that we can't even imagine right now. And, you know, there's this UN, United Nations group. that essentially said that if temperatures change by more than 1.5 degrees centigrade, it's going to lead to irreversible changes in the world. And therefore, we must all battle together and keep temperature change below 1.5 degrees centigrade. And so various agreements were arrived at between all the world's countries to mitigate carbon emissions. Speaker 1 (8:29) Now, so the question was how to do it. How do you mitigate carbon emissions? Because if the whole world's economies are based on carbon emissions because of fossil fuel usage, then how do you suddenly say, you know what, no more carbon emissions? You can't suddenly shut off lights. You can't suddenly shut off making steel and cement and all of these things either, right? You can't suddenly shut off your thermal plants, which rely on coal. Then what will happen to electricity? So you can't just do that. Speaker 1 (8:55) The question was, how do we now do this migration from fossil fuel-based energy systems to what? So that is really where the whole issue of renewable energy started becoming an answer to this problem. And so back in 2007 and 8, when I took the decision to join Swiss Lawn, some of this was beginning to start percolating into people's minds. And that's the reason I took the decision to get into this sector because I realized that this was going to become a massive problem in the future. And so therefore devoting one's career and life to solving this problem or helping solve the problem, because no individual can solve it by themselves, I thought was a very worthwhile endeavor for me for the rest of my life. I was 45 at the time. And secondly, I also felt that in doing this, there would also be business opportunities. Fair. Because you can't solve anything without it being good for, from a business standpoint, because the amount of capital you need to change an economic system that has developed over centuries, right, requires enormous amounts of capital, right? So anyway, so that is what my thinking was, and that is what we now need to do. So the question is, how does renewable energy come in? Renewable energy comes in. through wind and solar, but it's electricity. So it begins to address the 20 % of energy that is electricity. And today, after 15 years of my having been in the sector, we are now at a point where renewable energy accounts for approximately about 15 to 16 % of electricity. Speaker 1 (10:30) Only. Speaker 2 (10:31) Not the energy. Speaker 1 (10:32) Not energy as a whole. Speaker 2 (10:34) Okay. Speaker 1 (10:34) So on one level, you can see the scale of the challenge. At another level, you can see the scale of the opportunity. Speaker 2 (10:41) Because Speaker 1 (10:41) eventually everything has to change. Speaker 2 (10:43) Yeah. Speaker 1 (10:44) Now, one interesting thing happened along this last 15 years journey of mine. In the beginning, wind and solar were more expensive than coal-based power generation. And so the question was, who's going to pay for the extra cost? India said, why not? Should we pay for it? We didn't cause the carbon emissions to happen into the atmosphere. If the Western world did it, let them pay for it. Which made eminent sense. And as an Indian, I thoroughly agree with that logic. But somewhere when Prime Minister Modi came in, he took a different view, which is very interesting, actually. And, you know, where he derived this view from, I guess it goes back to a gut understanding or a gut intuition or call it what you will. But he said, you know what, or he may have understood this at that time, that look, this is actually something that has to happen. Speaker 2 (11:35) And Speaker 1 (11:35) if it is something that has to happen, why should India not take a lead in this area? And so he pushed. Wind and solar very hard. He set very big targets for wind and solar in India. And that got the whole government to start really pushing hard on doing more and more wind and solar. And that's how we've got to this point that we've got to, which is actually, compared to all the other countries in the world, not a bad position for us to have got to. 15 % is not bad. Is not bad. But also in doing that, because the scale increased. And because of a variety of other factors, wind and solar suddenly became cheaper than coal-based power. And so affordability suddenly became a big driver of this energy transition as well. True. And so now suddenly it makes more sense to add wind and solar than it makes sense to add coal-based power because it's cheaper. So it's no longer even about carbon emissions. It's become much broader than that. And it's become much more about what is cheaper and what is better for us as a country and what is better for us as an economy. So that's where we are right now. But Speaker 2 (12:39) right now, the amount of energy that we use or the amount of electricity we use, let's just pick up 15%, 20 % of the energy and then the 15 % of it. So the amount of electricity that we use, it's going to go up significantly with the rise of AI, technology, all of this, right? Do you think the biggest problem in the technology world in the future? In the AI world, it's not going to be chips. It's not going to be all of that. It's going to be electricity. Speaker 1 (13:10) It is. It is because ultimately, electricity and more broadly energy drive everything around us. So we Speaker 2 (13:17) don't have enough electricity to make all of us intelligent. Speaker 1 (13:20) No, that is true. But I think that electricity in India is growing at about 6 to 7 % a year. Energy is growing a little bit less than that at about 4%. But we are adding a lot of new capacity fairly rapidly as a country. And the good thing is most of that is clean energy, which is wind and solar. Speaker 2 (13:39) How much electricity do we need in India? Or compare it with India, America, China. What are the electricity needs? You must be having some ballpark number. Yeah, Speaker 1 (13:48) yeah. Speaker 2 (13:48) I can Speaker 1 (13:49) give you the exact numbers. So today, India has a total power generating capacity of about 550. gigawatts or 550,000 megawatts. This is the third largest in the world. In a year? That is a total power generating capacity. Capacity in a year? So this generates approximately 1.8 trillion kilowatt hours of electricity every year. That is how much India consumes. Okay, so there's capacity, then that capacity is used to generate this much electricity, which is consumed by Indians. That 1.8 trillion units is growing at about 6 % every year, which means we need about 120 billion units more of new energy every year, which in renewable energy terms is equal to between 60 and 70 gigawatts of new renewable energy capacity. Last year, India added about 50 gigawatts of new renewable energy capacity. So we're almost there. It's at a point where all electricity consumption increase can come from renewable energy in the next few years' time. And of this 550 gigawatts today, wind and solar account for about 220 gigawatts. And if I add hydro and nuclear, it amounts to 300 gigawatts. 250 of the balance is coal-based power. Speaker 1 (15:14) Now, coal-based power is not really growing now. Nobody wants to add more coal-based capacity because everybody knows that over time, coal will get phased out. And as people say, the stone age did not come to an end because of lack of stones. It came because new technology showed up. Similarly, the coal age in India is not going to end because we don't have any coal any longer, but because something else has overtaken that, which is cleaner, cheaper, easier to install, etc., etc. So that's the direction that we are going to go in. Now, as we do all of this, and as we add this 1.8 trillion at 120 billion units and this 60, 70 gigawatts, this 550 gigawatts by 2035 is going to double to about 1,100 gigawatts in India. And of that 1,100... The capacity or the consumption? The capacity. Okay. the consumption at 6 % will double in about 12 years. So in about by 2035, we should assume that the 1.8 will become 3.6. Now that includes electric vehicles, it includes AI data centers, and it includes more industrial activity. It includes everything. Because also keep in mind that energy, that appliances that use electricity are also becoming more efficient. Cars are becoming more efficient, right? Light bulbs have become more efficient. So there is... efficiency improvement happening at the rate of about 1.5 % to 2 % every year as well. So this electricity growth, if there was not efficiency improvement, would have actually been 8 % a year, which really is quite a large amount. It's by far the largest of any large economy in the world. So by 2035, electricity demand will grow to double. The power generating capacity will double. And of this 1,100, renewables will account for almost 750 gigawatts. Okay. Up from the 300 right now. So there'll be another 450 gigawatts of capacity added in the next eight, nine years. So it's growing at about 50 to 60 gigawatts a year is what we will need to keep growing. Which is by the way, the second fastest in the world after China. It's actually last year, we also crossed the US. So India is actually growing pretty fast in this whole area. Okay. Okay. Now, just to give you comparative numbers. The US's power generating capacity today is 1100 gigawatts. So it's almost double that of India's. But China is almost, I don't even know what the latest number is, but it's probably 2500 gigawatts. So it's almost five times India's capacity. Speaker 2 (17:49) It's bigger than US as well? Much bigger, much Speaker 1 (17:52) bigger. Speaker 2 (17:53) Why? Because the country needs more? Because they're a Speaker 1 (17:55) much bigger manufacturing powerhouse now. So all of that requires a lot of energy. So the rest of the world has outsourced a lot of their production to China and therefore also a lot of their carbon emissions to China. So, you know, the funny thing is China added almost 60 % of the entire world's capacity addition of renewables last year. 60%. Wow. So they did more than the rest of the world put together. So what is happening there is insane. Right? So be that as it may, India is doing a pretty good job as well. We are still, you know, we all surrender and we Speaker 2 (18:29) are Speaker 1 (18:29) number two. We are distant number two. Speaker 2 (18:30) Yeah. Speaker 1 (18:31) But we are number two. We should be happy with that. Do you think we could run out of power? Speaker 2 (18:37) Or electricity? No, not at all. Speaker 1 (18:39) You know, an interesting stat I heard the other day was that the world gets every minute from the sun 8,000 times the amount of power that it consumes in that minute. 8,000 times. So even if solar increases by 100 times and meets all of the energy needs, not electricity only, but all of the energy needs of the world, if solar increases by 100 times, we'll still be getting more solar power by almost a factor of 80 times. Okay, every single minute. So there's enough energy that is coming into the world as a whole from the sun. So the sun is just an infinite amount of a source. But we Speaker 2 (19:23) don't have enough ways to actually store it, use it, distribute it today, right? Sun is there as a source. But do we have enough infrastructure? Speaker 1 (19:35) Good point. It's a very good point. See... We are trying to create a system now which was built for a certain different historical power generating mindset or sort of system. What is going to happen is that over time, technology is going to come to our rescue. And it is. Solar, when it was started about 18, 19 years ago, was almost... 10 times as expensive as it is right now. It's come down by a factor of, you know, 10 times in terms of the cost. there's a lot of work happening on technology. Solar costs are going to keep coming down. At the same time, there's a lot of work going on in batteries as well. Battery costs are also going to come down. And as that happens, the cost of solar plus storing that solar and using it in the evenings when the sun is not there or at night when the sun is not there, that cost is coming down. And it's almost at a point now where using solar plus storage is going to be cheaper than... Any other solution. Fair. And grids now have to get built out very rapidly. Because as electricity grows, we need that grid to really be able to take power from wherever it's getting generated to wherever it's going to get used. So we need this whole lattice type of interconnecting grid system all across the country. And we don't have that really fully at this point. So grid build out is going to be very critical. But that's the tricky part, right? That is absolutely right. That's what the challenge Speaker 2 (21:13) is. Speaker 1 (21:13) It is a challenge. But I think it's Speaker 2 (21:16) a Speaker 1 (21:16) challenge that is addressable with proper planning and proper execution. The government and I think everybody realizes that this is a problem that we need to solve. So there's a lot of work going on in this area. And I think, you know, because renewables suddenly grew quite rapidly over the last year or two, and that leads to grid management issues because a lot of surplus. energy in the middle of the day and not enough in the evening. And that problem has hit us. But now we're trying to find solutions and we will find solutions over the next couple of years time. And a lot of that side of the solutioning is going to get ramped up. And I'm pretty confident that we'll be able to, two, three years later, be able to go both at pace, the generation side as well as the transmission and distribution side. And then another very interesting thing is going to be happening. Rajan, that is that... You know, people are going to start putting solar more and more on their rooftops and using it directly into their homes. And, you know, as solar technology evolves, I will not be surprised if you get to a point where you'll start having see-through windows with solar on them. Car roofs will start having solar on them. You know, it'll become ubiquitous. It'll be everywhere. And so everybody is going to be using power. or generating electricity and using it in a very different way than we are doing right now. So there is going to be a big, I think, massive shift in our relationship with electricity. That is going to happen as a result of technology evolution. But do you think Speaker 2 (22:47) that if technology, the way it is growing right now, and the AI consumption and data centers and all of the things that are coming in our life, right? If it happens faster, then our capacity to build an infrastructure. then do you think the government will start Speaker 2 (23:05) choosing where to provide electricity? Should they give it to citizens? Should they give it to industries? Should they give it to AI data centers? What should they do? I don't think Speaker 1 (23:15) Raju need to worry about that. There are people like us and our company which are going to make sure that we add capacity at the rate that is required to meet the country's requirement. I'm pretty, I'm almost 100 % confident that we will not get to this scenario that you're describing. If anything, we will have too much power over a period of time. We'll have too much power. We'll have too much power to a point where, you know, we may have to start, because you see the industry is now ramping up and everybody is getting into the generating space. Yeah. All the large conglomerates of India are now in this space. Speaker 2 (23:58) Top one to ten. Everyone. Everybody, Speaker 1 (24:00) right? Then there are people like us. Fortunately, we're still the second largest in the country right now. Then there are lots of small guys as well. There are lots of private equity funded folks as well. So now I would say, compared to when I started and even from five years ago, you know, I would say the number of players has really increased dramatically. So the amount of capital going into it, the amount of people, the amount of... the amount of management bandwidth that is going into the sector is now at a much higher level than it was just a few years ago. And all of these people are out there looking for land, trying to get connectivity to the grid, to build projects at sites, to get PPAs, to find buyers of their power. So all of that is happening at a much, much higher pace than it was happening earlier. So I don't think that shortage of power is going to be a problem at all. Speaker 2 (24:51) So why is there a UN cry between all AI founders and they talk about it in US specifically? In the Speaker 1 (24:58) US. Yeah. Because the US, India is not the US and the US is not India. The US has certain deficiencies, structural problems that India has addressed. What are those? Very quickly is that the US has a grid constraint. The US has seven different grids in the US. India has a single national grid. That's a big difference. We can move power from any part of India to any other part of India without any hichkacha problems or obstructions. Speaker 2 (25:27) Interesting. The Speaker 1 (25:27) US, you can't. You can't generate power, let's say, in the wind-rich state of Texas or the Midwest anywhere and transfer it to California or to New York because they don't have a grid that interconnects all the way through. They have seven different grids. Speaker 1 (25:47) And planning the interconnections between those is very difficult to do. And it's even harder to build the lines because some states are democratic states, some are republican states. So it's a bit messed up to do that. And that's what's happening in the U.S. And see, the U.S. electricity demand was not growing for many, many years. So any new renewable capacity that was coming up was replacing. existing other capacity that is going out of, you know, that is getting decommissioned. Now, suddenly they're having to, because this AI demand has suddenly come in, Speaker 2 (26:23) it's Speaker 1 (26:25) actually leading to electricity demand growth of about 2 or 3%, which they were not expecting. And therefore, you know, there's a sudden ramp up happening in generating sources, which was not the case earlier. And the second thing is the grid is just not geared to... transmitting more power. And so a lot of these data centers that are coming up are trying to find solutions that are called behind the meter solutions where you don't go to the grid at all. You have your generating station right next to you, right? Which is why there's a lot of focus on things like nuclear or geothermal or gas, which is something that you can put next to your data center or somewhere close by. And there's less of a reliance on the grid because You just can't wield the power or move the power from one part of the country to another. We don't have that problem in India. Number two, in our case, our electricity demand is already growing at 5 or 6 % a year. AI may add another 1 % growth to it, which is not at all difficult for us to meet. Yeah. With, as I said, so many people now entering the sector. So I think structurally it's very different. What we now... have to do as a country. And this is sort of the next challenge for us. And I must say that, you know, we are standing at multiple inflection points in our energy transition journey as a country. Those really are number one. Renewable energy needs much faster grid build-out, which you and I talked about earlier. So that's the first thing that needs to happen. The second thing is that this whole conversation of energy security... has now entered our mindset in a much bigger way. That wasn't there earlier. As a result of the Middle Eastern wars and so on