New Delhi: Saudi Arabia is interested in partnering India to develop complementary supply chains, and deploy funds and new technologies here in what may further bring down already low solar power tariffs in the country.

Also, Lightsource BP is betting big on setting up solar power projects here through its partnership with the National Investment and Infrastructure Fund of India (NIIF).

“We discussed with Indian leadership the opportunities to synergize our vision with India,” said Khalid A. Al-Falih, Saudi Arabia’s minister for energy, industry and mineral resources at the India Energy Forum by CERAWeek on Monday.

He said the idea is to develop solar supply chains while also investing in India.

Al-Falih, who is also the chairman of world’s biggest oil producer, Saudi Arabian Oil Co. (Saudi Aramco), on Monday met Prime Minister Narendra Modi during a meeting with top executives of global oil companies and experts from the energy sector.

The proposal from Saudi Arabia comes at a time when India has pitched the International Solar Alliance (ISA) as a counterweight to Organization of the Petroleum Exporting Countries (Opec)—of which the Middle East country is a prominent member.

At the first general assembly of the ISA recently at its headquarters in India, Modi said ISA will play a role similar to that of Opec.

“The lowest cost PV (photo voltaic) solar project is in Saudi Arabia. I think some of the developments in financing as well as future technologies that we will be developing in the kingdom will be given priority hopefully to be deployed as part of India’s solar vision,” Al-Falih added.

His announcement also assumes significance given most solar power developers in India have been sourcing solar modules and equipment from countries such as China, where they are cheaper.

Saudi Arabia plans to manufacture 200 gigawatts (GW) of photo voltaic capacity by 2030.

India on its part has an ambitious 175GW clean energy target by 2022, of which 100GW is to come from solar projects.

Mint reported on 14 June about Saudi Arabia’s public investment fund (PIF), which has invested in SoftBank’s Vision Fund and ride-hailing firm Uber, looking to invest in India’s infrastructure sector.

Saudi Arabia is a crucial source of energy for India and hosts a number of expatriate Indians.

PIF, the kingdom’s main investment arm, plans to grow assets under management from about $230 billion to over $400 billion by 2020. Building “strategic economic partnerships” is among its key objectives.

India has also emerged as one of the most favourable destination for renewable energy with investments of about $42 billion. The government estimates the sector to have business potential of about $70-80 billion over the next four years. This in turn has attracted companies such as BP Plc that has already made a $12 billion investment commitment in India.

“We are working with a new company called Lightsource BP developing solar projects on a very-very large scale. So far, we have committed to a fund—Green Growth Equity Fund (GGEF) about $250 million of investment in solar projects. I believe that will get to be a billion dollar fund to develop solar,” said BP’s group chief executive officer (CEO) Bob Dudley at a press conference at the India Energy Forum on Monday evening.

BP has a 43% stake in Lightsource, which has invested $3 billion across 2 GW of solar projects globally.

The NIIF has partnered with the UK Government for GGEF, wherein they have committed £120 million each into the fund. EverSource Capital, an equal joint venture between Everstone Group and Lightsource BP is GGEF’s fund manager, that plans to raise £500 million from international institutional investors.

India has recorded record low solar tariff of Rs 2.44 per unit making it imperative for solar power developers to secure finance at the lowest cost. Also, SoftBank Group Corp. CEO’s Masayoshi Son offer to supply free electricity to International Solar Alliance member countries, including India, once its contracts to supply power in these countries expire after 25 years is expected to bring further disruptions to an already highly competitive sector.

By 2030, India plans to meet 40% of its electricity needs from non-fossil fuel sources. It assumes significance in a country that is now the biggest emitter of greenhouse gases after the US and China, and is among those most vulnerable to climate change. India plans to reduce its carbon footprint by 33-35% from its 2005 levels by 2030, as part of its commitments to the United Nations Framework Convention on Climate Change adopted by 195 countries in Paris in 2015.

Al-Falih said claims that crude oil will soon be phased out as the dominant source of energy for transport are misguided.

“The narrative that electric vehicle and solar will take over the market is wrong. This is creating serious risks for the global energy market,” he said and added, “EVs (electric vehicles) and renewables will make market penetration but at a slower pace.”

Making a case for fossil fuel sources such as crude oil, Falih said conventional vehicles comprise 99.8% of the global vehicle fleet, with the balance being EVs that have only replaced 30,000 barrels per day (bpd) of crude oil vis-a-vis a global production of 100 million barrels per day.

“It will still remain negligible, even as the fleet will double in next three decades. Orderly energy transformations are a complex phenomenon,” Al-Falih said, adding “I am glad that the Indian government’s wise and rational policies have led to more realistic yet progressive electrification plans for Indian mobility.”

The National Democratic Alliance government has decided against formulating an EV policy in an apparent U-turn from its position so far, providing a breather to many carmakers that were unprepared for an abrupt shift to the clean-fuel technology. Any shift to EVs will help India’s strategy for achieving its climate change commitments and help reduce its reliance on oil imports.

“We appreciate the importance of this point that the pain that the consumers here in India are feeling,” Al-Falih said and added that the pain would have been much more if five or 10 years ago Saudi Arabia adopted the optimistic but unrealistic view regarding a decline of fossil fuels in the future.

Sultan Ahmed Al Jaber, minister of state in United Arab Emirates government and the CEO of state run-Abu Dhabi National Oil Co. said India’s energy transition does not mean a transition away from fossil fuels.

“On the contrary, fossil fuels will remain the dominant source of energy in India, representing at least 80% of the Indian energy mix by 2040. And oil imports will rise by 175%, accounting for 65% of overall energy imports. In short, oil and gas will remain a fundamental driver of the Indian economy,” he added.