Renewable energy is at the cusp of exploding into a very big sector in India, which not only holds the promise for a greener future, but also provides employment to the youth in the county in a major way. Just as India has outshined many top countries in the world in industries like IT, pharma and automotive, the clean energy scenario in the country is about to establish its global footprint in a formidable manner. India is about to emerge among the top three counties internationally in the renewable energy field and is aiming to become a net zero-economy by 2070 and have an installed renewable energy capacity of as much as 500 GW by 2030. The industry will usher in new kinds of technology, unparalleled supply chain management systems and humungous investment in its quest for such cleaner avenues to generate power.
Impetus and support to the industry is also necessary from the point of view of not only reducing the import bill of the country, but also for becoming energy independent in the times to come. The commitment towards mitigating climate change and to make the country more self-reliant will drive the growth of the industry in the coming few decades.
Immense Positivity in Clean Energy Sector
As India is poised to break into the top ranks globally in the sector, there is immense positivity within the country regarding various aspects of setting up clean energy projects, their expansion and their operations. Part of the positivity has also global push amid concerns about deteriorating environmental parameters. The Indian government is moving firmly towards achieving its own Nationally Determined Contributions (NDCs) for a greener world and has been supporting the industry with policy interventions like Must Run, competitive and transparent open bidding, Round-The-Clock energy projects, Green Hydrogen Power, PLI for modules and battery manufacturing, hybrid (solar+wind) energy projects. The kind of policy innovation that has taken place in the renewable energy sector in the last decade or so is unmatched in any other industry.
The government policies have helped build a conducive environment in the sector, which has helped the stakeholders start from scratch and come to a point where they can become flag bearers globally of the clean energy generation, transmission and even storage. Unlike in the past (for example in fields like coal and telecom), the competitive bidding that the government has brought in is based on several technology adoptions which has made the entire process transparent, infusing confidence among the power producers.
International Demand and Inclination
Given the international narrative for cleaner ways to generate power and the push for modern era energy production, coupled with transparency and conducive environment ushered in by the Indian government, there has been a number of foreign investors who are willing to bring sizable liquidity which is need of the hour in increasing the capacities of such methods of power generation.
Like any other infra projects, financing of the renewable projects is key to succeed our mission of 500 GWs. Government has taken a few policy initiatives of promoting InVIT structure for infra project financing, deepening of the domestic bond market and also relaxation of FPI investment limits in these sectors to ensure adequate liquidity and availability of long-term low-cost financing.
These measures by the government have helped large and well-established corporate houses to participate in the renewable energy success script that is being written in the country. With the entry of well established corporate players, there is a major churn happening, for the benefit of the industry, in all the spheres like solar module manufacturing, battery storage device, new technologies, efficiencies in generation, transmission, distribution and EV charging infra and technology, etc. These large players are also ensuring large ticket investment in the industry, which is much needed.
However, there are some challenges in India’s efforts to provide electricity to the remaining 15 percent of its 1.25 billion population that is still living in darkness, and meet the targets set out in the Paris Agreement. The country has been somewhat late in introducing measures such as the Performance Linked Incentive (PLI) scheme for the manufacture of solar panels and this scheme itself needs improvisation.
Another challenge that lies in front of the renewable energy producers, particularly the solar power players, is that of land availability. The good part is that all the infertile land lying almost waste in the country can be converted into solar farms with very promising returns and greener tomorrow. Solar power projects require large pieces of land and the government must step in to help the private companies get the required tracts of land. The government has to ensure a ‘plug-and-play’ kind of mechanism (solar parks) for the solar energy producers by making available litigation-free land, necessary permits and the needed paraphernalia for proper grid connection.
For any transformational journey, every single stakeholders need to positively contribute. As of now, heavy weights are lifted by few Central Agencies (SECI & NTPC) to promote renewable industry. Unless all state government agencies also participate in the transformational initiatives, 500 GW achievement may become a difficult task. Due to recent action of cancellation of PPAs by a few State Governments, State PPA has lost its sanctity and neither investors nor lenders are ready to accept State PPA. There is urgent judiciary and regulatory intervention required to restore the sanctity of any commercial contracts signed by any government, particularly long-term contracts such as PPA where other stakeholders invest billions of rupee and get cancellation notice of PPA without any valid reasons.
Lower Tariffs Must Benefit Consumers
For renewable energy to truly take wings in the country, it must be ensured by the government that the benefit of lower tariffs reaches the consumers. The solar power tariff has come down to about ₹1.99 per unit in recent times from around ₹18 per unit in the beginning. However, this benefit of lower tariff has not reached the consumers who see their electricity bills going up every few years. For the common people to benefit from the falling tariff, the government has to keep its electoral constraints apart and bring the distribution entities back to solvency by ushering in major reforms in the power distribution sector. Like in the case of telecom, the benefit of lower tariffs reached the customers, which was critical for the success of the industry. There needs to be a similar strategy in the renewable energy sector.
The Government needs to privatise state-owned distribution companies to enhance efficiency and effectiveness of distribution, establish robust power trading exchanges, create and promote Open Access Markets to ensure end-consumers get benefits of these transformational journeys.
Government has introduced Rooftop solar incentive schemes and Solar Agri Water Pumps Scheme (Kusum) with limited success. As India has demonstrated its ability to launch and implement a nationwide scheme of vaccinating one billion people in 18 months, the next big thing India as a nation can aspire to do, would be to revolutionise roof top and retail solar energy generation. India needs to have the audacity to dream every roof in India will have solar panels, every farmland to have at least one solar powered water pump, and every house to have at least one electric vehicle. It should be a national mission to make every company and every household meet at least 60 % of their energy requirements through green & clean energy sources to achieve our dream of 500 GWs by 2030.
Another challenge which needs addressing, is the negativity attached to the energy sector for the traditional lending institutions. Even the banks have not been able to shed their inhibitions and continue to see the renewable energy generation industry with the same lens as the traditional thermal energy sector. The government can bring the clean energy sector in priority sector lending, bring in vivacity in the financing market, and introduce green financing options to provide the necessary depth and thickness in the financing market for the sector to thrive.
If these issues are addressed in a time bound manner, Indians can lead the world to a brighter, greener and more beautiful future.
Opinion piece by: TC Pattabiraman, CFO, Vector Green Energy