Just three years ago, India’s pledge to reach nearly 500 gigawatts of renewable energy capacity by 2030 made it a bright spot in the global solar industry. Now US corruption allegations centred on the country’s biggest solar operator have cast a pall over a sector vital to its efforts to combat climate change.
Around the same time that Indian Prime Minister Narendra Modi was being feted for his ambitious targets at climate change talks in November 2021, Gautam Adani, billionaire head of the Adani Group, was allegedly involved in a huge bribery scheme to secure solar deals, according to US authorities.
Adani and associates “offered and promised” bribes worth $265mn to Indian government officials in 2021, according to a US criminal indictment announced last month. It accused the 62-year-old Adani, who is widely seen as having close ties to Modi, of personally meeting a government official as part of efforts to “corruptly persuade” authorities.
The allegations have highlighted the barriers to India’s rapid solar sector expansion and raised questions about its ability to meet clean energy targets. Analysts and Modi opponents said they could constrain financing for future Indian solar projects, if foreign investors and creditors increased their risk premiums for lending or avoided Indian projects entirely.
As set out by the US Department of Justice and the Securities and Exchange Commission, the events that led to Adani allegedly resorting to bribery began about six years ago, when Indian policymakers were trying to encourage domestic solar panel manufacturing.
India was seeking to transform itself into a clean energy superpower but government officials voiced concerns about its growing reliance on technology made in China, the world’s largest producer of solar panels.
To tackle the problem, officials slapped tariffs on Chinese solar imports in 2018. Meanwhile the state-owned Solar Energy Corporation of India (SECI), which is tasked with pushing the industry forward, devised a solar power purchase tender with a twist.
Interested companies would have to produce both electricity and solar panels, in the hope this would jump-start domestic production. The tender initially struggled to attract interest, with solar farm developers nervous about taking on risky manufacturing.
But after delays and revisions, in June 2020 two winners emerged: Adani Green Energy, the renewables division of the Adani Group; and Azure Power, a renewables developer headquartered in New Delhi and part-owned by Canadian pension fund Caisse de dépôt et placement du Québec.
The deals were transformative for the companies, covering up to 12GW of solar projects — enough for millions of homes — and capacity to produce 3GW of solar panels a year, combined. Analysts at the time said Adani Green would make “more than a billion” in profit from the deals, according to the SEC complaint.
The optimism soon soured. In order to finalise the deals, SECI had to persuade state-owned regional electricity distributors to buy the power at the price the state corporation had agreed with Adani and Azure. Yet with market prices falling, distributors balked, and the deals stalled.
The agreed price of the electricity was unusually high because of the photovoltaic manufacturing requirement included in the deals. That structure proved so unwieldy that India never did a manufacturing-linked auction again. Adani Green eventually opened a solar manufacturing plant this year; Azure never did.
Another obstacle was that most of India’s regional electricity distributors are under financial strain because they are forced to sell electricity below cost.
As months passed, with no final contracts signed with the regional distributors, executives at Adani Green and Azure resorted to corruption, US prosecutors alleged. They alleged the largest bribe of $228mn was offered to an official Gautam Adani met in the southern state of Andhra Pradesh.
The alleged scheme appeared to work: Between July and December 2021, several electricity distribution networks signed deals with SECI, including in Andhra Pradesh, allowing the state corporation to move ahead with its deals with Adani Green and Azure.
In December 2021 — a month after Modi’s appearance at the Glasgow climate talks — Gautam Adani welcomed the finalising of the “world’s largest green power purchase agreement” of 4.6GW with SECI.
Today, Adani Green is the biggest solar operator in India by operating capacity and reported net profits of Rs11bn ($130mn) for the year to March 31.
Some content could not load. Check your internet connection or browser settings.
But the “record-setting” solar awards at the heart of the alleged bribery scheme have not turned out as planned. None of the projects have yet been completed, according to consultancy Rystad Energy.
Neither Adani nor Azure has sold all of the power each won in the 2020 auction. According to data published by SECI in October, Adani has about 1.8GW unsold, and Azure about 1GW.
Developers across India are struggling to secure electricity sales contracts for renewables projects that have been awarded, stalling construction. About 10GW of this “unsold” capacity is hanging over the market.
Sushma Jagannath, Rystad’s vice-president for renewables and power, said the Adani bribery allegations were likely to have a knock-on effect on the solar sector. “Things like this can often discourage international players from investing in the Indian market,” Jagannath said.
Since the US allegations last month, TotalEnergies, Adani’s biggest foreign partner on renewable and other energy projects, has suspended fresh investment in joint energy projects with the group.
Pawan Khera, head of communications for the Indian National Congress, the country’s largest opposition party, said the allegations against Adani raised concerns that could “impact the quality and cost-effectiveness of solar projects in India”.
“Any reputational damage or financial constraints faced by the conglomerate could cause significant setbacks in achieving India’s climate goals,” Khera added.
Adani is one of a limited number of Indian groups able to execute big projects commensurate with the country’s solar ambitions, said Rahul Tongia, senior fellow at the Centre for Social and Economic Progress, a think-tank.
“Some players have scale, some have manufacturing, some have better financing and global reach,” Tongia said. “There aren’t so many that have all of the above.”
Adani Group has called the US allegations “baseless” and said it was seeking all “possible legal recourse”. India’s government has described the charges as “a legal matter involving private firms and individuals and the US Department of Justice”.
India has made undeniable progress in renewable power. When Modi set a 2030 target of 500GW of non-fossil fuel capacity in Glasgow in 2021, the country had about 150GW, a level since increased to more than 200GW, according to government data.
But the sector has problems beyond alleged official corruption. Jagannath said an unprepared electricity grid and lack of long-distance transmission had become a bottleneck for renewables growth.
Earlier this year, Modi’s government quietly moved its target for reaching 500GW of non-fossil energy back two years to 2032.
