Clean Revolution case study: Suzlon

Author:
Clare Saxon Ghauri
Reading time: 11 minutes
26 September 2012

This is part of The Climate Group's Clean Revolution case study series. Read an interview with Tulsi Tanti, Founder, Director and Chairman, Suzlon.

Suzlon was born as a solution to the challenges of energy security. A strong values base has emerged as the company has grown and expanded internationally to realize the social benefits of renewable energy, however success has come from a canny approach to building the company’s competitive advantage, both through vertical integration to offer a full service as producer, maintainer and operator of turbines, and also through international acquisitions to leverage expertise developed in European markets like Denmark and Germany. Systems thinking has been a strong trait in the company to this end, particularly in its acquisition of key suppliers to the wind market, RePower and Hansen Transmissions.

Suzlon has held the number-one spot in the wind industry in India for 11 consecutive years with a 50% share of the market for the past ten years. In terms of installed capacity, it is the third largest in Asia and fifth worldwide. The Suzlon Group has a combined global market share of 8.4%. Its presence can be found across 32 countries with over 17 GW installed.

Established in Gujurat, Suzlon has its global headquarters powered 100% by renewable energy in Pune in Maharashtra state. As a vertically integrated wind company, Suzlon manufactures and maintains turbines as well as operating its own wind farms. The firm has transformed from a start-up in 1995 to a major multinational, employing 13,000 people and operating facilities in North and South America, Asia, Australia, Europe and Africa. Eighty percent of the business’s sales are outside India, although close to 60% of Suzlon’s installed generating capacity remains in the country (see Suzlon's installed base graph).

India is notorious for an inadequate power supply. Over 500 million of its population has no access to electricity. For the grid-connected public and business, supply is also regularly interrupted, particularly in the summer. As a result of chronic under-investment in distribution, a heavy reliance has evolved on expensive back-up generators running on diesel fuel. Grid-electricity prices are unusually high for commercial customers – twice the rate paid in countries like the US. At a national level, 45% of export earnings are spent on energy imports, mostly on fossil fuels. The International Energy Agency suggests that Indian coal imports could increase sevenfold by 2030, putting energy security high on the agenda.

Suzlon grew its business in India against this backdrop, offering reliable electricity supply to commercial customers at relatively low cost and taking advantage of a range of incentives for wind generation. But its innovative approach to growing its business has been central to its success.

I BELIEVE IN ‘COOPERATIVE COMPETITION’ – THE MAJORITY OF MARKETS WHERE WE OPERATE ARE STILL IN GROWTH PHASE, SO THERE’S BUSINESS FOR EVERYONE.
–Tulsi Tanti, Founder, Director and Chairman, Suzlon

In 1990, Tulsi Tanti realized that his family-owned polyester textile business could not rely on grid-sourced power for its operations. Facing unreliable supply and high prices, the family took the decision for investing in wind power project to freeze its power cost for 20 years and invested in two Danish-made turbines.

Sensing an opportunity to supply reliable wind energy solution to India’s commercial sector, Tanti later took the risky move of investing $600,000 to fund the establishment of Suzlon, initially securing the license for German turbines in India and later, when the supplier went bankrupt, in securing global rights and acquiring and setting up its R&D center in Germany. Tanti moved away from the textile business and incorporated Suzlon in 1995, aggressively building a full-scope wind turbine manufacturing, servicing and operating business to overcome the maintenance issues that had dogged competitors in India. Key stepping stones in Suzlon’s subsequent development included:

  • A first major contract, with Bajaj Auto Group, to build 60 MW of wind generation (2000), establishing Suzlon’s credibility nationally
  • Establishment of European R&D facilities in Netherlands and Germany to tap into international expertise in turbine design and production (1995-2003)
  • Suzlon’s first international venture – a 24-turbine farm in Minnesota, USA (2003)
  • Raising $24 million from Citi and Chryscorp to grow Suzlon’s international business (2004).

By late 2005 Suzlon’s listing on the Bombay Stock Exchange had grown its market capitalization to $8 billion.

Suzlon acquired Hansen Transmissions, a leading gear-box manufacturer, in 2006 and the German turbine maker, Repower, a year later, continuing its vertical integration strategy and supplying both Suzlon and its competitors. More recently the company has established wind farms in the USA, China, Australia and Brazil, as well as manufacturing facilities in China to meet local requirements for indigenous production.

AFFORDABLE ENERGY

The primary driver behind Suzlon’s early development was securing affordable energy – in 1995 wind generation provided an attractive proposition to commercial customers in India against a backdrop of unreliable and expensive grid supply alongside a suite of incentives introduced by the Government to encourage renewables.

STRATEGIC ADVANTAGE

The prospect of a growing international market for wind power in the late 1990s and early 2000s provided a strong driver for Suzlon’s growth. Its strategic advantages, in its broad scope from manufacture to generation and global R&D base, enabled it to secure early contracts in the US and critical mainstream investment.

VALUES

Alongside a strongly entrepreneurial business approach, it is clear that the realization of wind power’s social and environmental benefits has driven a strong values-based approach in Tulsi Tanti’s leadership and Suzlon’s push for expansion, as Tanti’s recent environmental awards attest. As well as being a successful business leader, Tanti has become a vocal advocate on climate change and renewable energy. He has received numerous awards including Ernst & Young Entrepreneur of the Year (2006), Champion of the Earth (2009) by the United Nations Environment Program, and ‘Hero of the Environment’ from TIME Magazine. Tanti joined The Climate Group’s International Leadership Council in 2010.

COAL IS STILL KING

Coal remains cheap, abundant and dominant internationally. For high-growth economies like India and China, the energy discussion focuses on how to provide energy to one billion people while limiting environmental impact and the depletion of fossil fuel resources. As an energy source that drives sustainable economic growth, wind is core to India’s renewable energy market. However, in 2007 only 7% of India’s energy came from wind, comprising 70% of the total renewable input in India. With policies like feed-in tariffs, renewable energy certificates and ‘wheeling and banking’ (financial policy incentives to develop wind in the windiest locations in India), wind has grown exponentially but remains a minority energy source that will need to continue to grow to challenge coal’s dominance.

COMPETITION

As the wind industry grows, Suzlon faces mounting competition in the international market (outside India) from Chinese turbine producers like Sinovel and Goldwind.

50%

Suzlon’s market share of installed wind capacity in India

5TH

Suzlon’s global ranking amongst wind companies

70%

Proportion of wind power consumed by industrial customers in India

40 GW

Goal for installed wind capacity in India by 2022 as stated in the Renewable Energy Development Agency’s five-year plan

194,000 MW

Total installed wind power capacity globally by 2010 (see Global cumulative installed wind capacity graph)

13,000 MW

Total installed wind power capacity in India in 2010 (see India's cumulative installed wind capacity graph)

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