International perspectives

Opportunity to Leapfrog into the Renewable Age – Is India on the Right Track?

India is poised to show the value of renewable energies to developing economies. Its new targets, government programs, alongside other factors, seem to be moving India into a renewable energy age.

By Srinivas Krishnaswamy, CEO, Vasudha Foundation April 2016

India is poised to show the value of renewable energies to developing economies. The national government has set ambitious targets: develop 175 GW of renewable energy generation by 2022 (100 GW of solar and 75GW from small hydro, wind and biomass, and other renewable sources) and increase the share of non-fossil fuels in its electricity generation mix to 40 percent by 2030, as announced in India’s “Nationally Determined Contribution” submitted to the United Nations Framework Convention to Climate Change in October 2015. Alongside these (and other) targets, national and state programs, infrastructure developments, and a number of external factors, India seems to be moving down the path to a renewable energy age.

In line with its announced targets, the past two years have witnessed a fairly phenomenal growth in the renewable energy sector in India. The total installed capacity for renewable energy generation grew from 29.46 GW in June 2014 to 38.8 GW as of March 31, 2016. The break up of installed capacity for renewable energy is: 25.08 GW of wind, 4.8 GW of solar, 4.5 GW of biomass and co-generation, 4.17 GW of small hydro power, and 0.12 GW of waste to energy. The bulk of the additions in renewable energy capacities from 29.46 GW to 38.8 GW in about two years has largely come from solar, which has grown from virtually a few kW of installed capacity to 4.8 GW as of March 31, 2016.

This growth, particularly in installed solar capacity, has been concentrated in just a handful of states. Rajasthan leads the pack with a total installed capacity of 1.3 GW, followed closely by Gujarat with a total installed capacity of 1 GW. Other states that have fared reasonably well in developing solar generation capacity are Madhya Pradesh, Telengana, and Andhra Pradesh.

There are a number of policies that have and are supporting renewable energy development. In India, renewable energy growth cannot easily be separated from the government’s priority of addressing electricity scarcity. The national government is simultaneously pursuing policies to address electricity scarcity, including promoting electricity generated from both fossil fuels and non-fossil fuels, and launching a number of programs aimed at reforming the electricity sector for renewables. A brief description of some of the recently introduced programs is as below:

a. Ujwal DISCOM Assurance Yojana (UDAY): Initiated by the national government, this program is primarily a financial turnaround and revival package for electric distribution companies in India. It provides for state governments to take over much of the electric utilities’ debt, help improve operational efficiency, and thereby reduce the cost of power. If implemented in true spirit, this program has the potential to support further renewable energy development. Electric utilities that have been avoiding the purchase of relatively costlier electricity (particularly from solar) due to financial constraints could now be encouraged to purchase electricity sourced from solar, even if it is more costly.

b. Electrification Targets: The national government has set a target to provide 24-hour electricity to all households by 2022, preceded by a target for 100% village electrification by 2019. In light of these targets, the distributed solar and renewable energy segments have rapidly expanded. In June 2014, the total number of villages without electricity was estimated to be 21,000. From June 2014 to March 2016, the number of villages without electricity has decreased to 16,800, and the number of households without electricity, which was 45 percent as per 2011 census, is now estimated to be around 33 percent.

c. Transmission Infrastructure: The national government has undertaken and made headway in building electricity transmission infrastructure in order to ensure connectivity to a large number of solar and wind parks that are in various stages of development. As of March 31, 2016, the national government had already installed 22,100 circuit kilometers of transmission lines.

The above national programs and targets have all been positive steps towards scaling up renewable energy generation and leapfrogging India’s energy sector into a renewable energy age, but there are other external factors that have and can further contribute to propelling states to increase the pace of scaling up renewable energy. The following are some of these contributing factors:

  1. Decline in the generation of electricity from coal: Due to an acute water shortage, two coal-fired power plants have had to shut down their operations, and a number of them have had to scale down operations. However, units that had to completely shut down their operations for a prolonged period of time include units from the Parli Power Plant and the Farakka Coal Fired Power Plant. As of April 2016, water levels are still at 28% of total capacity. In short, acute water shortages have impacted electricity generation from coal fired power plants. Competing demand for scarce water supply has forced policy makers to explore options for less water-intensive energy sources, such as renewable energy.
  2. Falling Cost of Solar: The cost of generating electricity from solar has fallen steadily over the last 2-3 years, internationally and in India. From an initial cost of approximately Rs. 18.00 ($0.271 USD) per kWh in 2008, the average cost of generation in India has now come down to Rs. 5.50 ($0.083 USD) per kWh as of January 2016. This cost closely competes with the cost of generation of electricity from a coal-fired power plant that operates with 100 percent imported coal, which is Rs 5/- per kWh.
  3. Thermal Power Plants Performance Standards 2015: In December 2015, the Indian Ministry of Environment, Forests and Climate Change issued revised standards for coal based thermal power plants in India, with the primary aim of minimizing pollution. These new standards for thermal power plants will not only help improve the ambient air quality around the plants, they will also limit water usage in thermal power plants, and thus lead to a reduction in energy required to draw water. Once implemented, these revisions will impact the cost of generating electricity from coal.

To conclude, India has set ambitious targets and made significant progress. The national government’s targets for electrification and renewable energy, its financial schemes (i.e. UDAY) and transmission infrastructure development all support a framework for continued renewable energy development. These efforts are further supported by the above-mentioned contributing factors, including water shortages, coal power plant shut-downs, decreasing costs of solar electricity, and more energy-efficient standards for thermal power plants.

Although much of the renewable energy development thus far has been concentrated in a few states, many more states have projects planned to scale up renewable energy (particularly solar). As of March 2016, 33 solar parks with a total installed capacity of 19.9 GW have been sanctioned, and most of these are in various stages of being commissioned. In addition, most states of India have also brought in policies to promote roof top solar for the residential and commercial sector, including a combination of feed-in tariffs and net metering. With all of these in various stages of implementation, it is very much possible for India to further accelerate its renewable energy development (particularly in its electricity generation mix) and possibly meet its ambitious target of 175 GW installed capacity from renewable sources by 2022. With these successes and prospects, India certainly seems to be on a pathway to go the renewable energy way.

However, the success of further renewable energy development will greatly depend on a number of issues, particularly the implementation of these policies and measures at the state level. Since electricity falls in the administrative purview of both the national and the state governments, national policies alone will not suffice. Thus far, indicators suggest that India has embarked on the right track to leapfrog to a renewable energy age, but still has far to go. Furthermore and importantly, this success in renewable energy and the reducing costs of solar could also deter India from pursuing other options, such as nuclear power, in its quest to secure India’s energy future. Despite huge budgetary allocations and efforts, the total installed capacity of nuclear energy in India has grown over a three decade period to a mere 5.8 GW as of March 31, 2016. In contrast, in just two years solar has grown from virtually zero capacity to 4.8 GW. It is high time for the government to realize that with good policies, renewable energy can indeed deliver.