In the early 1990s, when entrepreneur Tulsi Tanti faced power shortages at his family’s textile factory in India, he decided to install two wind turbines to help with the electricity problem. He soon realized the turbine business had huge potential, and in the years since he has built Suzlon Energy Ltd. into an international giant that is now rivalled only by the biggest turbine makers such as General Electric and Vestas. Last year Suzlon completed a takeover of Germany’s REpower, and its machines now generate 20,000 megawatts of wind energy in more than 30 countries.
But Suzlon, like other renewable energy players, is suffering from a worldwide slump, and has been reporting losses while scrambling to refinance high levels of debt. Still, Suzlon is a growing player in Canada, and will have installed about 500 MW of turbines here by the end of this year, about 10 per cent of the country’s total. Mr. Tanti made a rare visit to Canada last week.
Is the global renewable energy industry in crisis?
Yes, the industry is struggling and in a stressful situation. The simple reason is that some of the markets that were supposed to grow are not growing. Second, the availability of project financing is not growing. In the last two years, the whole industry has been in a consolidation phase. In 2013, we won’t see any growth – it will be 5 per cent lower, or flat. But in 2014, growth will start again.
There is a great opportunity for global industry players like us [if we can] bring down the cost of energy with the help of technology and innovation. The mission is very clear: to compete with coal. We are targeting that, by 2015, the cost of wind energy will be equal with coal. Then the market will increase in a big way.
Where are the big growth markets?
Emerging countries such as India, China, and Brazil don’t have sufficient access to energy. These are the markets where there will be huge demand. Developed economies – Europe, the U.S., Canada and Australia – are highly driven by their policy framework. If governments are supportive, the growth and momentum will continue. In the European Union, there is a crystal-clear target that 25 per cent of power has to come from renewable energy. So I am not worried about that market. It will remain very strong.
Your stock has plunged, like that of so many renewable companies, and you have a lot of debt. How will you survive until the market improves?
It is a very challenging time. But we have an opportunity, with our German engineering and technology [at REpower], combined with the Indian cost structure [at Suzlon]. That gives us a huge competitive edge in the marketplace. We are bringing in the next generation of turbines fast, and cutting costs in the supply chain. And the process is going on, with the help of bankers, to consolidate debt.
How do you like Ontario’s green energy program, with its ‘feed-in tariffs’ that pay high rates for renewable power?
We appreciate feed-in tariffs because they give long-term stability for our investments. The feed-in tariff is the most successful policy in the world [for encouraging renewables]. In Germany, it caused a great economic boon for sustainable development.
What about Ontario’s requirement that wind projects have local content? Is that difficult for a company like yours?
Local content is good, but there are limitations. Our main concern is that we need volume. If we have to build the capacity but the market size is not there, then it is not viable. If the government continues to drive volumes, and eliminates uncertainty, then that will provide the motivation for manufacturers like us to invest in Ontario and make it a manufacturing hub. We can supply to other parts of Canada, and it is very close to the U.S. border.
How will you meet Ontario’s content rules?
We have local vendors, and we are planning to establish a rotor blade production facility in Ontario. The towers will be local, the rotor blades will be local, and some transformer and electrical equipment will be local. That will get us over the local requirements.
Is Canada paying enough attention to trade with India?
There is a very good relationship [between Canada and India], although it is not like the high trade relationship with China. China’s economy is more built on exports, while India has more of a domestic market. There is a huge opportunity and upside to increasing trade between Canada and India. There is no language barrier. And so many Indians live in Canada.
One reason you were in Canada was to talk to some MBA students. What did you tell them?
The majority of the next generation of MBA students are [looking to work at] consultancy or financial firms, or in investment banking. But the renewable sector has a huge future, and there are great opportunities in the value chain for those who start as small entrepreneurs. [I wanted to] motivate them to become entrepreneurs. I strongly believe entrepreneurship will bring more innovative solutions and a more competitive environment.
Why have you cut back your Chinese operations?
In the early days, there was no supply chain in China, but now it has developed, so it makes sense to have a different business model. We are dropping in-house manufacturing capacity, because we can out-source the components. And we are also looking for joint venture partners, with state-owned companies. The majority of our customers are state-owned, and it makes them comfortable if our partner is a state-owned company. But the Chinese renewable energy industry is the largest in the world, so we are not exiting from it.
Is offshore wind power the segment with the most potential?
The global offshore market will continue to grow by 30 per cent annually for the next decade. The key is Europe, where most installations are happening. Second, we are looking in China, which will be a good upcoming market. Japan has recently opened up [to offshore wind], because they are replacing nearly 40 gigawatts of nuclear power generation with renewables. Then in India, have a huge coastal area, with more than 100 GW potential for offshore wind.
For a time you were on the Forbes magazine list of billionaires, but you have dropped off it. Does that matter to you?
No. That is not my mission. I am working for a cause. The world is at a big risk from climate change. We have to come up with solutions, to bring in a sustainable economy. I would like to see our group install 100,000 MW in the next 10 years, and create more of an impact on carbon mitigation, and help create a sustainable economy for the world. That is our mission.
TULSI TANTI BIOGRAPHY
Founder and chairman, Suzlon Energy.
Born in Rajkot, Gujarat, India; 54 years old.
Degrees in commerce and mechanical engineering.
Started a textile business in Gujarat, and in the early 1990s bought two turbines to supply it with power.
In 1995, founded his own turbine maker, Suzlon Energy.
Entered the U.S. market in 2003.
Bought a stake in German turbine maker REpower in 2007, taking 100 per cent in 2011.