In India, for the past few years, the shift to clean, renewable energy has been a priority. The growing environmental awareness and reduction in prices of green energy has fuelled this trend. According to a report by Energyworld.com, India has committed `24 trillion to the energy sector under the ‘National Energy Pipeline’, the major share of which will be for investments in renewable energy.
However, there could be a lag in the recovery of demand in the post-pandemic situation. Buyers could shy away from the relative higher costs associated with clean energy and may no longer have the desired initiative or confidence to commit to new contracts. This may be a significant setback to India’s energy transition even though the costs of modern energy - including from renewables - has witnessed a sharp fall in the past few years.
India’s renewable energy ambitions are among the most aggressive in the world. However, the short-term target of 175 GW renewable energy by 2022 announced in 2014-15 appeared ‘easy’. It would not require major grid upgrades or storages and at the same time, it is aligned with the new business-as-usual based on cheap prices, especially for solar power. Till now, 88 GW have been commissioned.
Several industry insiders are of the opinion that while the AC electrical grid always has to be in real-time balance between demand and supply, India’s financial balance was always precarious, with loss-making distribution utilities at the end of the chain. Social welfare redistribution has long been a key aspect of India’s energy policy, where commercial and industrial users have overpaid to cross-subsidise homes and agriculture. This entire model is at risk after Covid-19, where overall demand is down by 25%. The example of Tata Consultancy Services (TCS), India’s largest IT company can be cited in this case, who has plans to have 75% of their employees working-from-home by 2025.
While talking about the impact of the pandemic on generation of the solar power segment, Puneet Goyal, Co-Founder, SunAlpha Energy, told BE, “Due to disruption by Covid-19, our internal analysis says, we expect India to add only 3500 MW of solar in CY of 2020 out of which 1000 MW is in the solar rooftop market. H2 2020 CY will have around 2500 MW of installations. This is a 70-80% drop compared to last year.”
Transition to renewables
Goyal agreed that the pandemic has adversely affected the industry but at the same time, they have witnessed an increasing number of commercial and industrial customers approaching them for solutions. He further stated, “A consumer has the opportunity to think outside the box during these hard times. More and more large power consumers are realising that solar power is the most economically viable and dependable long-term solution. Banks have also risen to this aspect and have started funding these projects with confidence.”
William Patrick Hall in an article titled ‘Impact of coronavirus on Indian energy sector’ for The Energy and Resources Institute has written that with international travel currently limited and potential slowing of economies, there may be negative impacts on supply chains that are important for the energy industry. This in turn may impact the rate at which clean energy projects can be deployed. However, he also noted that some of the changes may have positive impact on the energy system and ensure a transition to a greener way of living. He wrote, “Companies and their employees are familiarising themselves with remote working arrangements, which if retained to some extent, would reduce the amount of travel and the energy used in commercial buildings. Moreover, metro areas are witnessing the benefits of reduced fossil fuel combustion on the local air quality, which have provided communities with a glimpse of the future, if they are to pursue cleaner forms of transport.”
Apart from a cleaner environment, there are two more reasons that can fuel renewable energy which have been highlighted by Goyal. He felt that there are two specific reasons behind the purchase of solar power by businesses – it helps them to make money and it helps them to save money. He stated that the latter is what makes complete sense to any home or business and their company has seen significant demand owing to customers' growing energy needs. He further informed that counterintuitively, across all sectors, their company has seen higher demand since the Covid-19 pandemic.
Financial challenges and prospects
Industry insiders are of the opinion that financial challenges are the main hurdles for achieving the target in the renewable energy sector as lending by domestic capital agencies is shut. Private sector is also not very keen. Apart from large project finance, the focus of the banks has shifted to retail. There are a lot of restrictions on foreign borrowings, with the European Central Bank (ECB) guidelines restricting the amount borrowed, controlling the pricing and imposing end-use restrictions.
The Government of India must look into high interest rates and inconsistencies in its policies. If all states had the same solar net metering regulations then there could be a tremendous job creation and growth not only for the solar sector but also for sectors which are using solar energy as a tool to help grow their businesses.