Implementation of the goal may not be that easy as renewable energy is costly and the sector is facing headwinds.
Abhijit Kumar Dutta
The Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government’s clean energy drive got a turbo prop on September 23 when Prime Minister Narendra Modi announced that India will double its non-fossil fuel target to 450 gigawatt (GW). Modi made this path-breaking pledge at the UN Climate Action Summit in New York where he gave a clarion call for a “global people’s movement” to bring about a behavioural change to deal with climate issues.
His announcement has surprised many because during his Independence Day speech, the Prime Minister had said India would produce 175 GW of non-fossil fuel as part of its commitment to the Paris Climate Agreement. In fact, a month before Modi spoke from the ramparts of the Red Fort, the government’s strategy on renewable energy was articulated by RK Singh, Union Minister of State for Power and New and Renewable Energy, in the Lok Sabha.
In a written reply on July 19, Singh stated that the government had set a target of installing 175 GW of renewable energy capacity by 2022. This would include 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydro-power.
Interestingly, the very same day at an event in New Delhi, Anand Kumar, the renewable energy secretary, spoke about achieving a renewable energy capacity target of 260 GW by 2024 — the terminal year of the current NDA government.
It looks like the goalposts for capacity addition and deadline with respect to renewable energy are continuously changing.
While Modi, during his speech in New York, did not explicitly mention any deadline for reaching the ambitious target of 450 GW, it can perhaps be assumed that Modi had either 2022 or 2024 on mind.
Given that the country right now has an installed renewable energy capacity of 80.47 GW, of which 29.55 GW is solar, 36.37 GW is wind, 9.81 GW is biomass and 4.6GW is small hydro power, achieving the 450 GW target, which is a more than 460 per cent jump from the current level, in 3-5 years is an extremely tough task. For the record, India’s renewable power capacity had jumped nearly 150 per cent in the past five years.
While many experts have cautiously welcomed Modi’s pledge, dubbing it as positive but ambitious, others feel that the implementation of the target may not be that easy as renewable energy is costly and the sector is facing some headwinds.
According to a report prepared by the Centre for Science and Environment (CSE) earlier this year, policy gaps are hobbling the renewable energy sector. That is why last year, the sector witnessed a slowdown triggered by financial difficulties being faced by distribution companies, import tariffs, and subsequent tariff increases.
The CSE feels that inconsistent policy has been the bane of the sector. “Nothing can be more disruptive for an emerging sector that seeks to attract global investors, than ad hoc and abrupt policy changes,” says Priyavrat Bhati, adviser, energy group, CSE.
Take for example solar modules. The government had reserved auction capacity for domestic manufacturers, but this drew the ire of the World Trade Organization. Import duties had been levied and then withdrawn; at present, a safeguard duty of 25 per cent is being levied on imported modules. Similarly, the wind industry has been caught unawares by the introduction of an auction-based regime to award bids as against the feed-in tariff (FiT) process.
On the other hand, distribution companies, or discoms, are under financial stress. This has resulted in payment delays for developers, cancellation of auctions, and lack of enforcement of contracts. This obviously dampens investor confidence and developers’ interest.
Solar roof-top, the CSE argues, has failed to make any headway in the current market, which is skewed towards large-scale renewable energy. The country is aiming at a 40-GW capacity by 2022, but till November 2018, only 1,334 megawatt (MW) of grid-connected solar rooftop systems had been installed.
Also, the preference has been for commercial and industrial installations — residential consumers, who hold immense potential, account for less than 20 per cent of the total installed capacity.
For wind power, the limitation of power grids comes in the way of successful energy generation. The fluctuations in voltage and grid frequencies are major challenges. The development of grid infrastructure is crucial to make this process more effective and efficient. Moreover, the cost involved in installing, operating and re-powering windmills is quite high. This makes it important to have access to credit at cheap rates of interest.
To put the renewable energy sector on a sustainable high-growth path, experts feel the government should encourage ‘smart grids’ that use communications infrastructure, control systems and information technology for efficient delivery. They also suggest a rethink of the discom model. Much will depend on the health of discoms as they are at the heart of the electricity market.
Moreover, investment is needed to develop inexpensive energy-storage capacity and indigenous research must be encouraged to improve the existing technology in terms of cost and performance.
It is, therefore, obvious that the government needs to administer swift and strong energisers to achieve its ambitious renewable energy target.Abhijit Kumar Dutta is a freelance writer. Views are personal.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.