India’s new government that was sworn in on 26 May has roused
hopes of an economic revival driven by wide-ranging reforms,
including the revitalisation of the country’s somnolent renewable
energy sector.
India had once been primed as one of the world’s most vibrant
markets for renewables, as the energy-starved country of 1.25
billion started diversifying increasingly into renewable energy. But
the decline of this sector was spurred as much by the general
recession as by policy uncertainty, an inattentive, even
indifferent, Ministry of New and Renewable Energy (MNRE), and the
inexplicable withdrawal of incentives and abrupt changes in the
macro-economic framework governing the industry. It was only towards
the end of its term that the Congress-led government took corrective
measures to breathe new life into this business.
Much is now expected of the new government of the Bharatiya Janata
Party (BJP) that swept away the Congress in a landslide electoral
triumph. It is, after all, headed by Prime Minister Narendra Modi,
who owes much of his mandate to the spectacular manner in which he
bolstered the economy and business environment of the western state
of Gujarat of which he was Chief Minister since 2001.
In 2009, Gujarat under him became the first state to outline a
policy dedicated to solar power. This prompted the central
government to launch its Jawaharlal Nehru National Solar Mission
(JNNSM) the following year. Gujarat’s 860.4 MW of solar capacities
installed till 31 January 2014 overshadow even the 666.75 MW of the
desert state of Rajasthan. The state is catching up in wind power
capacities as well, being currently third, with 3,384 MW, after
Tamil Nadu’s 7,251 MW and Maharashtra’s 3,472 MW. Notably, 362 MW of
its tally was established within the first 10 months of 2013-14 till
January 2014, almost a third of the total 1,175 MW of wind
capacities added nationally in that period. India’s fiscal year is
from 1 April to 31 March. In those 10 months, Maharashtra added 297
MW and Tamil Nadu, 89 MW.
The development of wind power in India began in the 1990s. The
Electricity Act of 2003 formalised grid-connected wind energy by
providing for regulatory interventions such as for facilitating grid
connectivity, and determining tariff and Renewable Purchase
Obligation (RPO).
The independent MNRE, which had made India the only country to have
an exclusive ministry for renewable power, has now been merged with
the ministries of power and coal to ensure coordinated
decision-making and faster implementation of projects. (Newly
appointed minister Piyush Goyal intends to visit Gujarat soon to
study the best practices of its energy model and his ministry has
already started charting “a responsible and comprehensive” National
Energy Policy.)
This bodes well for a country that has often seen its industrial and
economic growth inhibited by shortfalls in conventional power. Power
shortage has devastated India’s business environment, resulting in a
GDP loss of US$68 billion - 0.4 per cent of GDP - in 2012-13.
With unreliable coal (and gas) supplies denting capacity targets,
renewables found increased favour. Grid-connected renewable power
(there is yet very little off-grid renewable) now accounts for
31,692.14 MW – or 12.9 per cent - of the country’s 245,393.53 MW of
installed power capacities. At 20,226 MW, wind has a 63.8 per cent
share in renewables and solar PV, 2,600 MW (8.2 per cent). Localised
off-grid electricity that serves 10,752 of the country’s 640,867
villages includes 255,000 solar street lights, 993,000 solar home
lighting systems, 939,000 solar lanterns and 138 MW of decentralised
solar power plants.
History of turmoil
Few industries in India have been in such prolonged turmoil
as power generation, aggravated by poor planning and poorer
execution. Work has been suspended on several thermal power plants
across the country on account of volatility in coal costs, wavering
fuel linkages and lack of policy clarity. Fuel shortfalls have
caused around 20,000 MW of new thermal capacity to lie idle. Peak
power deficit - shortfall in supply when demand is maximum - reached
5.4 per cent at 7,556 MW in April 2014. Coal-based thermal power,
however, still has the major share in India’s installed capacities,
of 145,408.39 MW, or 59.3 per cent.
Though the country is the fifth-largest producer and consumer of
electricity, after China, the US, Japan and Russia, more than 400
million of its population have no access to electricity. Yearly per
capita electricity consumption has increased to 883.63kWh from
566.69 kWh in 2002-03, but still lags far behind the US’
12,391.37 kWh, Australia’s 10,392.64 kWh, Japan’s 6,749.73 kWh,
Russia’s 5,669.47 kWh and China’s 3,493.79 kWh.
India is also the fifth-largest wind power producer, after China,
the US, Germany and Spain. Its wind power industry has matured,
being now equipped to provide direct-drive, stall-controlled and
pitch-controlled turbines ranging from 250 kW to 2.1 MW and with hub
heights and rotor sizes upto 100 metres. More than a dozen
international companies now manufacture wind turbines in India and
they and their Indian counterparts, almost all from the private
sector, have the capability to produce more than 9,000 MW per annum
and have upwards of 40 models on offer, including turbines designed
for low and medium wind regimes. Turbine prices have always been
lower than the global average due to lower labour and production
costs in the country.
The sector has, however, been marred by several issues of late, and
the National Wind Energy Mission (NWEM) is being launched by the
middle of this year to rejuvenate it. The Mission seeks to
incentivise investments, ease land clearances and regulate tariffs,
but unlike JNNSM, will not involve bidding for projects. NWEM has
trailed the Solar Mission because while wind energy progressed well,
solar had required a boost.
MNRE estimates the installable wind power potential in India for
50-metre mast at 49,130 MW and for 80 metres, 102,788 MW. Solar
energy potential is also enormous. About 5,000 trillion kWh per year
energy is incident over India’s land area of 3.28 million sq km,
with most parts receiving 4-7 kWh per sq m per day.
Solar milestone
Solar power crossed a major milestone with the addition of
just over 1 GW of capacities in the last one year alone, a
remarkable build-up over the 47 MW installed in 2010. After a slow
start early last year, solar installations are now striding towards
the capacity targets of 10 GW by 2017 and 20 GW by 2022.
After the launch in February by New Delhi’s independent power
producer (IPP) Welspun Energy of its Rs1,100 crore (US$186.4
million) 151 MW solar power plant, hitherto the country’s largest,
in the central Indian state of Madhya Pradesh, six state-owned
companies are setting up the world’s biggest solar plant, of 4,000
MW, across 48 sq km of salt plains in Rajasthan. The US$4.4 billion
project of crystalline silicon PV modules will supply 6.4 billion kW
of energy annually, reducing India’s carbon footprint by over 4
million tonnes of carbon dioxide each year. It will be developed in
phases over seven years, the first of 750 MW costing US$1.09 billion
to be set up in three years.
The project will be 10 times larger than the world’s largest 400 MW
concentrated solar power (CSP) plant commissioned in February in
California’s Mojave Desert. The US$2.2 billion Ivanpah Solar
Electric Generating System comprises three massive generators and
356,000 mirrors covering 8 sq km of land. India has planned four
more ultra mega solar PV projects, of 500 MW each, for 2014-15,
two in the northern state of Jammu and Kashmir (J&K) and
one each in Rajasthan and Gujarat.
New energy model
“The growth of renewable energy has changed the energy
business in India,” states the newly released ‘citizen’s report’ on
the State of Renewable Energy in India of New Delhi-based
policy research and advocacy group, Centre for Science
and Environment (CSE). “It has, in many ways, democratised energy
production and consumption in the country.” The Centre points out
that before renewables gained significance, energy business was all
about fossil fuel-based big company and grid-connected power that
dominates even today. But now there is an alternate energy market in
which thousands of small companies, NGOs and social businesses are
involved in selling RE products and generating and distributing
renewable-based energy.
The renewable energy sector in India has, however, fared poorly over
the past two years. While 6,761 MW of grid-interactive renewable
power was added during the 10th Five Year Plan (2002-07)
against a targeted 3,075 MW and 14,661 MW was added during the 11th
Plan (2007-12) against a target of 12,230 MW, the decline has been
visible from 2011-12, when 4,942.90 MW of RE capacity was installed.
It dropped to 3,163.17 MW in 2012-13, the first year of the 12th
Plan (2012-17). It seems to be on the mend now, with the
commissioning of 3,639.82 MW, 84.16 per cent of the
target of 4,325 MW for 2013-14. This included 2,083.3 MW of wind
energy, or 83.34 per cent of the targeted 2,500 MW, 962.1 MW of
solar, or 87.47 per cent of 1,100 MW, and 171.4 MW of small hydro,
or 57.13 per cent of 300 MW.
The 12th Plan aims for 29,800 MW of RE capacity
addition, 15,000 MW of it wind, 10,000 MW solar, 2,100 MW small
hydro and 2,700 MW bio-power, including waste to energy. JNNSM is
besides looking to add 20,000 MW of grid and 2,000 MW of
off-grid solar applications, as also 20 million sq metres of solar
thermal collector area by 2022. Wind, solar, biomass and small
hydro projects have been allocated Rs135,100 crore (US$22.9
billion), or 9.8 per cent of the total energy outlay of Rs13,72,580
crore (US$232.6 billion) under the 12th Plan.
“This is not enough,” observes the CSE report. “Largely because of
policy uncertainty – some say paralysis – within MNRE,the past two
years were a complete washout for the RE sector in India, with
investments dipping significantly from US$13 billion in 2011 to
US$6.5 billion in 2012.”
This perception is shared by just about all stakeholders in the RE
sweepstakes. After a successful implementation of Phase I of the
Solar Mission, needless delay in communicating Phase II till
beginning 2014 brought about stagnancy in the solar industry. Wind
power, too, was derailed by the abrupt revocation of both the
Accelerated Depreciation (AD) and Generation Based Incentive (GBI)
benefits at the beginning of the 12th Plan. Both benefits
had been introduced in 2009 as being complementary to each other.
While GBI was re-introduced a year ago, AD, which had driven 70 per
cent of the wind installations, has not been reinstated. The AD
benefit, intended to promote wind capacity additions during the
initial growth phase and which is still available for solar power
producers, had enabled wind farms to claim 80 per cent depreciation
of equipment cost. Following its repeal, they can now claim only the
standard 15 per cent.
Mahesh Makhija, director of business development (Renewables)
at CLP India Pvt. Ltd, the subsidiary of Hong Kong’s CLP
Holdings, says AD, alongside the turnkey development of their
ventures, attracted high net worth investors not directly in power
generation, but who contributed to the initial growth of the wind
industry. They, however, opted out after AD was withdrawn. IPPs were
expected to move in instead, but prolonged indecision on the
continuation of GBI deterred them, too.
Capacity additions suffered as a result, Makhija notes, with several
under construction and planned wind projects coming to a near halt
as their developers had factored GBI in when finalising their
projects and its absence rendered the projects commercially
unviable.
“We believe that both AD and GBI schemes can work exclusive of each
other,” Makhija stated. Wind projects of 2,021.29 MW had availed
themselves of the GBI benefit and 1,830.43 MW of the AD benefit
between March 2010 and October 2012. He feels that though GBI has
been re-introduced alongside other corrective steps, RE capacity
addition in 2014-15 will fall far short of the 5,920 MW targeted
capacities for the year though it is likely to surpass that achieved
in 2013-14.
With an investment of around US$1 billion, CLP India is the largest
investor in India’s wind sector, having built up a portfolio of 12
wind farms of a cumulative capacity of 1,051 MW. It will be
investing an additional US$1 billion to US$1.2 billion to raise the
total capacity to 2,000 MW by the end of 2016.
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