Modern SEZs can adopt prudent sustainability practices more strategically and affordably in their confined areas, thereby accelerating their growth, attracting investment health and value proposition. According to UNCTAD, "SEZs that market their environmental performance (ecozones) are already emerging (UNCTAD, 2016), and active promotion of high environmental, social, and governance (ESG) standards will increasingly become a feature of SEZs."
India is one of the few countries on track to meet their NDCs of COP 21 both in terms of their carbon emissions intensity (has achieved 14% drop and the target is 35% drop by 2030 from 2005 levels) and renewable energy capacity (has achieved 37% of installed capacity from renewables compared to 40% target). And now, India has further expanded its ambition to include 450 GW of total renewable energy capacity by 2030.
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Notably, SEZs can actively play a role in this development, benefit from green growth outcomes, and be recognized. For example, Kandla SEZ (KASEZ) was awarded Platinum Rating under IGBC Green Cities Rating for existing cities in the industrial cities category. According to the news report, "The SEZ initiatives with solar energy and LED lighting was also among the factors that contributed to the IGBC rating." The recognition can set an inspiring example for other SEZs to follow. While widespread adoption of renewable energy in SEZ is still in the making, SEZ developers should actively consider the option given the immense advantages.
Firstly, there are several options to source green energy, allowing a business to pick the model that is geared towards its interest and budgetary needs -
- Onsite rooftop solar – OPEX PPA model or CAPEX
- Open access PPA
- Group captive PPA
- Renewable Energy certificates – (Recent proposal by the government to keep them till perpetuity will boost the supply of RECs)
- Green Term Ahead Market (GTAM) – This was launched in August last year. Using GTAM, corporate buyers can buy renewable power and fulfil sustainability obligations. This is an alternative to long term PPAs.
Secondly, switching to renewables also gives business predictability in electricity cost. For example, by signing a long term PPA (power purchase agreement) with a third-party service provider, a business can lock in energy prices for the life of the contract, which could extend for up to 15 years or more depending on the nature of the agreement.
Thirdly, under the PPA model, an EPC will be responsible for the maintenance and operation of the solar plant, the ownership of which may be transferred to the customer at the end of the agreement. As long as the agreement stays in practice, the customer only has to pay for the electricity generated from the solar plant installed.
By installing solar plants, SEZ can create a value proposition; attract multinational companies (those with ambitious sustainability goals) to set up their offices, and be in a safe position against fluctuating energy costs. Thankfully, the cost of solar power generation is going down. Like the law of diminishing returns, the reduction in renewable energy price is going to be there, but it will be slower. Deferring investment by 2 years will be suboptimal. For SEZ developers, the time to act is now.