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  • Critical analysis on demand for renewable power in India

    Beyond 2023-24, new power generation capacity could be all renewables, based on cost competitiveness of renewables as well as the ability of the grid to absorb large amounts of renewable energy together with battery-based balancing power, according to a report released by The Energy and Resources Institute (TERI) on February 14.

     

    The report also says that current installed capacity and the capacity under construction would be able to meet India’s power demand till about 2026 and no new investments are likely to be made in coal-based power generation till that time.

      

    The report titled, ‘Transitions in the Indian Energy Sector - Macro Level Analysis of Demand and Supply Side Options’ was released by Piyush Goyal, minister for power, coal, new and renewable energy and mines, at a conference organised by TERI.

    The cost of renewable electricity and its storage is on a steady decline and could stabilise at around Rs5 per KWh. This would enable India to move decisively towards renewables for future generation. The decarbonisation of power generation is also an opportunity to move other carbon-based sectors like transport to electricity, thus multiplying the benefits of clean energy generation.

    India has an ambitious target of 175,000 MW of renewable power by 2022 including 100,000 MW of solar power.

    India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come.

    In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required.

    India ranks third among 40 countries in EY’s Renewable Energy Country Attractiveness Index, on back of strong focus by the government on promoting renewable energy and implementation of projects in a time bound manner.

    The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).

    Total installed capacity of power stations in India stood at 305,554.25 Megawatt (MW) as of August 31, 2016. Electricity generation rose 5.69 per cent year-on-year to 486.44 BU during April 2016-August 2016.

    The Planning Commission’s 12th Five-Year Plan estimates total domestic energy production to reach 669.6 Million Tonnes of Oil Equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22.

    India’s wind power capacity, installed in 2016, is estimated to increase 20 per cent over last year to 2,800 MW@, led by favorable policy support that has encouraged both independent power producers (IPP) and non-IPPs. India is  expected to add nearly 4,000 MW# of solar power in 2017, nearly twice the addition of 2,133 MW in 2015.

    India’s wind energy market is expected to attract investments totalling Rs 1,00,000 crore (US$ 14.91 billion) by 2020, and wind power capacity is estimated to almost double by 2020 from over 23,000 MW in June 2015, with an addition of about 4,000 MW per annum in the next five years.

    Around 293 global and domestic companies have committed to generate 266 GW of solar, wind, mini-hydel and biomass-based power in India over the next 5–10 years.

    The initiative would entail an investment of about US$ 310–350 billion.

    Between April 2000 and March 2016, the industry attracted US$ 10.48 billion in Foreign Direct Investment (FDI).

    The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. The Government plans to set up a US$ 400 million fund, sourced from The World Bank, which would be used to protect renewable energy producers from payment delays by power distribution firms. At the same time this will protect the distribution firms from the shrinking market for conventional grid-connected power, caused by wider adoption of roof-top solar power generation.

    The Ministry of New and Renewable Energy (MNRE), which provides 30 per cent subsidy to most solar powered items such as solar lamps and solar heating systems, has further extended its subsidy scheme to solar-powered refrigeration units with a view to boost the use of solar-powered cold storages.

    The Government plans to start as many as 10,000 solar, wind and biomass power projects in next five years, with an average capacity of 50 kilowatt per project, thereby adding 500 megawatt to the total installed capacity.

    Government of India has also asked states to prepare action plans with year-wise targets to introduce renewable energy technologies and install solar rooftop panels so that the states complement government's works to achieve 175 GW of renewable power by 2022.

    The Government of India announced a massive renewable power production target of 175,000 MW by 2022; this comprises generation of 100,000 MW from solar power, 60,000 MW from wind energy, 10,000 MW from biomass, and 5,000 MW from small hydro power projects.

    The Indian power sector has an investment potential of Rs 15 trillion (US$ 223.67 billion) in the next 4–5 years, thereby providing immense opportunities in power generation, distribution, transmission, and equipment, according to Union Minister Piyush Goyal.

    The government’s immediate goal is to generate two trillion units (kilowatt hours) of energy by 2019. This means doubling the current production capacity to provide 24x7 electricity for residential, industrial, commercial and agriculture use.

    The Government is taking a number of steps to achieve India's ambitious renewable energy targets of adding 175 GW of renewable energy, including addition of 100 GW of solar power, by the year 2022.

    The government has also sought to restart the stalled hydro power projects and increase the wind energy production target to 60 GW by 2022 from the current 20 GW.

    In 2015-16, India added 3,019 MW of solar and 3,300 MW wind energy capacity, beating the target of 2,000 MW and 2,400 MW respectively. With tendering completed for an additional 21,000 MW of solar, India is poised to cross 20 GW, a target earlier set for 2022. The cost of new solar power is touted to come down below new coal power, resulting in growing optimism on India’s new renewable energy (RE) target for 2022 and its potential to transform the energy mix.

    In terms of physical capacity, the sector has grown from a grim 1.36 GW installed capacity at the time of independence to 303 GW at present. Starting with only 1,500 (0.25%) electrified villages in few pockets, the country has pulled electricity wires to 5,86,506 (98.1%) villages.

    Recently, the power minister Piyush Goyal claimed that all remaining villages will be electrified by 2017 – a year ahead of the current deadline.

    However, the darker side remains a big challenge. While one-fifth of all households (a larger share of population) are yet to be connected, many of those connected do not have access to quality and timely supply. Two-third of all households still depend on traditional biomass to meet their energy needs for cooking. Despite such a poor state of access, energy accounts for 77% of national GHG emission. Subsequently, carbon intensity of Indian electricity is estimated to be the highest among the top 10 electricity-producing countries.

    Given the import dependency, India is already exposed to international price volatility, emergent carbon taxes and other geopolitical risks. Such a situation calls for a ‘new deal’ for electrical expansion, building on sustainable production and consumption, which must avoid a lock-in to a high carbon development path.

    The government recognises the need and urgency, as reflected in domestic policy agenda. In its Intended Nationally Determined Contributions (INDC), India has set a target to achieve 40% cumulative installed capacity from fossil-fuel-free energy resources by 2030. In an earlier move, the government has committed to achieve 175GW of renewable energy capacity by 2022. Both the targets, backed by recent legislative initiatives, show India’s commitment to the promotion of renewables and reduction of their reliance on fossil fuel. Undoubtedly, renewable energy holds good promises for meeting India’s energy needs, in a sustainable manner.

    Capital funding required for such renewable energy capacity expansion remains a big challenge. A recent expert group report provides a comprehensive analysis of these challenges as well as providing constructive recommendations for financial incentives to reduce procurement tariff of renewable energy.

    India’s power system needs a major transformation across all segments. While the policy and regulatory framework for the promotion of renewable energy is in place, there is need to consolidate the institutional structure to ensure timely and effective execution of policy targets. This is also critical to ensure effective private sector participation, and thus promote a competitive electricity market that provides a level playing field to all sorts of generators and suppliers. While adding up sustainable production capacities, India needs to optimise sustainable consumption practices, tapping the demand-side management and energy conservation opportunities. Financial revival of the ailing distribution utilities, which requires bridging the revenue gap, will be vital for achieving the transformation measures.

    India certainly has clear and ambitious targets. What it needs is a clear strategy roadmap, integrated planning and a whole-of-system approach, factoring in domestic developmental and environmental considerations.

    The roadmap to achieve the energy transformation must have a political mandate and social legitimacy. There is a need to seek a mandate across political lines for the roadmap. So far, much of the clean energy promotion has come from the Centre and often adopted by states through political delegation.