India's attempt at ramping up its renewable energy capacity has got off to a slow start. Against the the target of installing 12 GW of solar capacity in fiscal year 2016-17, only around 6 GW was installed by April 2017.
Experts list the lack of long term financing, inadequate budget allocation, and insufficient transmission and distribution, as the reasons behind the underperformance.
"Most DISCOMs are still not willing to buy solar power owing mainly to power demand-supply situation changing to surplus. DISCOMs already have more power than they need and unfortunately, RPOs are not being enforced," Vinay Rustagi, MD of market research firm Bridge to India told Moneycontrol.
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"Also, sharp reduction in tariffs in the last 3 months has made DISCOMs cautious and go slow on their ongoing procurement programmes as they find waiting a better option," he adds.
Source: MNRE
The pace of new solar tender announcements and completed auctions has slowed down significantly in the last year due to weak power demand growth in the country, as per a Bridge to India report.
Currently the world's fourth largest carbon emitter, India now aims to ramp up its renewable energy capacity to 175 GW by 2022, to provide clean energy at an affordable price. Such headwinds put India's renewable targets in jeopardy as out of the total, 100 GW (60 GW from grid connected and 40 GW from rooftop) is to come from solar energy.
So, what is the best case scenario? Rustagi says the government must aim to install about 60 GW of solar capacity by March 2022.
"Based on the current capacity of just over 12 GW, that means adding another 9.5 GW every year for the next 5 years," he said.
Debasish Mishra, Partner at Deloitte Touche Tohmatsu India LLP says that there will be slippages in the 40 GW of rooftop capacity target, while the ground mounted capacity of 45-50 GW is achievable.
Mishra also expects the government to achieve around 60-64 GW of solar capacity by 2022.
Tasked with achieving this goal, Renewable Ministry under Piyush Goyal rolled out a mix of subsidies and fiscal incentives to empower India's fledgling renewable industry.
"The government has worked hard to address many challenges facing the solar sector. Land and transmission situation has improved a lot, debt financing has become easier and growing volumes have helped to make solar power the cheapest new source of power," Rustagi says.
Money matters
Capital is the major reason why solar projects have been struggling in India.
Piyush Goyal says that in order to achieve the proposed 100 GW target by 2022, the overall investment required would be around Rs 6 lakh crore or at Rs 6 crores per MW, as per present costs.
Financial institutions, especially banks are expected to fall short of contributing towards funding the huge renewable energy target. With mounting NPA’s and bail-out of discoms being given higher priority, Indian lenders are likely to have their hands tied.
The renewable segment would have to access innovative ways like green bonds, climate bonds etc. for their capital requirements.
"The urgent need of the hour is for the government to take a long-term view and facilitate transition to a scenario where higher percentage of variable renewable power can be integrated into the grid," Rustagi says.
"The grid needs expansion and strengthening besides institution of a whole set of reforms relating to end consumer tariffs, ancillary services and building up energy storage capacity. Developers need to be assured that all the power generated by them will be evacuated and paid for," he adds.
“Proper planning of grid integration of the renewable energy capacity would help in achieving the ambitious targets,” Mishra says.
Source: MNRE
In the past three years, 2014-2017, grid connected renewable energy has seen a growth of 91 percent with a capacity addition of 22.6 GW.
The total installed capacity of grid renewable power stands at 57.26 GW, which accounts for 17.5 percent of grid power from all renewable resources.
Earlier under the JNNSM, the solar target for 2022 was just 20 GW which was increased five folds by PM Modi.
Though an ambitious target, it is necessary as India has committed to reduce its greenhouse emissions and to have 40 percent cumulative power capacity from non-fossil fuel based sources by 2030, under the Paris Agreement. This can only be achieved by significantly scaling renewable energy sources.
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