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As per the Ministry of New and Renewable Energy (MNRE), the renewable energy sector of India has attracted investments of over $42 billion over the past few years. This is alongside green projects that have successfully generated an employment of over 10 million. The Ministry also said, “New opportunities have emerged. Altogether new business space has been created. Indian companies have begun to explore foreign stock exchanges as a source of funds. India is progressively becoming a most-favoured destination for investment in renewables. Foreign investors can enter into joint venture with an Indian partner for collaboration and setting up renewable energy-based power generation projects.”

The Ministry added that 100% foreign investment as equity qualifies for automatic approval. To boost the sector, the government is also encouraging foreign investors to set up renewable energy-based power generation projects on build-own-operate (BOO) basis.

At present, the country’s renewable power installed capacity is over 70 GW. Over 40 GW of renewable capacity is under construction or has been tendered. MNRE also stated that globally, India stands fourth in wind power, fifth in renewable power, and sixth in solar power installed capacity. From 2014, while the solar energy capacity has increased eight times from 2.63 GW to 22 GW, wind energy capacity increased by 1.6 times from 21 GW to 34 GW.

The sector

India’s renewable energy sector is considered among the second most attractive renewables market in the world. After the sanctioned Paris Climate Treaty, the Indian government has focused on cleaner energy. This has attracted several prospective investors. India is targeting 15,820 terawatt hours (TWh) of renewable energy by 2040.

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows to the Indian non-conventional energy sector during April 2000 and December 2017 was $ 6.26 billion. As of February 2018, the total installed renewable energy capacity in India was 107.81 GW, which is around 32.26% of total energy capacity of the country, i.e., 334.15 GW.

During December 2017, the total installed wind power capacity in the renewables mix stood at 32.85 GW (52.27%), and solar power capacity was 17.05 GW (27.13% ). By 2035, total solar capacity in India is likely to be 8% of the global solar capacity.

With a potential capacity of 363 GW and with policies  focused on the renewable energy sector, northern India is expected to become the hub for renewable energy in India. 

The Renewables

Solar Energy: There will be an increase in grid parity of renewable capacity from around 57 GW in May 2017 to 175 GW by the end of 2022. Around 100GW of that capacity is expected to come from solar photovoltaic (PV). As major part of country’s tropical landmass is situated in locations with peak solar radiation, the World Bank has described India as having “among the best conditions in the world to capture and use solar energy”. The MNRE has pegged the country’s total solar power potential at nearly 750 GW, with 142 GW of solar resource available in the state of Rajasthan alone. The US-based Institute for Energy Economics and Financial Analysis (IEEFA) stated that India installed a record 10 GW of solar capacity in 2017-2018, twice the rate logged in the previous year and nearly double the country’s entire solar base.

There has been a tremendous increase in the manufacturing technology of solar panels. Solar power tariff in India has witnessed a drastic fall from  Rs. 15/KWh in 2009 to Rs. 2.44/ KWh in 2017 due to a decline in module prices and improvements in capacity utilisation factor. This recent fall happened during the online bidding for a 750 MW solar power park that is being set up at Bhadla near Jodhpur with viability gap funding (VGF) from Solar Energy Corporation of India Limited. Tariffs have also fallen to Rs. 3.25/ kWh and  Rs. 3.15/ kWh in Rewa, Madhya Pradesh and Kadapa, Andhra Pradesh in the last three months. This has encouraged fresh investments in the sector. But long-term sustainability of projects remains a matter of concern.

There are increased concerns about grid constraints with the surge in new renewable energy generation. India has targeted 170 GW of renewable energy capacity by 2022, out of which 100 GW is to come from solar. The rapidly falling cost of solar is making it more economical in big cities. Oil market slump will not have a huge impact since oil accounts for just 5% of global electricity production and barely registers in the most important solar markets such as the US and China. In addition, even at prices of $50 per barrel, oil still cannot compete with solar.

Wind Energy: Data from the Indian Wind Turbine Manufacturers Association (IWTMA) states that new windmill installations fell to a five-year low between April 2017 and March 2018.  India’s total wind energy capacity now stands at 34,042 MW. This is way below the Modi government’s target of 60,000 MW by 2022.

The government’s focus on solar power short-changed the wind energy sector. The faulty implementations of the policy change enabled firms to bid for projects at competitive prices rather than have a regulator to fix the tariffs. Yet, there weren’t as many auctions for projects. This resulted in muted capacity addition which led to wind power producers facing a threat from various state electricity utilities backtracking on power purchase agreements. States like Maharashtra and Gujarat have already come out with auctions and more are in the offing, both at the central and state levels. The MNRE has committed to auctioning 10,000 MW of projects in 2018 and another 10,000 MW in 2019.

Tariffs are also firming up and analysts don’t expect them to fall further and hurt project viability. In auctions conducted by Maharashtra last month, they rose to Rs. 2.85 per unit from a record low of  Rs. 2.43 in December 2017.

According to Gautam Bafna, an analyst at CARE Ratings, “Last year wind turbine manufacturers had spare capacity and were ready to supply at lower rates. That was a factor in low tariffs.” The excess capacity was a result of the slowdown in new windmill installations, which have since picked up.

Gradually, there are advancements in the capacity of new wind turbines, too. More and more consumers are realising the advancements in technology in solar and are using it as a decentralised/off-grid way of supporting their own energy requirements. Energy storage in the form of batteries is taking a big leap with batteries cost reducing globally.

Hydro Energy: Hydro power is one of the most efficient renewable energy sources since it uses the water cycle for generation of electricity. When the water is moving in a circle, it follows a path starting from the surface to the ocean, which forms a certain amount of kinetic energy that can be used to create electricity. Hydropower is responsible for supplying power to almost 60% of the countries around the world.  India ranks fifth globally when it comes to hydro-electric potential. Combining the capacities of Indus Basin with 33,832 MW, Ganga basin with 20,711 MW, Central Indian River System with 4,152 MW, western flowing rivers of southern India with 9, 430 MW, eastern flowing fivers of the southern India with 14, 511 MW, Brahmaputra Basin with 66, 065 MW, the total capacity of the hydroelectric power plants is around 148,700 MW but the total installed capacity at the moment is around 40,000 MW only.

After three consecutive years of flawed generation because of lesser rainfall and snowfall, there is a growth of about 3.1% in hydroelectric power generation in 2017-2018. Dry winters have also affected the best hydro power companies like National Hydro Power Corporation (NHPC) by about 1.7 % in terms of generation of power. Other companies like Satluj Jal Vidyut Nigam Limited (SJVNL) and North Eastern Electric Power Corporation Limited (NEEPCO) have experienced a rise of about 2.5% and 1.5% in the FY 2017-2018. The FY 2017-2018 saw a huge growth in the power generation sector with about 126.1% billion units.

Building dams across rivers can be the biggest concerns since these would clog one side and flood the other, harming local residents. This also affects the crop structure of a particular area since its river might be the biggest source of water. The hydroelectric power plants can face issues when the flow of water is not in the desired direction and wouldn’t generate enough current. This problem worsens during droughts or summer. 

The future of hydro power plants is quite promising as the increase in the rate of power production is about 3.1% with different industries being brought in. With right infrastructure, hydro can transform the power sector.

Geothermal Energy: It is estimated that India has about 10000 MWe of geothermal power potential that can be harnessed for various purposes. Geothermal energy is one of the oldest forms of energies used for production of power in our country. The heat energy flowing from the earth’s core to the surface with a temperature of about 6000° C results in the formation of flux. The price of geothermal is within range of other electricity choices when the costs of the lifetime of the plant are considered.

In recent years, the number of countries has increased from 10 to 24 in terms of usage of geothermal energy for power production. The share of geothermal in total renewable energy supply was 7.1%.  Over the last 20 years, capital costs for geothermal power systems decreased by a significant 50%.

Although the geothermal form of energy is brilliant for containing our earth’s balance and decreasing the pollution levels, there are certain issues related to the same as well. The emission of greenhouse gases has been seen to have increased in an immense amount near the geothermal power plants. There are certain components emitted in toxic amounts and thus caused hazards for the residents nearby. The geothermal plants can alter the fertility and the stability of the nearby land areas and even cause greater motions on earth’s surface. The overall expense of starting up and running geothermal plants is pretty high since the level of subsidies; reservoirs etc. don’t come at cheap prices.

For future, India is looking great in terms of having potential for production of geothermal energy. Gujarat has been actively promoting the production of geothermal energy for the country. There is a need to rationalise installation costs. Since the installation costs are very high, the world is coming together in several summits to create a sustainable future with its production in the future.

Governmental policies

The Government of India is committed to clean energy sources and is undertaking various large-scale sustainable power projects and promoting green energy. In addition, renewable energy has the potential to create many employment opportunities at all levels, especially in rural areas. It is expected that by 2040, around 49% of the total electricity will be generated by renewable energy, as more efficient batteries will be used to store electricity. This will further cut the solar energy cost by 66% as compared to the current cost. Use of renewables in place of coal will save India  Rs. 54,000 crore ($ 8.43 billion) annually.

To boost the solar power generation in the country, the Government of India has announced various policies and regulations, such as, accelerated depreciation, capital subsidy, Renewable Energy Certificate (RECs), Net Metering Incentives, Assured Power Purchase agreement, etc. The schemes formulated by the government intends to reduce the capital expenditure in building a solar power plant, and subsidise power generation to make it economically viable for the stakeholders involved in the solar power business.

But as everybody knows that distribution section which is drawing and distributing power is the weakest link in the sector. Around 80% of the distribution companies are running at a loss, because the revenue earned is less as compared to the cost of supplied power. This is again due to less than optimal billing and collection. The government is trying to mechanise and automate the billing and collection system to bridge this gap. Rs. 40,000 crore has been earmarked for this. This will strengthen the rural electrification distribution system. Similarly, another scheme of Integrated Power Development Scheme (IPDS) has been awarded  Rs. 44,000 crore including the budgetary support of Rs. 22000 crore, which has been approved by the CCEA.

Bright future of solar energy

In a recent report, Mercom India found that Q1 2018 was the best quarter on record for solar installations in India, with 3,269 MW. It witnessed a 34% increase compared to 2,448 MW installed in Q4 2017. The cumulative solar installed capacity totalled 22.8 GW at the end of Q1 2018.

Raj Prabhu, CEO and Co-Founder of Mercom Capital Group said, “Even though Q1 was a record quarter, solar procurement activity has been muted over the last few quarters. But with an anticipated decline in module prices, we expect to see tariffs decline and distribution companies ramp up procurement activity.”

Rooftop installations accounted for 390 MW, which was up compared to 260 MW installed the previous quarter and 245 MW installed in the first quarter of 2017. Of the total installed solar capacity, large-scale projects accounted for 88% and rooftop accounted for the other 12%.

The uncertainty around the trade cases has put a freeze on development activity. The industry needs clarity on the safeguard duty to understand how it will be imposed and at what levels. Even with the announcement of the pass-through provision, concerns remain in the industry.

Mercom is forecasting approximately 8–9 GW of solar to be installed in calendar year (CY) 2018. However, the India Solar Market Update found that rooftop solar has been growing at a healthy pace but it is very dependent on government tenders and projects. Open access projects were really sought after, but slowly states are making them less attractive by levying wheeling and banking charges. Residential solar is still untapped as financing and upfront costs continue to be big challenges. Government subsidies are not getting paid on time, affecting small installers. 

On the bright side, solar module average selling prices (ASPs) began to decline in Q1 2018 after two consecutive quarters of increasing prices.

In a recent development, the Chinese government made a new policy announcement imposing installation caps and reducing feed-in-tariffs (FiTs) to essentially slowdown solar installations in China amid a ballooning solar subsidy deficits. This could mean a massive oversupply situation, which means an impending crash in solar module prices worldwide, including India. This creates an optimistic scenario for Indian solar developers who could begin to bid lower, which in turn could open the auction floodgates as states jump in to lock in low tariffs. “Overall, things are looking much brighter for the  Indian solar industry going into the second half of 2018,” added Prabhu.