Renewable capacity addition catches up with thermal power in India

Energy transformation has arrived in India. According to the Ministry of New and Renewable Energy (MNRE), IndiaÂ’s total renewable capacity including solar, wind, biomass and small hydro grew by around 11.2 GW in FY2016-17, at par with thermal capacity addition, which registered a decline of 50 per cent in the year.

The country added 5,526 MW of new solar capacity (up 83 per cent over FY2015-16) and 5,400 MW of new wind capacity (up 63 per cent) in the year. While these numbers are impressive, it is worth noting that the solar capacity addition including rooftop solar is almost 50 per cent below the annual target of 12,000 MW. In contrast, wind capacity addition was 35 per cent over the 4,000 MW target.

India added 5.8 GW of renewable capacity in a single month as implementing agencies pushed for commissioning of projects before the close of the financial year.

There has been a downward trend in new renewable allocations in FY 2016-17 and the 2017-18 target of 20,450 MW will be impossible to meet. As renewables continue to grow, prospects for thermal capacity addition seem limited and renewables will decisively beat thermal capacity addition in the coming years.

The figures released by MNRE suggest that March was a blockbuster month with addition of 5.8 GW renewable capacity in a single month (more than the combined figure for the previous 11 months). While the financial year-end is always busy, there was considerable pressure on implementing agencies to boost March numbers to show respectable addition numbers. Second, developers would also have been keen to bring numbers forward to take advantage of the many financial incentives including generation wind based incentive (GBI) for wind projects, accelerated depreciation and 10-year tax holiday that are going to be significantly cut or phased out completely from April 2017 onwards.

The sector performance on some other measures has been much weaker. Pace of new utility scale solar tender announcements and project allocations slowed down considerably at just 4.2 GW and 6 GW respectively, down 70 per cent and 33 per cent over the last year. This downward trend in new allocations is likely to continue, perhaps for another six months, as the government seems to have gone back to the drawing board to incorporate learnings from the Rewa tender and IndiaÂ’s first wind tender.

With an even more ambitious target of 20,450 MW for 2017-18 for the renewables sector, it is clear that much more needs to be done to spur further growth. Falling prices will undoubtedly be of major help, but better regulatory enforcement of renewable purchase obligations and the UDAY scheme is critical. Overall, 2017-18 will register a very modest growth in renewable capacity addition, which should nonetheless easily come ahead of thermal capacity addition.