Increasing energy demand, climatic change, government initiatives and abundant untapped natural resources have been the key drivers behind the country´s movement towards renewable energy.
Today India has the fifth largest power generation portfolio worldwide with coal and gas being the popular energy sources accounting for 58 per cent and 9 per cent share respectively. However, India is slowly shifting towards power generation from clean renewable energy sources (RES) like solar, wind, hydro, biomass, geothermal, nuclear etc.
The current share of renewable energy (RE) in the country´s total energy mix is around 13 per cent in terms of installed capacity (33,073 MW) and 6.9 per cent in the overall energy generation mix. Although the share of RE has been on the rise (from 7.8 per cent in FY08 to 13 per cent in FY14) there is still immense untapped potential. The Ministry of New and Renewable Energy (MNRE) has set an RE generation target of 100,000 MW in the next five years. Apart from reducing the demand-supply gap, RE is set to play a major role in improving energy access in remote areas while reducing the carbon footprint. Joining hands with government bodies, several public and private sector companies including some international ones like L&T, BHEL, NTPC, Tata Power, Suzlon, Schneider, Moser Baer, NEPC, PGCIL, Welspun Energy and NPCIL are playing a significant role in this endeavour.
Increasing energy demand, climatic change, government iniatitives and abundant untapped natural resources have been the key drivers behind the country´s movement towards RES.
With India being the world´s fourth-largest power consumer, the gap between demand and supply has been widening rapidly. Over 40 per cent of the population living in rural areas have no access to electricity. The high share of coal-based power generation has a massive environmental impact owing to greenhouse gas emissi¡ons. The huge natural resource base is also providing a fillip. India´s land mass receives high levels of solar irradiation and the country has extensive coastline and high wind velocity in many areas.
The major driving factor, however, has been the Indian government´s proactive policy, avers Amit Kumar, Partner - Energy and Utilities, PwC India: ´The Indian government has successfully launched several policy instruments which have enhanced the viability and bankability of RE projects. The key policy instruments include tax incentives, Feed-in-Tariffs (FiTs), subsidies, Renewable Purchase Obligations (RPOs) that stimulate demand by providing a guaranteed market for RE power, Renewable Energy Certificates (RECs) and Generation Based Incentives (GBI).´
The government is playing an active role in promoting adoption of RES by enocuraging private sector investments and mandating the use of renewable resources. In addition to allowing 100 per cent FDI, the government is encouraging foreign investors to set up RE based power plants on build-own-operate (BOO) basis. The strength of RE, no doubt, lies in its ability to cater to both grid-connected and off-grid requirements and ensuring energy access in areas that still lack grid connectivity. The increased use of indigenous renewable resources is also expected to reduce India´s dependence on expensive imported fossil fuels.
In addition to existing avenues, the government is also tapping new ones like offshore wind energy. The MNRE which has a draft National Offshore Wind Power Development Policy ready for Cabinet approval, is all set to set up a National Offshore Wind Energy Authority and the country´s first offshore wind energy project in Gujarat.
´The offshore wind energy segment has immense potential due to India´s vast coastline of 7,600 km. Announcement of Draft National Offshore Wind Energy Policy and the expected launch of a National Offshore Wind Energy Authority have further boosted the confidence of investors in this sector,´ states Dr Arup Roy Choudhury, Chairman and Managing Director, NTPC Limited. ´Recently, the MNRE signed an agreement with seven Public Sector Units for setting up India´s first offshore wind energy demonstration project along the coast of Gujarat. We are the lead partner for this project,ö he adds. NTPC, which has already commissioned 95 MW of solar PV projects has several projects in the offing including a geothermal plant in Himachal Pradesh, wind energy projects in Karnataka and Kerala. NTPC plans to have a portfolio of 1,000 MW capacity through RES by 2017.
However, there are several challenges in this segment like the capital cost requirements which are substantially higher than onshore projects, transmission of energy and security as these projects will be located along the coastline. Nuclear energy is another segment that has immense potential. Currently, nuclear energy provides less than 3 per cent of India´s power requirements. The Indian government is also planning to take several measures to boost nuclear energy production including setting up of nuclear energy parks.
There are indications that the government may open up the sector to private players. As of now, under the Atomic Energy Act 1962, only government-owned enterprises can be operators of nuclear power plants. However, the Act permits private participation in the construction of nuclear plants, manufacture and supply of nuclear equipment, etc.
Transmission and distribution of power generated from RE sources is yet another area the government is focusing on. A dynamic transmission and distribution system is the need of the hour. Smart grids and smart mini-grids are considered ideal.
ôSmart grids and smart mini-grids are definitely one of the solutions to ensure uninterrupted power for residential, commercial and industrial users,´ opines Anurag Garg, Vice President, Solar Business, Schneider Electric India. ´The smart grid ensures energy efficiency in three ways: it creates a two-way communication between the grid and load (building); allows two-way energy flow between the grid and load (building); distributes energy intelligently across a region to manage the load better. In essence, the smart grid combines electricity and IT infrastructure to integrate and interconnect all users (producers, operators, marketers, consumers, etc.), in order to continue to efficiently balance demand and supply over an increasingly complex network,´ he elaborates. Schneider, a global specialist in energy management, offers products and services in solar broadly under two categoriesùUtility Scale and Large Commercial (USLC) and rooftop and off-grid.
Equipped with design and engineering capabilities the company also helps customers with concept and financial analysis. The government on the other hand plans to roll out a Rs 43,000-crore ægreen energy corridorÆ project aimed at synchronising electricity produced from renewable sources with conventional power stations in the grid. Currently, the grid faces difficulty in absorbing renewable electricity because of varying voltage and supply.
While the government is rolling out many measures to promote the RE sector, there are still several roadblocks that need to be looked at, according to industry professionals. The barriers are related to policy, regulations, financial and market conditions, says Kumar and lists out some of them: ´Lack of cohesion in the government´s policy, absence of a separate RE law, absence of single-window clearance, non-availability of evacuation infrastructure and grid integration, poor enforcement of RPOs leading to low REC price and over supply, lack of priority sector lending for RE resulting in prohibitive interest rates with no interest subsidy, are some of the major barriers.´
Seconds Garg: ´Some policy issues, confidence of financial institutions in terms of funding solar projects, land clearances and land availability are some of the challenges faced by the solar sector currently. One of the biggest hurdles faced by Schneider has been the long gestation period of the projects.´
This is primarily due to land availability-related issues, high capital expenses and low investor confidence. However, the company is now positive about the timelines for project execution due to the initiatives taken by the new government. Also the efforts being made by the government to develop solar parks across the country should help reduce project timelines.´
On the other hand, the government is aware of the stumbling blocks, and is planning several iniatives to alleviate the situation including a Renewable Energy Act. ´We are planning to formulate a Renewable Energy Act as currently, all the electricity activities come under the Electricity Act, 2003. The Act will not only help in streamlining many aspects like power generation, supply and tariff, but will also help in attracting investments,´ says Upendra Tripathy, Secretary, Ministry of New and Renewable Energy. ´The sector currently requires an investment of $40 billion, but it gets only $6 billion. We have requested the Reserve Bank of India to bring renewable energy funding into the priority sector and are also asking banks to demarcate 10 per cent of their credit for the RE sector. To overcome issues of land acquisition and delays in obtaining clearances, we are in discussion with major States about setting up a single-window clearance mechanism´ he adds.
RE is no doubt the way forward and will be playing a greater role in the total energy space in the country in the future, more so, given the government´s iniatitives and proposed strong policy framework.