A clean energy future is on top of every country’s sustainability agenda today, which is evidenced by the large-scale expansion of sustainable power projects worldwide. European nations, for example, seem to be in a race to outdo one another in their renewable energy accomplishments. In 2015, Denmark generated 140 percent of its electricity requirements on one particularly windy day from wind turbines alone, the excess of which was exported to Germany, Norway and Sweden. And last May, Germany came remarkably close to being completely run by clean energy for a day due to a surge in wind and solar power. That same month, Portugal was powered solely by renewable sources for 107 hours, which is roughly four-and-a-half days, setting the bar higher. But the Central American nation of Costa Rica beat all the European countries with its landmark achievement in green energy in 2016. For more than 250 days last year, the country used zero fossil fuels and drew its electricity from hydropower plants, wind turbines and geothermal plants. Thanks to such efforts, the notion that renewables can run a whole country is no longer unfathomable. In fact, it is now an ideal to aspire to.
India, however, is far from reaching that ideal any time soon. But it does have tremendous potential. And the government has set itself rather ambitious goals to utilise said potential, which have caught the interest of global investors. The Ministry of New and Renewable Energy (MNRE) intends to scale up clean power production to 175 gigawatts (GW) by 2022, of which 100GW will be solar energy alone. As of now our solar capacity is at 8GW, and if the ministry wants to fulfill its agenda within the stipulated time, they would have to increase production by 15GW annually for the remaining six years. That’s a tough ask. In actuality, upsizing the renewables base in India will be far more challenging than in any of the countries mentioned above. Those nations apportion substantially higher funds relative to the requirements as well as provide strong incentives to reel in private investment. Not to mention, their energy requirements are considerably lower. But India faces multiple limitations that need to be taken into account and addressed before we reach the 2022 milestone, let alone be powered entirely by renewables.
Bloomberg New Energy Finance (BNEF) estimated that India would require US 100 billion dollars in financing to realise the aforementioned vision. However, in 2015, cumulative public and private investment amounted to 10.2 billion dollars, less than half the required 26.3 billion. And considering this year’s budget allocation of 809 million dollars to MNRE, the state will require heavy private funding to meet the annual target as well as catch up with the lag from the previous year – as of December 2016, solar capacity was increased by only 2,150 megawatts (MW) against the intended target of 12,000MW for the 2016-17 fiscal year. The energy ministry is trying to cover the capital gap by attracting domestic and foreign private investors. So far, it has been successful in obtaining a $20-billion commitment from Japan-based Softbank, in partnership with Taiwan’s Foxconn and India’s Bharati Enterprises, as well as $2 billion from French company Électricité de France (EDF).
To provide power to the whole country, including the 300 million people without electricity in rural areas, and the millions more with unsteady supply, as well as keep up with rising energy demands, private funding and public-private partnerships are paramount. The key to this lies in appealing incentives and policies. Presently, the government offers feed-in tariffs (a fixed amount per unit paid to organisations or individuals who generate clean energy) for wind power projects, a 10-year tax holiday for projects registered before April 1, 2017, and accelerated depreciation, which expedites the loss of book value of companies engaged in renewable projects, so that the amount taxable reduces in the early years itself. Additionally, all State Electricity Regulatory Commissions (SERCs) are required to enforce Renewable Purchase Obligations (RPOs) for power distribution companies by which they are to purchase a part of their electricity needs from green sources. However, in the 2017 budget, the registration period for the tax holiday was not extended, and accelerated depreciation was reduced from 80 percent to 40 percent, while no new incentives were introduced. Indeed, the government’s drive to expand renewable energy sources has created awareness about its advantages, but cutting down on benefits will not encourage investment.
And when finance is one of the major challenges, it is surprising that the money collected from the coal tax, which funds National Clean Energy Fund (NCFE), is not being utilised to its fullest. Only 40 percent of the $8 billion generated from the tax’s collection over the past seven was allocated to the fund.
But even if sufficient capital is amassed, clean energy projects will not be successful without a resilient power grid. Solar and wind power is not as stable as electricity produced from conventional sources, hence upgrading to grids that are flexible enough to control unpredictable surges is a process that cannot be overlooked. In an interview to The Hindu, Atul Arya, Head of Energy Systems at Panasonic India, said that 15-20 percent of the total renewable energy generated in the country is wasted due to the low capacity of power grids. Hence, construction of the green energy corridor, a $3.5-billion project for transmission of renewable power, is necessary to offset such losses. Germany’s development bank KFW has agreed to bankroll $1.1 billion for the project, but according to Manoj Kohli, executive chairman of SoftBank Energy in an article for Livemint, it could take up to five years for the corridor to be functional.
Another point to note is the MNRE’s singular focus on solar energy in the renewables mission. India is the fourth largest producer of wind energy in the world, with a total installed capacity of 27GW. Since wind power dominated the field of renewables for the longest time, the thrust for solar energy is understandable. However, the goal of 60GW by 2022 undermines its actual growth potential. According to National Institute of Wind Energy, India has the capacity to install and generate 302GW of wind power, as well as increase its production to 67GW by 2020 itself with the right push. Hence, we should prioritise the increase in shares of all renewable sources proportionately for greater reach in clean energy. Portugal and Costa Rica, for example, depend upon a renewable energy mix that affords due importance to solar, wind and hydropower, and the results speak for themselves.
Our energy plan for 2030 involves generating 850GW of power, of which renewables will account for 40 percent, but the bulk of the remaining will come from coal as it continues to be the cheaper option. But since the present government is headed in the right direction and is committed to walking the renewables path, we could step up our game to reach our full renewable potential. For starters, including the development of clean energy sources under the Smart Cities initiative’s objectives or that of Swachh Bharat Abhiyaan could boost funding as well as the number of projects undertaken nationwide. Secondly, ensuring the right incentives are in place, not just for solar but all renewables, as well as strictly directing funds from the coal tax to NCFE will facilitate larger investment.
Furthermore, a cooperative model of investment could be encouraged, especially for residential consumers, to utilise rooftop solar potential or set up wind farms. People can either invest for the personal use of their communities or buildings or follow the model of the Portuguese solar cooperative Coopérnico. The company rents rooftop space from non-profit organisations/institutions, fits them with solar panels, and sells the electricity generated to the national grid, and the members who invest in it benefit from the profits.
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14 June 2017