Grid-connected renewable power today accounts for as much as 20.2 GW – or 11% – of India's 182.3 GW of installed power capacity. The majority share − 55%, or 99.8 GW – is still accounted for by coal-based thermal power. Gas-fired thermal power, totalling 17.7 GW, contributes an additional 10%, while the 38.7 GW of hydropower accounts for 21%, and nuclear 2.6% with 4780 MW.
Solar, wind and biomass are finding increased favour, with burdensome coal and gas supplies denting capacity targets. Only 52 GW of the 78.6 GW originally envisaged under the 11th Five Year Plan that ended March 2012, has been added, at a cost of US$145 billion. The 10th Plan (2002-07) also saw a meagre 21.2 GW capacity added, against a target of 41.1 GW. The 12th Plan (2012-17) now aims for a capacity addition of 103.3 GW at a combined investment of US$223.7bn, which includes commensurate transmission and distribution capacities.
The continuing trend of missed targets has widened peak demand deficit in the country to 12%. This has clearly undermined the Government's avowed mission of Power to All by 2012.
Incentive-fuelled
Incentive-laden policies have fuelled growth in India's renewable energy sector. Wind power is the fastest growing with a record 3,163 MW of wind energy capacity added in the financial year 2011/12, bringing the country's total wind capacity to 17.4 GW. This marks a steady rise, from 2,350 MW the previous year, 1,565 MW in 2009/10 and 1,485 MW in 2008/09. India thereby retains third place, behind China and the U.S., in terms of new installations. The addition of 3,500 MW of wind capacity now appears within reach in 2012/13, foreseen or unforeseen drawbacks not withstanding.
Grid-connected solar capacity also surged from 18 MW in 2010 to 277 MW in 2011, again making 500 MW of capacity seem attainable this year. Solar photovoltaic (PV) power plants totalling over 180 MW were set up in the country and off-grid installations of over 50 MW were completed as well.
Renewable power has been particularly beneficial for an enormous, (3.28 million km2) over-populated (1.2bn) country like India. Hundreds of thousands of solar lights, solar water heating systems and biogas plants have been installed in the country, illuminating over 9000 remote and inaccessible villages so far.
Soaring investment
Clean energy investments in India reached a record US$10.3bn in 2011, up 52% from the US$6.8bn invested in 2010, according to Bloomberg New Energy Finance (BNEF): “This was the highest growth figure of any significant economy in the world, the country accounting for 4% of global investments in clean energy,” says Ashish Sethia, Head of Bloomberg's India research. “The large growth was driven by a 7-fold increase in funding for grid-connected solar projects: From US$0.6bn in 2010 to US$4.2bn in 2011, almost the same level of investments as wind, which totalled US$4.6bn.”
Sethia mentions that while there was concern at the beginning of last year that increasing lending rates might hit investment, policy measures like the Jawaharlal Nehru National Solar Mission (JNNSM) and renewable energy's increasing cost competitiveness eventually made 2011 a record year.
While an addition of 15 GW of wind capacity has been proposed for the 12th Plan, the National Solar Mission of the Ministry for New and Renewable Energy (MNRE) aims at adding 20 GW of solar power capacity by 2022. The Ministry estimates the potential for solar energy for most parts of the country to be around 20 MW/km2 of open, shadow-free area – covered with 657 GW of installed capacity.
Asset financing for utility-scale projects remains the main type of clean energy investment in India, with US$9.5bn in 2011. Venture capital and private equity investments also revived, with US$425 million invested in 2011, over four times the 2010 figure. A stock market slump, however, dampened equity-raising via the public markets last year, with only US$201m raised compared with a record US$735m in 2010.
BNEF chief executive Michael Liebreich deems India's record performance in 2011, and the momentum it is carrying into 2012, as one of the bright spots in the clean energy firmament: “With support mechanisms falling away in the U.S., the ongoing financial crisis in Europe, and China already going flat out, it is gratifying to see some of the world's other major potential markets coming alive,” he remarks. “India is firmly in the lead group and we are seeing interest around the world in being part of what is unfolding there.”
Powering ahead
Renewable energy is central to India's climate change mitigation efforts. The country's vast market potential and industrial, financing and business infrastructure have made it a favourable destination for Clean Development Mechanism (CDM) projects, with renewable energy projects having the major share. There have been 727 registered CDM projects in India, accounting for a fifth of such projects worldwide. Of these, 520 are renewable energy projects, of which wind accounts for 225, followed by 6 for solar energy and 82 for hydropower.
India has hitherto established 3,056 MW of power capacity based on biomass/bagasse co-generation, with a further 2,600 MW targeted for the 12th Plan period. Incentives such as concessional customs duty on machinery and component imports, excise duty exemption, accelerated depreciation on major components, and relief from taxes and capital subsidy are being provided for the set up of biomass power projects. A preferential tariff is also provided for the sale of power from biomass power plants.
The National Solar Mission aims at promoting grid-connected solar power to a level that will bring the cost of solar power generation to grid parity. December's competitive bidding for projects totalling 350 MW witnessed some of the lowest quoted tariffs in the world. They averaged Rs8.77/kWh (US$0.18/kWh), the lowest having been Rs7.49/kWh (US$0.15/kWh). Tariffs exceeded Rs18/kWh (US$0.36/kWh) at the start of the Mission two years ago. All indications are for further decreases in solar PV, though costs have not come down this fast for concentrated solar power (CSP), where they are still in the range of Rs12-13/kWh (US$0.24-0.26/kWh).
Wind too is competitive as an electricity resource. There is no competitive bidding in wind so far, the tariffs ranging Rs3.5-4.5/kWh (US$0.07-0.09/kWh): “Barring China, India has the lowest cost-per-MW for wind energy in the world – up to 60% cheaper than Europe,” notes Tulsi Tanti, founder, chairman and managing director of the Pune-headquartered Suzlon Energy Ltd. “It has absolutely no fuel costs, providing a stable pricing visibility for over 20 years – a huge competitive advantage to corporate India, particularly to SMEs.” The billionaire entrepreneur estimates wind energy to have saved India 67m tonnes of coals imports, translating to savings of US$6bn.
Part 2 out soon.
About: Sarosh Bana is India correspondent for Renewable Energy Focus magazine.
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