India’s Potential to Maximise Renewable Energy
India’s electricity sector generates roughly 1.2 trillion kWh of electricity annually, which divides roughly into 1,000 kWh per person. This is distinctly low by global standards; it is roughly one-quarter that of China and one-thirteenth that of the US.
With its strategic geographical location, India has abundant resources of non-conventional energy. As of 30 September 2020, 36.17% (including large hydro) of India's installed electricity generation capacity is from renewable sources. According to 2027 blueprint, India aims to have 275 GW from renewable energy. India has also made substantial progress when it comes to legislations and consolidating a framework for achieving the objective of transforming the use of renewable energy sources as the mainstream and predominant mode of energy use.
The Government has conceived and devised major Policies in the renewable energy sector and legislations giving effect to the goals mentioned in such policies, which has been implemented with the sole intention of achieving holistic sustainable development while addressing the pressing issue of mitigating the effects of climate change.
With the advent and expansion of industrialization and commercialization, the global boundaries started getting blurred and this led to a spurt in the process of exploiting of resources for the purpose of advancement among the nations. However, this process of development came with its own vices and destructive features. Primary among them was the effect on the climate, the ever-increasing urbanization leading to depletion of forest cover, and increase in pollution levels.
A shift of paradigm is clearly perceptible where the benchmark for economic development of a country is now based on its ability to optimally utilize the renewable energy sources and the diversified use of the power derived from such renewable energy sources, like solar, wind, hydro, bio-mass and waste to energy.
Globally there is now an increased awareness of the havoc that climate change and rising pollution can cause. Every country must cut back its carbon emission levels and India is no exception. Looking ahead, therefore, renewable energy emerges as an obvious alternative. India must strive to transform its energy mix and ensure that a majority of the additional capacity comes from renewable sources. It has been estimated that renewable energy will very soon become cheaper than that derived from fossil sources, which also enhances its importance to a developing economy like ours in which affordability and last-mile access are major issues.
While the last 4 years have seen India’s renewable energy capacity grow appreciably, we need to take some concrete steps to keep up this momentum. Most importantly, we must ensure better grid management so that it can absorb more renewable energy while overcoming the key challenge of its intermittent nature. The truth is that intermittency will emerge as a real concern once renewable energy starts to account for a greater share of the overall supply, and we have some time before that becomes a reality.
WE forum lists down five-point action plan that will help us best harness the potential of renewable energy in India in the days ahead:
1) Promote hybridization of solar and wind energy and build ancillary markets
The synergy in a hybrid wind and solar plant will help reduce variability in power generation. Hybrid projects would also have much higher capacity utilization factors, thus practically eliminating the intermittency challenge. Such projects have the additional benefit of reducing the costs associated with the sharing of transmission lines. Ancillary markets will provide backup services that smooth out the variable nature of energy supply. Germany now has enough storage capacity to cover the needs of 6.3 million people to support its grid infrastructure while we do not have any. There are tremendous opportunities for improvement in this one area alone
2) Build enhanced evacuation infrastructure
We need greater investment in high-voltage transmission lines to transport bulk energy over vast distances quickly and efficiently from power-rich to power-scarce states. This is all the more important in a scenario where storage solutions are not well developed
3) Invest in digitalization
There is huge potential for advanced software solutions that can optimize grid-level operations besides impacting consumer behaviour. The creation of demand response programmes, for example, can prod industries to shift their loads to times during the day when more energy is available on the grid. This, in effect, reduces peak demand. Demand response programmes will not be cost burdens on renewables and are, in fact, proven business models in themselves.
4) Develop battery storage solutions
As battery storage costs continue to fall precipitously, they will become an increasingly important tool for managing the fluctuating pattern of renewable energy generation. Grid operators can store electricity generated from renewable projects in large battery systems in low-demand situations, and then promptly release that electricity into the grid when demand increases.
5) Turnaround the distribution companies
Nearly a quarter of electricity generated is lost in transmission because India’s distribution companies (known here as discoms) use outdated infrastructure, resulting in line faults and leakages, as well as undersized and over-utilized transformers. Weak monitoring and sloppy maintenance standards lead to frequent power theft through hooking and tapping.
Not surprisingly, this results in our discoms suffering from poor economic health, which is further accentuated by their inability to collect dues from their customers in a timely fashion. This sets off a negative ripple effect in the entire electricity value chain. Immediate reforms are needed to revitalize the discoms- privatization and greater autonomy may be the answer. There is a dire need to invest in upgraded infrastructure and to formulate an action plan to enhance revenue collection.
Today, the criticality of renewable energy cannot be overemphasized given that it balances the three crucial goals of the Indian economy: rapid pace of growth, tackling pollution and meeting our global commitments on climate change. Not surprisingly, the sector has been at the centre of policy attention and the Indian government has been focusing on several enablers to help unleash its full potential. However, far from being complacent, we need to identify the areas where the sector is still deficient or needs support and address those gaps at the earliest opportunity through strategic interventions as outlined above. We owe our children a greener and safer planet, and a booming renewable energy sector will go a long way in helping us realize this vision.
Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India is ranked fourth in wind power, fifth in solar power and fifth in renewable power installed capacity as of 2018.
Installed renewable power generation capacity has gained pace over the past few years, posting a CAGR of 17.33% between FY16–20. With the increased support of Government and improved economics, the sector has become attractive from investors perspective. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role. The government is aiming to achieve 225 GW of renewable energy capacity (including 114 GW of solar capacity addition and 67 GW of wind power capacity) by 2022, more than its 175 GW target as per the Paris Agreement. The government plans to establish renewable energy capacity of 500 GW by 2030.
Market Size
As of August 31, 2020, installed renewable energy capacity stood at 88.79 GW, of which solar and wind comprised 35.73 GW and 37.99 GW, respectively. Biomass and small hydro power constituted 10.14 GW and 4.73 GW, respectively. By December 2019, 15,100 megawatts (MW) of wind power projects were issued, of which, projects of 12,162.50 MW capacity has already been awarded. Power generation from renewable energy sources in India reached 127.01 billion units (BU) in FY20.
In 2019, India installed 7.3 GW of solar power across the country, establishing its position as the third-largest solar market in the world.
With a potential capacity of 363 GW and with policies focused on the renewable energy sector, Northern India is expected to become the hub for renewable energy in India.
Investments/ Developments
According to the data released by Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflow in the Indian non-conventional energy sector stood at US$ 9.22 billion between April 2000 and March 2020. More than US$ 42 billion has been invested in India’s renewable energy sector since 2014. New investment in clean energy in the country reached US$ 11.1 billion in 2018.
Some major investments and developments in the Indian renewable energy sector are as follows:
The Solar Energy Corporation of India (SECI) implemented large-scale central auctions for solar parks and has awarded contracts for 47 parks with over 25 GW of combined capacity.
In April 2020, Vikram Solar bagged a 300 megawatt (MW) solar plant project for Rs 1,750 crore (US$ 250.39 million) from National Thermal Power Corporation Ltd (NTPC) under CPSU–II scheme in a reverse bidding auction.
Adani Group aims to become the world’s largest solar power company by 2025 and the biggest renewable energy firm by 2030.
Around Rs 36,729.49 crore (US$ 5.26 billion) investment was made during April-December 2019 by private companies in renewable energy.
Brookfield will invest US$ 800 million in ReNew Power. ReNew Power and Shapoorji Pallonji will invest nearly Rs 750 crore (US$ 0.11 billion) in a 150 MW floating solar power project in Uttar Pradesh.
In November 2019, Renew Power, Avaada, UPC, Tata unit won solar projects in 1,200 MW auction of the Solar Energy Corp of India.
As of 2019, India was set to open its solar power plant, Bhadla Solar Park in Rajasthan, which would be world’s largest solar plant with a capacity of 2,255 MW.
As of March 2019, Eversource Capital, a joint venture between Everstone and Lightsource planned to invest US$ 1 billion in renewable energy in India through its Green Growth Equity Fund.
The international equity investment in the India’s clean energy sector was US$ 283 million in 2016, US$ 532 million in 2017 and US$ 1.02 billion in 2018.
Government initiatives
Manoj K Singh, Founding Partner, and Nilava Bandyopadhyay, Senior Partner at Singh & Associates reviews the country’s reforms as:
The draft Electricity (Amendment) Bill, 2020 gives impetus to the Renewable energy sector. Following are the relevant amendments proposed through the Bill to strengthen it and create a robust framework for the same.
National Renewable Energy Policy shall be formulated and notified by the Central government, in consultation with the State Governments. The focus points of the Policy shall be the promotion of generation of electricity from renewable sources of energy and prescribing a “minimum percentage of purchase of electricity from renewable and hydro sources of energy.”
This further empowers the Central Government to determine Renewable Purchase Obligation (RPO) which shall bring uniformity of RPO for all the States as the States shall be bound to adhere to such determination of RPO. The proposed amendment aims at providing importance to electricity generated through Hydro power by introducing the purchase obligation with respect to hydro sources of energy.
The amendments proposed to Section 61 of the Electricity Act clearly amplifies the intent of focusing on creating a structural parameter for the renewable energy sources of power. It seeks that the Appropriate Commissions shall take into consideration the provisions of National Renewable Energy Policy, along with the Electricity and Tariff Policies, while exercising its powers of determining the tariffs and formulating the regulations pertaining to tariff. It also seeks to provide stimulus for encouraging the hydro source of power, in addition to the other forms of renewable energy.
The Bill specifically empowers the Appropriate Commissions to be guided by the National Renewable Energy Policy, in addition to other policies, while discharging its functions.
While widening the scope of Section 142, the Bill proposes to impose a uniform penalty for the non-compliance of RPO by a person. As on date, it was the Appropriate State Commissions which were empowered to determine and levy the penalty for such non-compliance. The proposed amendment aims at moving a step closer to achieving uniformity in the procurement mechanism of the renewable energy.
The Bill further proposes/introduces the concept of Renewable Generation Obligation (RGO), though the same has not been defined in the Bill. With the proposed amendment to Section 176, it seeks to give powers to the Central Government to make rules pertaining to RPO and RGO.
With the Bill aiming towards creating and strengthening the existing conceptual and contractual framework, this might lead to increased confidence and investment opportunities in the RE sector. Also, with the RPO being uniform across the country, it will pave the way for further decarbonisation of the environment and will help in the transition from thermal power to renewable energy power.
Packages/Schemes:
The Government of India, in association with the Ministry of New and Renewable Energy and other dedicated ministries and organisations like SECI, has been focusing on articulating and initiating various schemes like development of Solar Park and Ultra Mega Solar Power projects, UDAY Scheme (Ujjwal Discom Assurance Yojana), and others to create the infrastructure required for propelling the use of renewable energy sources.
This has been done keeping in mind the deviation from the rampant use of power generated by using thermal and other fossil fuel based resources, which has been depleting at an alarming rate. The desperate need of the hour is to utilize the resources abundantly available, i.e. the renewable energy sources, which will pave way for developing the economy of the country.
With the current scenario of global slowdown owing to the lockdown on account of COVID-19 pandemic, and glaring resource crunch, each and every sector has been experiencing setbacks. The Government is trying to provide stimulus packages for those sectors who are reeling under the stress of the unprecedented circumstances.
The Union Ministry of Power has communicated to all the States/UTs extending INR 90,000 crore financial package to assist the stress DISCOMs. A communication was sent on 14.05.2020. The infusion of the liquidity would be through Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) as part of the Atmanirbhar Bharat Abhiyan. The loans will be provided to the DISCOMs against guarantees by the State Governments which will be used to clear liabilities of CPSE Gencos/Transco, IPP and RE generators. Total funding quantum will be about INR 90,000 crore. The funding would be done in two tranches of INR 45, 000 crore each.
There will also be a huge impact on the government subsidies provided to the sector owing to the global crisis in petroleum resources and the effect of the same on sectors like power. A number of subsidies were formulated and announced before the COVID-19 crisis, such as PM KUSUM (Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhivan), and Phase II of FAME India scheme (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India).
However, it projects a fairly good picture of the renewable energy sector, even after the current pandemic crisis. Investment capital have been made available for new projects and SECI has been successful in auctioning solar power project in the month of June while delivering India’s lowest renewable energy tariff at INR 2.36/-kWH. With such promising outcomes, India is sure to be in the limelight in this time of darkness and gloom. With SECI providing the Viability Gap Funding to the Solar Power Project Developers, it functions as an incentive for investment and development of the infrastructure for renewable energy which is the basic requirement.
The Bihar Electricity Regulatory Commission (BERC) has released draft tariff regulations for renewable energy projects. These regulations will be valid for the control period of the financial year (FY) 2020-21 to FY 2022-23. The Commission has invited suggestions and comments from various stakeholders by September 25, 2020.
The project-specific tariff will apply to biogas-based projects, solar projects, including rooftop (5 MW and above), small hydro projects, solar thermal (5 MW and above), wind, and renewable hybrid projects.
A useful life period of 25 years will apply to wind power projects, biomass projects with Rankine cycle technology, solar projects, and solar thermal projects. Similarly, the useful life period of municipal solid waste-based projects, biomass gasifier-based projects, and renewable hybrid energy projects will also be 25 years. The useful life period of small hydro projects would be 40 years.
The Commission has considered a debt and equity ratio of 70:30, and the return on equity as 14%. The depreciation rate of 4.67% per year was adopted for the first 15 years, and the remaining depreciation would be spread during the remaining useful life of the project.
The operation and maintenance (O&M) expenses for the financial year (FY) 2020-21 will be increased at the rate of 3.84% per year for the tariff period. The generating company will levy a late payment surcharge of 1.50% per month if the payment is delayed beyond 45 days.
Solar Projects
The Commission will determine project-specific capital cost based on the existing market trends. The normative capital cost will be ₹36.3 million (~$488,005)/MW on prevailing market trends for solar and also rooftop solar projects. The capacity utilization factor (CUF) for solar power projects will be 19%. The O&M cost for the FY 2020-21 will be ₹858,000 (~$11,534)/MW, and the auxiliary consumption will be 0.75% of the gross generation.
Parameters for Solar Thermal Projects (Less than 5 MW)
The capital cost for solar thermal projects will be ₹120 million (~$1.61 million)/MW, and the CUF will be 23%. The O&M expenses for the first year of the control period will be ₹2.29 million (~$30,786)/MW, and the auxiliary consumption will be 10% of the gross generation.
Biomass Power Projects with Rankine Cycle Technology
For biomass with Rankine cycle project (other than rice straw and Juliflora-based project) with a water-cooled condenser, the capital cost will be ₹55.9 million (~$740,385)/MW. For a project other than rice straw and Juliflora with an air-cooled condenser, the capital cost will be ₹60 million (~$794,689)/MW. For rice straw and Juliflora (plantation)-based project with a water-cooled condenser, the capital cost will be ₹61.1 million (~$809,258)/MW. For rice straw and Juliflora (plantation)-based project with an air-cooled condenser, the capital cost will be ₹65.2 million (~$863,562)/MW. The O&M expenses for the first year of the control period (FY 2020- 21) will be ₹4.6 million (~$60,926)/MW.
Biomass Gasifier-Based Power Projects
The capital cost for the biomass gasifier-based power projects will be ₹59.3 million (~$797,210)/MW for the FY 2020-21. It will remain valid for the entire duration of the control period unless reviewed by the Commission. The plant load factor for the determination of tariff will be considered as 85%, and the auxiliary consumption will be 10%. The O&M cost for the FY 2020-21 will be ₹6.1 million (~$82,006)/MW.
Non-Fossil Fuel Based Co-Generation Projects
The capital cost for non-fossil fuel-based co-generation projects will be ₹49.2 million (~$661,428) /MW for the FY 2020-21. It will remain valid for the entire duration of the control period unless reviewed by the Commission. The plant load factor will be fixed at 53% for the computation of the tariff. The gross calorific value for bagasse will be set as 2,250 kCal/kg. The price of bagasse for the first year of the control period, i.e., 2020-21, will be ₹2,274 (~$30.57)/MT, and it will be increased at the rate of 5% per annum to arrive at the base price for subsequent years of the control period. The O&M expenses for the FY 2020-21 will be ₹2.4 million (~$32,264)/MW.
Recently, the Central Electricity Regulatory Commission announced tariff regulations for renewable energy projects. These regulations will come into force from July 01, 2020, and will be valid until March 31, 2023. The draft regulations were published in May 2020.
Earlier, BERC approved the request of the Bihar State Power Holding Company Limited to carry forward the shortfall in its renewable purchase obligation for the financial year 2019-20 to FY 2020-21. The Commission further added that the power company could purchase either solar power or solar renewable energy certificates to fulfill the RPO shortfall for FY 2019-20.
Bihar is one of the least developed states for solar, with only 111 MW of solar projects currently in operation, according to Mercom India’s Solar Project Tracker.
India’s resolve to reduce its carbon footprints and lead the way for decarbonisation can very well be highlighted by its constant endeavour to bring reforms in the energy sector and providing special encouragement to the renewable energy sector.
Being on the cusp of a major historical and economic upheaval, India needs to develop the infrastructure for renewable energy resources and harnessing their power. With the adverse impact of fossil fuels and carbon emissions on the rise, the alternative modes of energy usage with be the determining factor and will play a pivotal role in the comprehensive development of a country like India.
The basic tenet of economics is that if a resource is scarce in supply and its demand is high, the price for the same will also be high. Similar is the situation with fossil based fuels which are depleting with each progressing day and procuring them is adding additional economic and financial burden. Government of India is with the legal, regulatory and policy reforms, has started working towards establishing a robust infrastructure for the renewable energy resources and making the same available for mass usage.
It is expected that by 2040, around 49% of the total electricity will be generated by renewable energy as more efficient batteries will be used to store electricity, which will further cut the solar energy cost by 66% as compared to the current cost. Use of renewables in place of coal will save India Rs 54,000 crore (US$ 8.43 billion) annually. Renewable energy will account for 55% of the total installed power capacity by 2030.
The Government is committed to increased use of clean energy sources and is already undertaking various large-scale sustainable power projects and promoting green energy heavily. In addition, renewable energy has the potential to create many employment opportunities at all levels, especially in rural areas. The Ministry of New and Renewable Energy (MNRE) has set an ambitious target to set up renewable energy capacities to the tune of 225 GW by 2022, of which about 114 GW is planned for solar, 67 GW for wind and other for hydro and bio among other.
India’s renewable energy sector is expected to attract investment worth US$ 80 billion in the next four years.
