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Report | October 2013

Cleaner Future Ahead?

Currently, renewable energy accounts for about 12 per cent of the total installed capacity in India, registering six-fold growth over the last 10 years. Yet is its potential being opened up quickly enough? Pradeep Pandey tells us.

With recent actions taken by the policymakers and government agencies, things have started moving but at a slower pace amid less positive hope among power producers. Yet the road ahead for the Indian power sector, mainly for thermal, largely remains bumpy. With recent actions taken by the policymakers and government agencies, things have started moving but at a slower pace amid less positive hope among power producers. Yet the road ahead for the Indian power sector, mainly for thermal, largely remains bumpy.

According to sector analysts and industry experts, the renewable energy sector performance is expected to remain muted until major issues related to the grid connectivity and tariff is resolved. Being a power deficit country with increasing demand for electricity, India cannot afford a delay in power capacity addition for a longer period. According to sector experts and analysts, India's renewable energy (RE) potential can feed electricity for over 30-40 per cent of the total population. .

Among renewable, wind and solar energy have contributed in larger capacities and in future too these two segments are likely to grow at a faster pace. However, other options like geothermal, wave, tidal and biomass are also being explored.

This pace is likely to be catalysed by solar, says Arvind Mahajan, Executive Director, KPMG India.'The silver lining has been the RE segments with the success of National Solar Mission Phase-I. Going forward with National Solar Mission Phase-II and favourable state solar policies, the solar sector is likely to see accelerated growth.'

According to KPMG, India's ever-increasing power requirements, together with growing concerns over energy security and climate change, are compelling the government to consider the adoption of alternative sources of energy. This coupled with India's vast supply of renewable energy sources such as solar radiation and falling costs make renewable energy more relevant than ever. 'There is huge potential for growth in grid and off-grid solar thermal, so we are excited,' said Ajai Goel, Chief Executive Director, Tata Power Solar.

Funding issues
Renewable project developers mention that they face critical problems while seeking loans from banks or financial institutions. Cheaper funding in the form of domestic credit or external commercial borrowings or buyers-suppliers credit from overseas is not easily available. The current pause in fresh investments has been witnessed due to various reasons such as global economic meltdown, stress on domestic lenders due to over exposure to the infrastructure sector. Expiry of grid based incentives to the wind sector was also one of the causes for slow growth.

However, the concerned ministries are working on various models for fund raising. The government is in discussion with bankers for keeping renewable energy into a separate segment while considering for credit. Presently it is with power sector.

Conclusion
India is one of the most attractive renewable markets in the world. The government launched a good set of policies starting with the National Solar Mission, grid-based incentives and other schemes for subsidies to the sector players. These schemes have played well in the sector and have given strong results. In the second phase, many elements to the policy have come up with a more ambitious plan. There is an attempt to address the domestic supply issue so there are several options that the government put on the table to drive to local manufacturing.

Key factors

  • High power deficit: The power deficit in the country is currently around 10 per cent and is expected to persist over the next five years due to coal shortages.
  • - Rising dependence on imports: Import dependence is currently at almost 30 per cent of our energy requirements and could rise to about 60 per cent in a worst-case scenario by 2032.
  • Favourable economics: At present, the variable cost of power from diesel-based generation is upwards of Rs 15 per unit. Solar and wind power have already turned economical for certain commercial or industrial customers at their leveled utility tariffs.
  • Grid-demand synergy: The correlation between solar-power generation and the load curve for different regions of the country indicate synergy between solar power and grid requirements.
  • Benefits of distributed generation: By encouraging solar power at the consumer's end (easy to generate at the consumption point), network-related investments and losses may be reduced significantly.

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