Initiatives for Development of Renewable Energy Sector in India
10 Sep 2020
Renewable energy (RE) is an important element of India’s energy security system. India plans to reduce its emissions intensity by 33 - 35% between 2005 and 2030. To this effect, it is focusing on accelerating the use of clean and renewable energy.
India is very ambitious in its targets for promoting renewable energy. In India, renewable energy has started playing an increasingly important role in the augmentation of grid power, providing energy access, reducing the consumption of fossil fuels and helping India pursue its low carbon development path. India builds on its goal of installing 175 gigawatts (GW) of renewable power capacity by 2022 by setting a new target to increase the country’s share of non-fossil-based installed electric capacity to 40 percent by 2030. To meet its ambitious targets and commitment to the entire world in the fight against climate change, India has been rolling out multiple initiatives, programs, policies and incentives to accelerate the development of the renewable energy sector.
The National Solar Mission (NSM) launched in January 2010, was the first mission to be operationalized under the National Action Plan on Climate Change. The mission’s objective is to establish India as a global leader in solar energy, by creating the policy conditions for solar technology diffusion across the country as quickly as possible. The initial target of the mission of installing 20 GW grid-connected solar power plants by the year 2022 was enhanced to 100 GW to be achieved by the same target year. In 2015, the Government of India announced a target for 175 GW cumulative renewable power installed capacity by the year 2022. A capacity of 87.26 GW in total installed capacity of 370 GW has been set up by April 2020 constituting more than 23 percent of the total installed capacity. This includes 37.7 GW (10.1%) of wind and 32.3GW (8.7%) of solar energy. India has 4th and 5th global positions in the wind and solar power deployment respectively. Since 2013-14 till March’ 2020, the renewable power deployment has more than doubled. Solar power capacity has increased by more than 14 times in the last five years from 2630 MW to 37505 MW in March’ 2020.
Besides environmental benefits, the lower cost of generation makes it a preferred source for the policy makers. While there is no denying that there are many benefits associated with Renewable Energy sources. However, wind and Solar generation, unlike the conventional sources, are less predictable, intermittent in nature and are location specific but still have “must run “status over conventional sources of power. The financial Impact of Integration of Renewable Energy Sources is more complex requiring the grid side dynamic management with economics of Renewable Energy Sources.
Prices of renewables have also come down significantly in recent years where average Solar & Wind prices are hovering around Rs. 3 per unit with around 10% variance depending upon geographical & techno-commercial factors. On face of it, Renewable Energy prices appear to be cheaper than other contemporary conventional power plants. But there is another perspective, that of renewable energy grid integration cost. If we glance at the country’s Power/Energy Demand-Supply positions, it becomes clear that this growth in Renewable Energy power is taking place at the cost of existing conventional power plants. The focus of the promotion of renewable energy policies and initiatives taken in the last few years has led to large-scale penetration of and use of such technologies across the rural countryside.
A range of policy instruments has been adopted to implement target for renewable energy. The revised tariff policy requires all States to reach eight percent solar RPO by the year 2022. The first phase of the mission opted for a reverse bidding mechanism; reverse bids (discounts) on benchmark tariffs set by the Central Electricity Regulatory Commission (CERC) were invited from prospective project developers. Solar water heaters and rooftop systems have been promoted in certain government, commercial and residential areas through regulatory intervention such as mandates under building by-laws and its incorporation in the National Building Code.
Off-grid and rooftop solar applications have also been promoted through the provision of subsidies from the central government. These measures led to a decline in the purchase prices of solar power in India much more than expectations. Several policy measures were undertaken in the last few years are as follows:
i. guidelines issued for procurement of solar and wind power through tariff-based competitive bidding process;
ii. policy for repowering of old wind power projects;
iii. quality standards for deployment of Solar Photovoltaic systems and devices;
iv. provision of rooftop solar and minimum percentage of renewable energy as mandatory under Mission Statement;
v. guidelines for development of smart cities,
vi. amendments in building bye-laws for mandatory provision of rooftop solar for new construction or higher Floor Area Ratio,
vii. infrastructure status for solar projects,
viii. raising tax free solar bonds,
ix. providing long tenor loans,
x. incorporating measures in Integrated Power Development Scheme (IPDS) for encouraging distribution companies and introducing net-metering.
xi. fresh project finance available at competitive rates for all new projects.
In the draft amendment of Electricity Act, 2003 recently issued by the government, it has been mentioned that the Central Govt will come up with a separate ‘National Policy for Renewable Energy’ to focus more on capacity build up in renewables and for the promotion of generation of electricity from renewable sources of energy and prescribe a minimum percentage of purchase of electricity from renewable and hydro sources of energy. There is an amendment to make it mandatory for state commission to follow direction given in National Renewable Energy Policy for prescribing a minimum percentage of purchase of electricity from renewable and hydro sources of energy.
In order to ensure strict compliance of the provisions of the Electricity Act and orders of the commission, it is to strengthen section 142 and section 146 of the draft amendment of the Electricity Act with increased penalties. Hydro sources of energy have been recognized as renewable sources of energy. To harmonize the national level commitments for environment protection, it is proposed to empower the State Commissions to specify the RPO as per RPO trajectory prescribed by the Central government from time to time;
India’s wind energy sector is led by indigenous wind power industry and has shown consistent progress. The expansion of the wind industry has resulted in a strong ecosystem, project operation capabilities and manufacturing base of about 10,000 MW per annum. The country currently has the fourth highest wind installed capacity in the world with total installed capacity of 37.7 GW (as on 31st March 2020). The Government is promoting wind power projects in entire country through private sector investment by providing various fiscal and financial incentives such as Accelerated Depreciation benefit; concessional custom duty exemption on certain components of wind electric generators. Besides, Generation Based Incentive (GBI) Scheme was available for the wind projects commissioned before 31 March 2017.
In addition to fiscal and other incentives as stated above, following steps also have been taken to promote installation of wind capacity in the country:
· Technical support including wind resource assessment and identification of potential sites through the National Institute of Wind Energy.
· In order to facilitate inter-state sale of wind power, the inter-state transmission charges and losses have been waived off for wind and solar projects to be commissioned by March, 2022.
· Issued Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Wind Power Projects with an objective to provide a framework for procurement of wind power through a transparent process of bidding including standardization of the process and defining of roles and responsibilities of various stakeholders.
· Guidelines aim to enable the Distribution Licensees to procure wind power at competitive rates in a cost-effective manner.
Wind is an intermittent and site-specific resource of energy and therefore, an extensive Wind Resource Assessment is essential for the selection of potential sites. The Government, through National Institute of Wind Energy, has installed over 800 wind-monitoring stations all over country and issued wind potential maps at 50m, 80m and 100m above ground level. The recent assessment indicates a gross wind power potential of 302 GW in the country at 100 meter above ground level. Most of this potential exists in seven windy States.
Wind is commercially and operationally the most viable renewable energy resource.Inview of growing awareness about green environment, development of renewableenergyhasbeenpromotedby the Government through several fiscalpoliciesissued by Central and State of Government. These policies include tax incentivesand obligation for purchase of electricity through renewable energy sources. The State Government has also provided different other state specific incentives and benefits through the individual incentive policies issued by the state Government. These incentives attract the investors and come down per unit cost of energy from renewable sources. Drives moving in the direction of reduction of per MW capital cost of renewable sources through technological development and increase in Plant Utilization Factor with overall improvement in efficiency.
India is endowed with vast solar energy potential. About 5,000 trillion kWh per year energy is incident over India's land area with most parts receiving 4-7 kWh per sq. m per day. Solar photovoltaics power can effectively be harnessed providing huge scalability in India. Solar also provides the ability to generate power on a distributed basis and enables rapid capacity addition with short lead times. From an energy security perspective, solar is the most secure of all sources, since it is abundantly available. Theoretically, a small fraction of the total incident solar energy (if captured effectively) can meet the entire country's power requirements.
There has been a visible impact of solar energy in the Indian energy scenario during the last few years. Solar energy based decentralized and distributed applications have benefited millions of people in Indian villages by meeting their cooking, lighting and other energy needs in an environment friendly manner. The social and economic benefits include reduction in drudgery among rural women engaged in the collection of fuel wood from long distances and cooking in smoky kitchens, minimization of the risks of contracting lung and eye ailments, employment generation at village level, and ultimately, the improvement in the standard of living and creation of opportunity for economic activities at village level. Further, solar energy sector in India has emerged as a significant player in the grid connected power generation capacity over the years. It supports the government agenda of sustainable growth, while, emerging as an integral part of the solution to meet the nation’s energy needs and an essential player for energy security.
National Institute of Solar Energy has assessed the Country’s solar potential of about 748 GW assuming 3% of the waste land area to be covered by Solar PV modules. Solar energy has taken a central place in India's National Action Plan on Climate Change with National Solar Mission as one of the key Missions. National Solar Mission is a major initiative of the Government of India with active participation from States to promote ecological sustainable growth while addressing India’s energy security challenges. It will also constitute a major contribution by India to the global effort to meet the challenges of climate change. The Mission’s objective is to establish India as a global leader in solar energy by creating the policy conditions for solar technology diffusion across the country as quickly as possible. The Mission targets installing 100 GW grid-connected solar power plants by the year 2022. This is line with India’s Intended Nationally Determined Contributions target to achieve about 40 percent cumulative electric power installed capacity from non-fossil fuel based energy resources and to reduce the emission intensity of its GDP by 33 to 35 percent from 2005 level by 2030.
In order to achieve the above target, Government of India have launched various schemes to encourage generation of solar power in the country. Recently, India achieved 5th global position in solar power deployment by surpassing Italy. Solar power capacity has increased from 2.6 GW in March, 2014 to 32.3 GW in April’ 2020. Presently, solar tariff in India is very competitive and has achieved grid parity. The renewable purchase obligation as wellaspreferentialtariffforprocurementofsuchpower has been specified byvarious State Electricity Regulatory Commissions (SERCs).
Small Hydro Project:
Hydro power projects are classified as large and small hydro projects based on their sizes. Different countries have different size criteria to classify small hydro power project capacity. In India, hydro power plants of 25 MW or below capacity are classified as small hydro, which have further been classified into micro (100kW or below), mini (101kW-2MW) and small hydro (2-25MW) segments. Hydro Power was being looked after by Ministry of Power prior to 1989 mainly with the help of State Electricity Boards. Many initiatives were taken by the government since then for the promotion of small hydro which included implementation of a UNDP-GEF assisted Technical Assistance project entitled “Optimizing Development of Small Hydro Resources in Hilly Regions of India” and India-Renewable Resources Development Project with IDA credit line having interalia small hydro development component with target of 100 MW canal based small hydro power projects through private sector participation. Subsequently plant capacity up to 25MW and below was entrusted with the MNRE.
The estimated potential of 21135.37 MW from 7135 sites for power generation in the country from small / mini hydel projects is assessed. The hilly States of India mainly Arunachal Pradesh, Himachal Pradesh, Jammu & Kashmir and Uttarakhand, and constitute around half of this potential. Other potential States are Maharashtra, Chhattisgarh, Karnataka and Kerala. Focused attention is given towards these States through close interaction, monitoring of projects and reviewing policy environment to attract private sector investments.The Ministry has taken a series of steps to promote development of SHP in a planned manner and improve reliability & quality of the projects. By giving various physical and financial incentives, investments have been attracted in commercial small hydro projects apart from subsidizing State Governments to set up small hydro projects.
Small Hydro Power (SHP) plants have many advantages over large scale hydropower generation. SHP has been identified as a good alternative to conventional electricity generation for many developing countries around the world. Run-of-the river type SHP plants contain considerable economic advantages. However, these are affected by various technical and economic challenges. The SHP programme is now essentially private investment driven. Projects are normally economically viable and private sector is showing lot of interest in investing in SHP projects. The viability of these projects improves with increase in the project capacity. The government aim to harnessed at least 50% of the potential in the country in the next 10 years. The focus of the small hydro project programme is to lower the cost of equipment, increase its reliability and set up projects in areas which give the maximum advantage in terms of capacity utilization.
The probable inclusion of this sector in the renewable segment has the potential to revive these projects and expedite the process of commissioning them as per stipulated timelines. In addition, there is a need to draft objective criteria for the award of clearances and create a single-window clearance system. A single clearance window is important to reduce the cost and time overrun by a considerable margin. This will not only lead to significant capacity addition in a short span of time, but will also encourage developers to undertake projects and make investments in this sector.
Waste to Energy:
The increasing industrialization, urbanization and changes in the pattern of life, which accompany the process of economic growth, give rise to generation of increasing quantities of wastes leading to increased threats to the environment. In recent years, technologies have been developed that not only help in generating substantial quantity of decentralized energy but also in reducing the quantity of waste for its safe disposal. The government is promoting all the technology options available for setting up projects for recovery of energy in the form of Biogas/BioCNG/Electricity from agricultural, Industrial and urban wastes of renewable nature such as municipal solid wastes, vegetable and other market wastes, slaughterhouse waste, agricultural residues and industrial/STP wastes & effluents. There are different types of waste which are generated from our daily or industrial activities such as organic waste, e-waste, hazardous waste, inert waste etc. Commonly used Waste-to-Energy (WTE) technologies to recover the energy from the waste in the form of Electricity and Biogas/Syngas are Bio-methanation, Incineration, Gasification and Pyrolysis.
The growth of municipal waste is directly linked to the population and economic progress of a town, city, state or a country. With a population of around 1.34 billion, India generates about 80 million tonnes of waste each year. This is expected to grow up to 430 million tones per year by 2050. Of the total waste generated per year, 80 percent goes into landfills while less than 20 percent is treated or recycled. Therefore, the existing landfills are reaching their maximum capacity and there is a growing industry consensus that proper waste disposal techniques will be needed in the near future. Waste to Energy plants have rapidly emerged as an effective solution for waste disposal. India has the potential to generate about 1700 MW of energy from urban waste including municipal solide waste, sewage and industrial waste.
The government has started taking steps to attract investments in this segment. In budget, the government made a provision to encourage cities municipalities to undertake WtE projects on a public-private partnership basis. Urban local bodies implementing WtE projects are also received support through instruments such as viability gap funding, repayment grants and low cost capital. To ensure the performance of these projects as per the set norms and their timely commissioning, the subsidy amount transferring to the developer’s account only after the MNREs monitoring of project operations. Under the scheme, the government has made provisions for creating awareness, developing skilled manpower, and conducting seminars or workshops for promoting WtE projects.
The main objective of Waste-to-Energy programme is to create a conductive policy and financial environment for the development and demonstration of energy recovery through waste utilization. The bio-energy segment is now focusing on overcoming its challenges and drawbacks through the introduction of new schemes and regulations aimed at promoting waste management and energy generation initiatives such as the Swachh Bharat Mission and Smart Cities Mission have served as pivots to revamp interest in the sector by offering grants and raising awareness towards creating healthy competition between districts for better management of waste. This has, in turn, increased the number of new WtE projects significantly.
Biomass has always been an important energy source for the country considering the benefits it offers. It is renewable, widely available, carbon-neutral and has the potential to provide significant employment in the rural areas. Biomass is also capable of providing firm energy. More than 70% of the country’s population depends upon it for its energy needs. Ministry of New and Renewable Energy has realised the potential and role of biomass energy in the Indian context and hence has initiated a number of programmes for promotion of efficient technologies for its use in various sectors of the economy to ensure derivation of maximum benefits. For efficient utilization of biomass, bagasse-based cogeneration in sugar mills and biomass power generation have been taken up under biomass power and cogeneration programme.
Bagasse based cogeneration programme is implemented with the main objective of promoting technologies for optimum use of country’s biomass resources for grid power generation. Biomass materials used for power generation include bagasse, rice husk, straw, cotton stalk, coconut shells, soya husk, de-oiled cakes, coffee waste, jute wastes, groundnut shells, saw dust etc. The current availability of biomass in India is estimated at about 500 million metric tonnes per year. Studies has estimated surplus biomass availability at about 120-150 million metric tonnes per annum covering agricultural and forestry residues corresponding to a potential of about 18,000 MW. This apart, about 7000 MW additional power could be generated through bagasse-based cogeneration in the country’s 550 Sugar mills, if these sugar mills were to adopt technically and economically optimal levels of cogeneration for extracting power from the bagasse produced by them.
Sugar industry has been traditionally practicing cogeneration by using bagasse as a fuel. With the advancement in the technology for generation and utilization of steam at high temperature and pressure, sugar industry can produce electricity and steam for their own requirements. It can also produce significant surplus electricity for sale to the grid using same quantity of bagasse. The sale of surplus power generated through optimum cogeneration would help a sugar mill to improve its viability, apart from adding to the power generation capacity of the country.
Over 500 biomass power and bagasse cogeneration projects aggregating to 9806 MW capacity has been installed in the country for feeding power to the grid. States which have taken leadership position in implementation of bagasse cogeneration projects are Maharashtra, Karnataka, Uttar Pradesh, Tamil Nadu and Andhra Pradesh. The leading States for biomass power projects are Chhattisgarh, Madhya Pradesh, Gujarat, Rajasthan and Tamil Nadu. A total capacity of 9806 MW has been installed in Biomass Power and Cogeneration Sector out of which 9131 MW are grid connected and 675 MW are off-grid. Government of India deployed different policies and executed that the strategies for biomass power generation. Such approaches have included the whole biomass energy sector which incorporated the bio gas, bio diesel etc. in the policies. Government has focused on the deployment and development biomass energy sector with strategic policy and program. Many subsidies are provided for establishment of the biogas plant.
Barriers and Challenges:
As the country is racing towards achieving the target of 175 GW of RE installed capacity, new challenges are emerging in the form of huge capital requirements, protection of foreign capital investments in RE projects from payment delays, providing adequate ISTS transmission & distribution infrastructure and developing suitable land resources. These issues may be handled with effective policy interventions and consultations with States. During the year, few of the major focus areas of action was to address barriers confronting large-scale adoption of renewable power, including available land, low-cost finance, domestic manufacturing capacity, and skilled manpower. Major areas of action remained to strengthen the planned infrastructure, protocols and power grid infrastructure.
Additional energy availability from generation of Solar & Wind exceeds the growth in energy demand thereby is causing backing down of conventional power plants to accommodate “Must Run” renewable energy. Due to addition of more and more RE Sources, average Plant Load Factor (PLF) of Thermal Power Plants is reducing. Currently, the avg. PLF of thermal power plants is hovering around technical minimum of 55% whereas around 10 years ago, it was a healthy 75%. While cost of RE generation appears to be less than thermal as discovered in tariff based competitive biddings, the associated balancing costs in form of higher transmission charges (due to lower utilization of green corridors etc.) has been camouflaged by exempting inter-state transmission charge on RE and loading it on others.
Discoms continue to pay for the fixed charges to the gencos for the stranded thermal capacity caused due to backing down because of their long-term capacity contracts or PPAs.
Average Power Purchase Cost and Average cost of supply are increasing and adversely affecting the affordability of consumers to pay for expensive power. This in turn is increasing the financial stress of discoms and contagion is being passed on through defaults by Discoms to Gencos and thereafter to the banks NPAs and economy.
Almost all the conventional power plants (except the merchant) have long term PPAs tied up with procurers based on availability based tariff regime meaning that if the plant is available, the procurer has to pay for the fixed charges irrespective of scheduling of the plant and if the plant is scheduled to supply energy by the Load Despatch Centre, the procurer has to also pay for the energy charges or the variable costs like fuel costs etc. With higher grid integration of renewable energy, the PLF of conventional thermal plants has gone down from 75% in 2011 to 56% in 2019-20. Most of the thermal plants are now operating at the technical minimum of 55% below which the O&M cost increases and life of the plant is adversely affected.
Since procurer or the discoms have contacted long term PPAs prior to RPO regime with
conventional plants and now also have to buy RE power under RPO regime, it is double whammy for them. They are forced to pay for the fixed capacity charges to the conventional power plants despite not buying energy from them. These stranded capacity charges, in turn, are passed on to the consumers as regulated expenditure. Therefore, the retail consumer tariffs are continuing to increase despite falling cost of renewable generation. Costs involved in the integration of renewable energy sources into the existing grids depend on the factors like variability of renewable energy sources, lesser predictability & difficult forecasting of renewable energy sources and location specific costs and subsidy costs.
To support the Make in India policy and to create decent employment to the youth, improving the credit flow to the SMEs, government brought manufacturing linked project development with suitable incentives for development of renewable energy. As the size of the development is increasing, the associated taxes, duties need special attention. Ministry has come up with timely recommendations to the Finance Ministry to create a conducive environment for orderly growth of the renewable energy sector. The focus of the promotion of renewable energy policies and initiatives taken in the last few years has led to large-scale penetration of and use of such technologies across the rural countryside. Such initiatives have created employment opportunities at multiple levels.
In order to promote renewable energy, government is making efforts for ensuring Renewable Purchase Obligation (RPO) compliance. State Electricity Regulatory Commissions are also required to ensure RPO compliance and enforcing penal provisions against defaulting