Renewed Focus

The new government has announced a number of measures for the growth of the renewable energy sector, which has already been growing at a healthy annual rate of around 22 per cent.

Sustainable energy is one of the key elements of a smart city and is determined by how the energy resources are maintained and utilised. Prime Minister Narendra Modi has called for an "energy revolution" to harness the countrys coal, gas, hydro, nuclear, and wind resources to promote energy security and economic development in a sustainable manner. Also, since about two-thirds of the global energy consumption occurs in cities, energy efficient and sustainable power supply is greatly needed. Efficient power plants, larger use of renewable resources and low-loss power transmission form the basis for a reliable energy supply.

With the government giving a substantial impetus to the renewable sector, a number of policy initiatives were made in the first budget presented by the new government supporting and enabling the growth of the sector. Rs 500 crore has been allocated to be invested in Ultra Mega Solar Power Projects (around 4 GW each) in Rajasthan, Gujarat, Tamil Nadu, Andhra Pradesh and Jammu & Kashmir.

Support of Rs 400 crore will be provided to launch solar-powered agricultural pumps and water-pumping stations and Rs 100 crore for the development of 1 MW solar parks on the banks of canals. The implementation of the Green Energy Corridor Project will be accelerated to facilitate the evacuation of renewable energy across the country. All these measures are likely to have a positive impact on the annual growth rate of renewable energy in India, which in the last decade has been about 22 per cent.

Vineet Mittal, Vice-Chairman, Welspun Renewables Energy Pvt Ltd, shares that the first step in ensuring sustainable power supply is to increasingly augment carbon-based energy sources with renewable energy. "The new government has a strong renewable energy focus which should see India developing a sizable renewable capacity at an exponential rate. Given the shorter development period of a renewable energy project, the next step that the government needs to take is grid integration. The western part of the country is dominated by solar projects while the southern is with wind energy projects. Once this is accomplished as (former) Power Minister Moily said, "we will have one frequency across India." Power frequency reflects the load generation balance in the grid at a particular period and is one of the most important parameters for assessment of the security of the power system and the quality of power supply.

Developing renewable energy will also help reduce dependence on coal, which is in short supply domestically, requiring imports of the mineral to fuel most of Indias power plants. India has a power generation capacity of 2,48,510 MW, of which only 13 per cent, or 31,692.14 MW, is contributed by renewable sources. With a focus to develop 100 smart cities in the times to come, ground mounted and solar rooftop projects can play a significant role. "Given conventional fuel-sourcing challenges and rising energy demand, solar can give a strategic push to combat Indias energy deficit. Installing rooftop projects accompanied by smart metering solutions can help the cities in accessing clean energy while helping the grid manage energy flow efficiently," shares Mittal.

While the vision to develop smart cities with green and sustainable infrastructure is the need of the hour, we have to remember the limitation of the rapidly dwindling reserves and resources staring at our face. And as our guest contributor Praveer Sinha shares in his write-up, there is a need to do more with less, there is a need for smarter utlisation of existing resources. This can only work well if there is an integrated and planned approach undertaken to support the growth of infrastructure in the country. There is also a need to empower and strengthen the role of the municipal corporations to give the central vision a push at the ground level.

Way forward: Opportunities and solutions

1. Separate sectoral limit and priority sector status for lending to solar energy: Solar energy should be made a priority sector and excluded from conventional power sector and has a different sectoral cap, such that banks are encouraged to lend to the sector.

2. Cheaper international funding required for development of solar project: Raising ECB limits, tax-free RE bonds, Special Infrastructure RE Bonds, International long-term loans from multilaterals, bilateral and other international donor organisations to be explored and encouraged.

3. Ensuring payment security: Given the financial health of the discoms, default in payment to developers is seen as a critical risk by financial institutions. It is necessary to take constructive steps for allaying the fears of the bankers and ensure investments in the sector.

4. Allow launch of Solar Park Financing Vehicles (SPFVs) to issue solar bonds and finance group projects. Group fund raising and financing options for solar projects, which can help reduce cost of funds and risk through pooling and scale benefits, is currently unavailable. MoF should issue guidelines and policy framework for setting up of SPFVs.

5. Make long-term foreign exchange hedging available at an affordable cost for RE projects: The government should work with institutions such as the Currency Exchange Fund (TCX) to identify how long-dated FX swaps could be deployed for RE in India.

6. Increase capital subsidy for off-grid projects: Budgetary allocation towards capital subsidy should be increased to cover minimum 50 per cent capital cost of the systems instead of the present 30 per cent of capital cost. Banks and financial institutions should be directed to offer innovative financial solutions such as solar system loans & solar system leases to encourage the development of the solar off-grid market at a faster pace.

7. Evacuation Infrastructure: The project development cycle of solar & wind is six to eight months. Therefore, based on the solar potential in a State, the respective State government should develop evacuation architecture. This will ensure that as soon as the projects are commissioned, the evacuation infrastructure is already in place and they are able to transmit the energy generated to the State grid.

8. Land Banks: Post assessing the solar potential of each State, government land banks should be created and allocated to the projects which are coming up in the State. Additionally, as solar and wind are non-polluting industries, these projects should fall under the Non-Agricultural Land Conversion exemption. For private land to be used for setting up solar power plants, stamp duty exemption may be considered. -As suggested by Vineet Mittal, Vice Chairman Welspun Renewables Energy Pvt Ltd.