Are Renewables Still The Live Wire?
After flaring up significantly, the incandescence in the renewable energy sector seems to be paling, raising posers about the 2022 target for a 175 MW capacity in clean energy
At the International Solar Alliance Forum of the World Future Energy Summit in Abu Dhabi in January, Union Minister of State for Power and Renewable Energy, Raj Kumar Singh, exulted that India had one of the fastest growing renewable energy programmes in the world. He emphasised that India would have 175 GW of renewable energy installations “well before” the targeted date of 2020. The pace and flurry with which solar, wind and hydel projects sprouted up during the 2016-17 fiscal, did indeed, suggest as much.
“The government has persevered to build and strengthen India’s renewable energy sector in the last four years, and its achievements are reflected in the way the share of renewables in India’s total energy capacity has risen to almost 19 per cent by 2017-end,” says Mahesh Makhija, Director – Business Development & Commercial (Renewables), CLP India.
Tulsi Tanti, Founder and MD of Suzlon Group adds, “Renewable energy has entered an exciting new phase and its growth is unstoppable. Once considered a niche industry dependent on government subsidies, today it is driven largely by economic realities, improved reliability and cost-competitiveness backed by proven technology. Renewables, specifically wind and solar today are not only cleaner, but also more affordable than coal”.
As a nation that still banks on dirty coal for 60 per cent of its power generation, the renewable energy target is somewhat sacrosanct, for it vindicates India’s commitment to battle climate change and global warming. “With the commitment made in the Paris Agreement, the sector will continue to be driven by targets and government support,” Makhija says with confidence.
The 2016-17 financial year saw a major spurt in renewable energy capacity. Wind and solar power capacity jumped by 11 GW, while capacity in conventional sources of power went up by 10.3 GW. Solar power capacity saw a spurt of 370 per cent to 12.2 GW from 2.6 GW three years ago. Capacity in solar power needs to increase by 20 GW a year though, if the 2020 target of 100 GW is to be actualised. That target seems daunting now, considering that even in 2017, only 9.6 GW of capacity was added to solar power.
The wind power capacity needs to increase by 6.8 GW annually to reach the targeted capacity of 60 GW by 2022. Significant investments are also necessary in biomass and waste-to-energy projects should the 2020 target of 10 GW be met. India hopes to draw only 5 GW of power from hydel energy four years hence. Small though the target seems, it does not seem achievable now that prospective investors are gnawing on their nails over the little speed-breakers down the road.
“2017 has seen a record capacity addition in renewable energy with 61 per cent increase in addition compared to 2016. While the solar industry is in the growth path and has the potential to achieve ambitious targets, we need support from the government to ease some bottlenecks, remove uncertainty in policy and help promote certain sectors to make the target achievable,” says Sushant Arora, Co-Founder, CleanMax Solar. Even in the rapidly growing solar power installations, roof-top solar cell installations were a laggard.
The path towards renewable energy is ostensibly strewn with rose petals (mostly in the way of tax incentives and untapped demand), but investors are suddenly chary, because of lack of clarity on tendering schedules, rising module costs, absence of a robust transmission network, low demand and having to renegotiate power purchase agreements at higher tariffs. The experts and the plethora of players in the renewable energy business, BW Businessworld spoke to, also wondered if investments in renewable energy were bankable in the absence of a sustainable or long-term policy.
“The events over the last two to three quarters and the recent Federal Budget have put a big question mark on our ability to reach closer to the 175 GW installed base in the next four years. And this being the pre-election year, where we don’t expect much change in the momentum (or the lack of it), we are simply left with three more years to achieve this mammoth target. The lack of a sustainable and long-term policy approach is going to impact the high renewables deployment rate over the last few years,” says Gagan Vermani, Founder and CEO of MYSUN.
According to Raj Prabhu, CEO and Co-founder of Mercom Capital Group, “The renewable energy installation target of 175 GW by 2022 looks daunting right now. Let’s look at solar, which makes up the majority of that target. The target for solar is 100 GW by 2022 and so far India has installed 20 GW. So we have to install 80 GWs in five years at a rate of 16 GW a year. Installation levels have not crossed 5 GW in any year except 2017!”
“The specific number isn’t important,” says Vikram Kailas, Co-founder, Managing Director and CEO of Mytrah Energy (India). “What matters is that this was an aspirational, indeed audacious, target,” he says adding, “that was meant to be a call to action for a variety of stakeholders including the developers, investors and lenders, regulators and other government intermediaries, the power distribution companies (the clients in this case) and others.” He too, like many others in the sector, called for easing of regulations in the renewable energy sector.
Even experts have begun to believe now that the momentum of increase in renewable energy installations in 2017, would not be sustained in 2018. Says Kanika Chawla, Senior Programme Lead for the Renewable Sector at the Council for Energy Environment and Water (CEEW), “While the advances we have made put us well on track to realise our mammoth target, the timeliness of delivery will depend on more frequent project tendering, and improving regulatory ease in the sector”.
“So, it makes you wonder how we are going to install 16 GW or more every year for the next five years,” says Prabhu. “Mercom is actually forecasting 2018 installations would decline from 2017 levels. So unless there is a serious effort by the government to fix these issues, reaching 175 GW in renewable energy installations by 2022 looks highly unlikely”.
Experts say not more than 100-110 GW of renewable energy capacity was likely to be achieved by 2022. “The government’s target of installing 175 GW of Renewables by 2022 is indeed an ambitious target — something that has acted as a catalyst to increase the activity in this space. However, in our opinion, it is unlikely that this target will be achieved within this timeframe. We expect the installed RE capacity in the system (excluding large hydro) to reach around 100 GW or 110 GW in the timeframe,” says a spokesperson from ICF India Consulting.
“India currently has 63 GW of total renewable capacity. That means we need to still add another 112 GW in the next four years, or about 28 GW every year. That seems a tall target as many states have surplus thermal power and demand is growing relatively slowly at about four per cent. We believe that we will end up somewhere around 100-110 GW by March 2022,” says Vinay Rustagi from Bridge to India, a renewable energy consultancy firm.
“The specific target of building 175 GW of capacity by 2022 looks extremely challenging,” concurs Kailas. “But to me the bigger question is whether, in the process, we are able to set up an ecosystem that sets the country for scaling even higher peaks in future.” Kailas echoes a view shared by many.
Incidentally, India has a commitment to combat climate change and global warming to the United Nation’s Sustainable Development Goals. India is also honour-bound to fulfil its Nationally Determined Contributions as per the Paris Agreement target, which stipulates that renewable energy be 40 per cent
of its energy mix by 2030.
Yet, as renewable energy emerges as a cheaper alternative and India turns more participative in the clean energy movement, investments are bound to flow into the sector. An enabling policy framework, therefore, is critical over the next few years, not only to ensure that the capacity addition targeted for 2022 is met, but also to vindicate India’s commitment to combat climate change at global forums.