The non-conventional is conventional now. Renewable energy has made the definitive break from its sustainability moorings to reshape commercial power markets worldwide. From Kadapa to California, solar power has made headlines of late, for the lowest tariff (`3.15 per kWh) and for a record contribution (40% of power supplied for part day), respectively. Over the last fifteen years, renewable energy in India has progressed from 3% to 15% of installed capacity, and from a subsidised to competitive power source. But how sustainable is it?
The gains made are significant but not entirely assured and can regress. All renewable energy is paid on delivered output as opposed to capacity contracted, which makes it susceptible to offtake risk, thus increasing the cost of capital. Also, the risk grows as more variable renewable energy capacity is added, unless remedial measures are taken.
The government’s adoption of competitive bidding for large-scale renewable parks has certainly paid off. About 40% of renewable capacity addition in the last two years (6.3 GW of 15.8 GW) has come through this route. Importantly, these parks have delivered more competitive tariffs than capacity-based tenders. In recognition of this, the government has doubled its target for solar park development from 20 GW to 40 GW.
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