The Renewable Story in India

Photo by Magic K on


The push for renewable generation capacity in India actually started around 2015. Prior to this, the capacity was being driven by the Jawaharlal Nehru National Solar Mission (JNNSM) which had a target of only 22GW by 2022.The impetus was actually provided when the government announced a target of having 175 GW of renewable generation capacity by 2022. This capacity included 100 GW of solar (out of which 40GW was rooftop solar), 60 GW of wind, the rest being biomass (10 GW) and small hydro (5 GW). This impetus led to the entry of independent power producers (IPPs) dealing with renewable generation. Apart from the government push towards renewable generation, the fact that coal-based generation would eventually be phased out was weighing heavy in the minds of central power generating companies, like NTPC, who have made concerted efforts to set up solar plants. The government did come up with various incentives to encourage renewable generation capacity, such as, the accelerated depreciation scheme, capital subsidy for solar units, tax holidays, feed-in tariffs, generation-based incentives, renewable purchase obligation etc. As a result of all this, the share of renewable capacity in India has gone up to almost 40% which accounts for about 10% of the yearly generation. We still have a lot of untapped potential as we have a solar capacity of about 45 GW, inclusive of roof top (out of a potential of about 750-1000 GW) and similarly, we have a wind-based capacity of around 40 GW (out of a potential of 700 GW at 120 metres height).

Why has the pace of renewable capacity addition slowed-down?

Though the growth in renewable capacity can be termed as phenomenal having grown from almost nothing in 2010 to about 100 GW today, it is clear that we would miss our target of 175 GW by 2022. One thing which has to be kept in mind is that the targets have been set up by the government whereas the lion’s share of the capacity addition is met by the private sector. The private sector will be motivated by the investor confidence and it is here that the problem lies.  Some of the states have killed the investor confidence by reopening power purchase agreements (PPAs) and also by denying timely payments to the developers creating serious cash flow problems. In addition, there have been other issues of land acquisition, high interest rates (especially for rooftop solar projects), securing supply of balance of plant etc. The introduction of a safeguard duty of 25% in 2018 for only two years actually slowed down the pace of addition to solar capacity.  Above all, one needs to have the capacity to absorb 175 GW along with other conventional capacities. If demand does not grow adequately, obviously targets will not be met. Keeping all the above in view, India will really have to struggle to meet its new renewable target of 500 GW by 2030. We would need to add about 45 GW of renewable capacity every year from now till 2030 in order to reach this target.

Problems of grid integration with increasing renewable generation:

One of the biggest problems with the increasing share of renewable generation is grid integration. Given that renewable generation (solar and wind) is intermittent in nature, one has to have a back-up for sudden outages. The best source for grid balancing is hydro generation which can be ramped up very quickly and the next best alternative is gas-based generation. Both hydro and gas-based generation are a problem in India. While addition to hydro capacity is hampered on account of litigation, law and order issues, environmental concerns, resettlement and rehabilitation problems, gas-based generation is not economical given the high cost of gas. In India, at present grid management is taking place by varying coal-based generation. However, this is not really the ideal way since it leads to continuous wear and tear of the machines. Another way to balance the grid is through battery storage technologies. The scope for doing this, however, is limited since battery storage is still quite expensive. The latest technology that is available for storage is through green hydrogen so that we do not add to emissions while producing the same. Hydrogen, however, is useful in the case of inter-seasonal storage i.e., long-term storage. For daily storage needs, batteries are the ideal option as they can be charged and discharged several times in a span of 24 hours.

Decarbonising the power sector

The accent on renewable generation has definitely helped in decarbonisation of the power sector and has helped in achieving our NDC targets. As on date, share of non-fossil generation capacity has already reached 40% and we have reduced emissions intensity by 28% against the target of about 35% by 2030. India has recently announced that it will enhance its reduction in emissions intensity to 45% and also increase its renewable generation capacity to 500 GW by 2030. Above all, India plans to become net-zero by 2070 which presumably includes all GHGs and not just carbon dioxide. Judging by this, India will probably have to peak its emissions by 2040 because analysts feel that a gap of 30 years between peak emissions and net-zero is practical. Reaching net-zero emissions by a certain date is not what matters the most, instead what is more important is how does one reach it? Is it by front loading of emission reductions or back loading it? If it is back loaded, then one releases more emissions cumulatively till such time one reaches the net-zero stage. Therefore, it is important for all countries to give a year-to-year trajectory over and above announcing net-zero dates.

Is the growth in solar capacity fuelled domestically?

Unlike wind based generating capacity, the solar industry in India is largely dependent on imports, mainly China. India’s wind-based generation sector got a big boost because of feed-in tariffs which encouraged the entry of manufacturers of turbines. In contrast, India’s domestic manufacturing capacity of solar cells and modules is only about 3 GW and 10 GW, respectively and not large enough to take care of domestic demand. Moreover, the Chinese equipment is about 20 to 25% cheaper due to policies adopted by the Chinese government. To promote the solar industry, the Chinese government gave large subsidies in land acquisition and raw materials. In addition, the Chinese industry always dealt in huge quantities given their sizeable domestic demand that helped them reap benefits of economies of scale.  In order to counteract dumping by Chinese manufacturers, the Indian government did impose a safeguard duty for a period of two years (25% in the first year, lowered to 20% and 15% for the subsequent period of 6 months each).  This limited period of duty imposition actually retarded the pace of installation of solar projects as developers preferred to wait for two years and held on to their investments. The government now proposes to impose basic customs duty of 40%, beginning from April 2022. In addition, manufacture of solar cells and modules have been brought under the ambit of the production linked incentive scheme with an outlay of about Rs 4,500 crore.

Cost of generation- coal versus renewable:

Is renewable power really as competitive as coal? While there has been a huge decline in cost of solar power, coal-based power is becoming increasingly expensive on account of the increase in price of coal and railway freight. Though the cost of solar power may hover between Rs 2 to Rs 2.5 per unit depending upon the project site (as compared to coal-based generation at an average of Rs. 3.2 for NTPC plants), one must bear in mind that solar power is only available in the day time compared to a 24-hour supply from coal. So ideally, if we compare the two, we should include the cost of storage to the solar based generation. With the drastic fall in cost of batteries, cost of storage has also come down but is still around Rs 6 to Rs 7 per unit. So cost of solar power inclusive of storage exceeds that of coal-based generation. Further, the reduction in the cost of batteries seems to be tapering off and we may not see any appreciable decline in the same in the years to come. We also seem to ignore the cost of recycling the solar waste which will become a huge problem post 2040.

Do we need any more coal based plants:

Should India stop adding to coal-based capacity right now? There is a lot of debate going on regarding this but at the end of the day, it is a case of sheer numbers. The variables that we need to keep in mind include the demand for power in 2030, the shape of the load curve, the cost of storage, the cost of conventional generation etc. The Central Electricity Authority (CEA) has undertaken an exercise in this regard which says that India will not be able to meet its peak demand (which occurs at 8pm) unless it adds to about 34 GW of additional coal-based capacity from now till 2030. This is in addition to about 32 GW of capacity (mostly in the public sector) which is already under construction. Of course, there are several assumptions in this study and any change in the actual values in 2030 would necessitate a change in approach.

Social cost of transition:

The move away from coal-based generation will mean loss of livelihood for several thousand coal miners currently engaged. Coal India Limited had a total manpower of about 2.76 lakh in 2020. One will have to provide for an alternate livelihood for this large populace which would mean re-skilling them. Though there is good potential for employment in the solar industry, especially roof tops, the problem is the mismatch in the geography. While the coal mines are located in eastern India and the Deccan plateau, the potential for renewable generation lies in the coastal states and Rajasthan. This means that it entails migration to retain jobs. There will be additional effects such as the loss of revenue for the railways since transportation of coal is their major bread winner. The states will lose a lot of revenue on account of royalty, estimated at Rs. 13,000 crore during 2019-20.

(The purpose of this blog is to apprise the uninitiated of the likely ramifications which may occur with an increase in renewable generation in the energy mix)

(Views expressed are the author’s own and don’t necessarily reflect those of ICRIER)

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: