Renewable Energy Scenario
The critical nature of climate change has brought 196 countries to form an international agreement in Paris in 2015. The agreement targets to limit the global average temperature rise to 2 °C at least. RE technologies have been considered to be instrumental in this pursuit. RE technologies generating energy from naturally abundant sources like solar, wind, hydro and biomass, among others have the capability to replace conventional fossil fuels like coal and petroleum and in turn stop the growth of CO2 emissions one of the main causes of climate change. India, despite its immediate economic development priorities, has decided to take a frontrunner’s position in this global effort and put forth ambitious targets for renewable energy in the country. This is a strategic move for India on two accounts:
- India enjoys a high renewable energy potential distributed in various parts of the country and it makes economical and climatic sense to utilize these resources for its energy requirements.
- A number of India’s development requirements can be positively attended through a strategic implementation of renewable energy technologies.
RE technologies, in both centralized and decentralized forms, offer multiple opportunities for local development. Along with reliable energy supply, RE projects can address issues like employment, energy dependent civic services like water supply and purification, health services, enterprise development and cleaner air – what is commonly termed as co-benefits. This pathway would be a bottom up approach for India’s sustainable development trajectory while complementing targets set at national and international levels.
Global Renewable Energy Scenario
World primary energy consumption grew up to 13,699 Mtoe (million tonnes of oil equivalent) in 2014 from 6101 Mtoe in 1973. The Asia Pacific region accounted for a record 40% of global energy consumption and 69.9% of global coal consumption; the region also leads in oil and hydroelectric generation. Europe & Eurasia is the leading region for consumption of natural gas, nuclear power, and renewables. Coal is the dominant fuel in the Asia Pacific region – the only region dependent on a single fuel for more than 50% of its total primary energy consumption. Natural gas is dominant in Europe & Eurasia, and oil is dominant in other regions.1
Oil remains the world’s leading fuel, accounting for 31.3% of global energy consumption followed by coal with 28.6% and natural gas with 21.2%. Biofuel/waste and hydro contributes 10.3% and 2.4% respectively. Share of other renewables like geothermal, wind, solar etc. is 1.4% of global primary energy consumption. Nuclear output accounted for 4.8% of global energy consumption.2
Worldwide, the number of countries adopting policies and target to support development and deployment of renewable energy technologies has been increasing every year. As per REN21 Renewable Energy Global Status Report 2016, at least 173 countries have national policy and target to increase the deployment of renewable energy technologies at the end of 2015. Apart from reducing greenhouse gas emissions from the energy sector, renewables are considered to be an important driver of social, political, and economic development, livelihood improvement by expanding energy access; enhancing energy security; promoting improvements in health, education, and gender equality; supporting job creation and reduce dependency on expensive fuel imports and fossil fuel subsidies.
An estimated 147GW of renewable electricity and around 38GWth renewable thermal energy capacity have been added globally in 2015, which is the largest annual increase ever. Renewable energy sector created 8.1 million direct and indirect jobs globally in 20153. Solar PV and biofuels provided the largest number of renewable energy jobs.
India’s Renewable Energy Scenario
RE sector has emerged as a major stakeholder in the power generation scenario in India. Government of India has been adopting favourable policies and programmes for sustainable growth of RE sector with a goal to achieve energy security and providing clean energy access to a large part of its population living in remote and difficult terrain. In 2015-16, India added 7100 MW of renewable energy capacity and in 2016-17 it has added
4925.26 MW (between April to January 2016). Today the total installed capacity stands at 50,018.00 MW.
The Ministry of New and Renewable Energy (MNRE), Government of India has been successful in positioning India as world’s RE leader through its ambitious and consistent policy support. In 2014, Government of India announced a domestic target of 175 GW of installed renewable energy capacity by 2022. This target would be a crucial stepping-stone for achieving 2030 target. Internationally at the Paris Climate Agreement in 2015, India in its Intended Nationally Determined Contributions (INDC’s) has pledged to reduce carbon intensity of its GDP by 33 to 35 % from 2005 levels by 2030. It has committed to achieve 40 % cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030. With such high targets, REN21 Global Status Report 2016 listed India among the top five countries for investment in renewable power projects after China, the USA, Japan and the UK. India also launched the International Solar Alliance (ISA) in 2015, to promote growth and development of solar power internationally in over 120 countries. Headquartered at India, ISA was conceived as a coalition of solar resource rich countries to address their special energy needs and provide a platform to collaborate on addressing the identified gaps through a common agreed approach.
The Government of India announced National Action Plan for Climate Change (NAPCC) in 2008 and subsequently announces National Solar Mission (NSM) in 2009. The NSM set targets, provided policy guidelines and financial incentives to support the growth of solar power in India. Of the target of 175GW of renewable energy installed capacity by 2022 has been further demarcated as 100GW solar, 60GW wind, 10GW biomass and 5GW small hydro.
At present, renewable energy share is about 15% of India’s total installed capacity of electricity generation. Amongst all forms of renewable energy, solar power has received a great level of interest from government and private sectors and installed capacity of solar power has increased significantly during last five years.
The Jawaharlal Nehru National Solar Mission commenced in 2009 with an objective to address India’s energy security challenges while promoting ecologically sustainable growth. The overall objective of the NSM is to make solar cost competitive with fossil fuel based energy options by 2022 through long term policy, large scale deployment, aggressive R&D and make in India initiative. Following up on the objectives of the Mission, the Government of India aims to reach a total of 100,000MW of solar power installed capacity by the year 2022. Utility scale solar and Rooftop solar will contribute 40% each towards this target, while Entrepreneurs will get an opportunity to meet 20% of the targets, with a focus to promote local job creation and skill development.
The states have been allocated their respective quotas of power generation from solar by Ministry of New and Renewable Energy, as their respective contribution towards the National.
At 100m height above ground level total wind power potential is estimated to be 3,02,251MW. Lawrence Berkeley National Laboratory, USA has estimated a potential of 800GW at 80 m mast measurement with optimum land utilization. Long coastline and prevailing wind patterns suggest substantial potential for offshore wind capacity in India, however, a systematic assessment of the same has not yet commenced. More detailed wind potential assessment has been given in Toolkit 4. The wind power programme in India was initiated towards the end of the 6th Five Year Plan, in 1983-84. Total installed capacity of wind power in India as on August 2016 is 27,667 MW with additional installed capacity of 4000MW during 2015-16. India has set a target of 60GW wind power installation by the year 2022.
The current availability of biomass in India is estimated at about 500million metric tonnes per year. Studies sponsored by the MNRE have estimated surplus biomass availability at about 120 – 150 million metric tonnes per annum covering agricultural and forestry residues corresponding to a potential of about 18,000MW. Additional power of about 5000MW could be generated through bagasse-based cogeneration in the country’s 500 odd sugar mills. Detailed description about the potential of bioenergy in India has been provided in Toolkit 4.
The Ministry has also launched several programs for development and deployment of large scale distributed energy based on biomass gasification technology. Such biomass gasification technologies are already operating successfully both as grid connected and off-grid systems.
The MNRE has been implementing biomass power/co-generation programme since mid-nineties. An aggregate capacity of 8182MW bio power projects has been installed until January 2017. The target is to achieve 10GW biomass power installed capacity by 2022.
The estimated potential of power generation in India from small / mini/ micro hydro projects is about 20,000MW (Refer Toolkit 4). Out of this potential, about 50% lies in the States of Himachal Pradesh, Uttarakhand, Jammu & Kashmir and Arunachal Pradesh. In the plain region Maharashtra, Chhattisgarh, Karnataka and Kerala have sizeable potential. State-wise details of the capacity are given at table below. Ministry of New and Renewable Energy has created a database of potential sites of small hydro and 6,474 potential sites with an aggregate capacity of 19,749.44 MW for projects up to 25 MW capacity have been identified. The MNRE sets a target of 5000MW installed capacity of small hydro power projects by 2022.
Key challenges for Renewable Energy sector in India
Although there are multiple levels of support from both central and state governments to promote the development of renewable energy sector in India, there are many challenges which are potentially affecting the growth of this sector.
Integration of distributed power generation system to the grid is a new experience for utilities in India. Many states are in the process of developing procedures and guidelines to create a standardized interconnection process. The main challenge for utilities is to build capacity of the staff to handle this shift.
Renewable energy sector has special financing needs. This is primarily due to the small project size, credit risk associated with small scale lending and high upfront cost. As per Climate Policy Institute (CPI) research, the commercial and industrial consumers are reluctant to invest the high upfront amount required to install small renewable energy systems given that it is a non-core business activity. In addition, banks are reluctant to lend to renewable energy projects because of high perceived risks and limited information on the performance and track records of renewable energy investments. Market risks, clubbed with other economic factors, have led to high interest rates in Indian financial markets, around 10% – 14% per annum, which is several times higher than in developed countries.
- There is still a lack of awareness among consumers on product quality and relevant standards and certifications important for a reliable long lasting system.
- As the markets mature, and the confidence of consumers on the services increase with better contract structures, it is envisaged that the renewable energy systems will become further mainstream product in the mix of India’s energy ecosystem.
Fiscal and Financial instruments to promote Renewable Energy in India
The Government of India is using the following financial instruments to achieve its objectives in renewable energy.
- Accelerated Depreciation (benefits can be availed through regular tax returns under the head “Profit and gains of business and profession” as per section 70 of Income Tax Act)
- Provision of bank loans as part of home improvement loan or home loan for rooftop solar systems.
- Loans available for projects and individuals under Priority Sector Lending.
- Loans for system integrators from Indian Renewable Energy Development Agency at concessional interest rates.
- Custom duty concessions and excise duty exemptions.
- Government subsidy for Residential, Institutional, Government and Social sectors.
- Viability gap funding for grid connected solar projects in certain categories through competitive bidding.
- Solar specific renewable energy purchase obligation.
- Support in developing large solar power park.
- Generation Based Incentives (GBI) for wind projects.
THE RE TOOLKIT