The renewable energy sector in India has been in the limelight for the sheer volume of activities taking place in this space in the past two years. The co-untry is working towards meeting the government’s ambitious target of achieving 175 GW of renewable capacity by 2022. There have been significant developments in the sector, which include the implementation of solar parks and rooftop schemes, introduction of solar city programmes, approval of repowering policy, issuance of new renewable purchase obligation (RPO) trajectory and launch of competitive bidding mechanism for wind projects. In 2016, India announced its first set of solar power projects with energy storage and assigned about $3 billion in state funding for developing the country’s solar panel manufacturing infrastructure.
In addition, the policy impetus included incentives for interstate transmission schemes across various states and investments in the Green Energy Corridor project. In the Union Budget 2016, the government doubled the coal cess to Rs 400 per tonne, thereby, creating financial resources to achieve the 175 GW renewables target. The government’s commitment to improve grid infrastructure also reflected in the proposed additional depreciation for the plant and machinery acquired and installed for transmission activities.
The global investment community has also begun backing the renewable activity in the country, with more than $100 billion in commitments that support sector development.
Meanwhile, India has also positioned itself as a key player in the fight against global warming by ratifying the Paris agreement as well as by playing a constructive role in the Marrakesh climate summit. The summit oversaw the signing ceremony of Framework Agreement on International Solar Alliance, to which over 20 countries including India were signatories.
As the growth of large-scale renewables continues its momentum, several trends will stand out in 2017. Listed below are some of the major trends and developments that may mark sector growth in the coming years…
Rapidly growing generation capacity needs large-scale deployment of energy storage for transmission decongestion, protecting processing plants from grid frequency and voltage drop-triggered outages. India plans to install 160,000 MW of solar and wind generation capacity over the next five years, and energy storage will play a critical role in ensuring its integration into the grid. As the renewable energy capacity of both wind and solar is projected to go up significantly, the need for energy storage will emerge as the key focus area for the industry as well as the policy makers.
Globally, the energy storage market made great progress in 2016 as storage technologies demonstrated their ability to support larger quantities of renewables on the grid and provide grid services. However, India lagged behind during the year in terms of commissioning any significant storage-based renewable energy projects.
With over 37 MW of energy storage projects announced/tendered by the Solar Energy Corporation of India (SECI) and NLC (erstwhile Neyveli Lignite Corporation), the market is now gearing up. These projects are coming up in different parts of the country, namely Himachal Pradesh, Andhra Pradesh, Karnataka and Andaman & Nicobar Islands. The contracted capacity includes 3 MW pilot projects for frequency regulation applications by Power Grid Corporation of India Limited in Puducherry.
In addition, key players like AES and Panasonic have declared their own 10 MW lithium-ion based collaborative energy storage projects at the Panasonic’s facility at Jhajjar, Haryana. These projects together will be worth around $20 million and will put India on the megawatt-scale storage projects map.
Apart from these, many international battery companies, especially flow battery companies, are lining up in the market with more island projects likely to be announced. They are also keeping a close eye on rural microgrids and the solar rooftop market.
From a negligible capacity in 2012 to over 1 GW of installed projects as of end-2016, the country’s solar rooftop market has come a long way. Over half of this capacity was added during 2016 alone. Driven by the decline in the cost of solar panels and the operational success of projects set up so far, plans are afoot to promote rooftop solar power generation in a big way across the country. At the central level, SECI is executing a pan-Indian grid-connected rooftop photovoltaic (PV) programme, while at the state level a dozen nodal agencies have announced their rooftop and net metering policies.
The response to SECI’s rooftop project tenders has been tremendous. In fact, the lowest tariff for these projects in the latest round of bidding has dipped to Rs 3 per kWh, which is lesser than the lowest tariff of Rs 4.34 per kWh witnessed in the utility-scale solar project space so far.
The industry is now gearing up for the largest solar rooftop tender of 1 GW released by SECI and other large scale tenders announced by various state nodal agencies. All these developments will augur well for the government’s target of achieving 40 GW of solar rooftop projects.
However, several bottlenecks need to be addressed in order to ensure the economic viability of rooftop projects. Large scale uptake of these projects calls for financial innovation, availability of reliable information on technology and cost structure, a robust feed-in tariff mechanism, power purchase agreement (PPA) standardisation, and clear rules for grid access.
While a large number of discoms are bound to oppose net metering for economic reasons and the fear of losing high-value customers, its effective implementation will be crucial for promoting growth across all user categories.
In spite of the challenges, the solar rooftop segment is bound to grow significantly during 2017 because of the benefits it offers as well as due to the government’s increased focus on promoting the development of decentralised sources of energy.
The industrial and commercial consumers that are among the highest grid power tariff payers in the country will be the biggest adopters of rooftop systems. The adoption of these systems will also increase among government agencies and educational institutions.
While the need to optimise on electricity bills will be the main driver for rooftop solar adoption among industrial consumers, for commercial users, meeting their RPOs and growing awareness about the potential benefits of solar power will lead to the uptake of these systems. Meanwhile, the availability of large open spaces and ready grid connectivity are the key factors for the growing adoption among government agencies and educational institutions.
Recent studies have revealed that solar and wind power resources are complementary to each other, and hybridisation of two technologies can help in minimising the variability, apart from optimally utilising the infrastructure including land and transmission system. The existing wind farms in the country have scope of adding solar PV capacity and similarly there may be wind potential near the existing solar PV plants. Further, industry experts believe that clubbed with battery storage, solar wind hybrids will prove to be an ideal solution especially for remote regions where grid has not reached.
The industry is enthused about the opportunities offered by this segment. Several domestic and overseas players have launched their wind solar hybrid systems while many more are planning to enter this space with innovative and efficient products and solutions.
Realising the potential of the solar wind hybrid segment, the Ministry of New and Renewable Energy has already issued a draft national wind solar hybrid policy with the key objective of providing a framework for the promotion of large grid connected wind solar PV systems. The draft policy aims to achieve wind solar hybrid capacity of 10 GW by 2022. State governments too are looking at promoting these projects. Gujarat has recently announced its plan to launch a solar wind hybrid policy, 2017.
As the policies are finalised, there is a need for the regulator to define a set of guidelines for the determination of generic tariff for wind-solar hybrid systems. Moreover, it is imperative to frame regulations for forecasting and scheduling for the hybrid systems.
In the coming years, the adoption of solar wind renewable hybrids will depend on how promptly the government devices a clear policy and a regulatory framework for such systems, availability of low-cost financing options, and awareness about the benefits of these systems, especially when combined with battery storage.
As solar takes centre stage, the wind energy segment seems to have become highly underrated. However, despite the unprecedented growth of solar power, wind continues to grow and dominate, accounting for the largest share in the country’s renewable energy capacity. In fact, the year 2015-16 saw wind power installations reaching new heights, with about 3,300 MW of capacity coming online. This surpassed the previous record of about 3,200 MW in 2011-12.
The wind power segment witnessed some major developments over the past year that indicates a promising outlook for the segment. Key amongst these include the release of draft guidelines for introducing the competitive bidding mechanism for wind project allocation and the draft national wind solar hybrid policy, notification of the National Offshore Wind Energy Policy, reassessment of the segment’s potential to 302 GW at a hub height of 100 metres, and notification of a new regulatory framework for scheduling and forecasting.
The key objectives of the proposed competitive bidding scheme for the award of 1,000 MW of wind power projects connected to the central transmission utility are to facilitate the supply of wind power from resource-rich states to those with relatively lower wind potential, encourage competitiveness through scaling up project size and achieve competitive prices. If successfully implemented, it will help the industry achieve targeted capacity addition.
Despite the aforementioned developments, an addition of 5-6 GW of capacity on an annual basis to meet the 60 GW target is no small task by any means.
In 2017, innovation and technology will be the catalyst for wind industry’s growth. The wind solar hybrid solutions, digitisation of services, smart grids, innovation in tower and blade technologies and greater research and development (R&D) will help boost growth in this space. Further, these technologies will continue to bring down the levellised cost of energy.
R&D efforts in the wind segment are focused on developing longer, lightweight blades made of carbon and other reinforced composites. By increasing the wind catchment area, these blades can reduce the weight of the turbines and improve economies, making energy harnessing more efficient.
Although conventional fuels like coal, gas and diesel are predominantly used in captive power generation, renewable energy solutions appear to be making significant inroads. A key factor driving this trend has been the need to rationalise energy costs through fuel portfolio optimisation. Capital costs, which were a hindrance to the adoption of renewable technologies, have witnessed a downward trend across technologies. Wind power costs are equivalent to, or lower than industrial power tariffs in some states.
Solar power has registered a steep decline in costs due to a drop in the prices of cells and modules globally. Biomass-based generation, which can be used as base load power, offers a strong business case for agricultural regions, where logistics costs are low. Another driver for the adoption of renewable technologies is the need to meet the RPOs by captive power producers, which includes large corporates.
Globally too, large organisations demonstrated their efforts towards building significant renewable energy capacity. Com-panies such as Google, Apple and Microsoft made huge commitments towards renewables in 2016.
With an increasing pressure on industries to reduce their carbon footprint and in order to meet their energy requirements in an environment friendly manner, in 2017, the industry can expect to see large companies identify creative strategies for sourcing renewable energy that go beyond the conventional PPAs and direct builds.
In step with the current pace of development, there is a growing need to accelerate investments in the renewable space. This is being carried out through innovative financial mechanisms and alternative instruments to lower the cost of capital, and by directing low-cost, long-term commitments from global institutions. A variety of financing mechanisms are, therefore, likely to gain traction in the coming years. These include the credit guarantee schemes, green bonds, equity participation by module suppliers/engineering, procurement and construction contractors, solar park financing vehicles, community pooled projects, securitisation, and crowd funding platforms. Moreover, in the coming years, India will demonstrate leadership in green finance as it launches its first green bank and begins to support local banking options through unique public-private mechanisms.
These new sources of finance are expected to significantly increase the influx of capital, mainly from international financial institutions and reduce the overall cost of capital for the sector.
In sum, based on the achievements of 2016, the country seems to have built a significant ground to accelerate the development of renewable energy. Although, meeting ambitious targets will be a big challenge, the aforementioned trends paint a promising picture for all stakeholders.