Renewable energy sources are not equally well distributed across the country. For example, only seven states have significant wind energy potential, and it is the same scenario for other renewable sources such as small-hydro and biomass. The only source that is more evenly distributed across the country is solar energy. Pertinently, it is not just the potential that has determined the progress in the development of these renewable energy segments. Political will, policy direction and implementation, the regulatory framework, tendering trajectories, approval processes, discom health and infrastructure (land and transmission) availability are some of the important drivers that have defined the success and outlook of renewable installations across states.
Karnataka, for instance, restricted its open access policy from March 2019 onwards, which previously allowed bulk consumers to buy power directly from renewable energy projects instead of discoms. Similarly, Uttar Pradesh’s new net metering policy forbids commercial and industrial consumers from supplying excess power from their rooftop solar panels into the grid. Gujarat, which has always been a favourable state for renewable energy deployment owing to fewer land acquisition issues, also faced a temporary slowdown in capacity development in 2019 due to land allocation policy changes. Renewable Watch takes a look at the top states in the country in terms of capacity addition so far, their growth story, key challenges and future outlook…
Karnataka: Taking the lead
Karnataka has shown incredible success in the steady installation and adoption of renewable energy over the past decade. Around 27 per cent of its power generation comes from renewable energy sources. Karnataka accounts for nearly 21 per cent (6.5 GW) of the country’s installed solar capacity, the highest among the states. It is, moreover, the fourth largest wind power market with 4.7 GW of installed capacity. The remainder of its 14.4 GW renewable capacity comprises small-hydro, biomass-based power, etc.
Karnataka’s renewable energy growth can been credited to its positive policy environment. Open access and solar park development policies, and promotion of hybrid wind-solar development, and reduction in coal import dependence (Karnataka does not produce coal) have helped the state to scale up its renewable energy capacity. The Pavagada industrial solar park, reportedly the second largest solar power development in the world, has helped create awareness about opportunities in this space. Additionally, the state has simplified land procurement for solar power plants by identifying land parcels that have not been very profitable for agriculture and arranged to make fixed payments to farmers for a year in exchange of the land. The Karnataka Electricity Regulatory Commission’s (KERC) decision to withdraw the surcharges levied on private entities selling renewable energy to consumers has, moreover, resulted in a huge increase in power production by the private sector.
Yet, Karnataka’s renewable energy sector is not without issues. There are challenges relating to inadequate transmission infrastructure, discontinuation of open access projects since 2019, the state’s decision to repeal the zero-wheeling charges order, etc. These need to be resolved in order to support renewable energy growth. That said, Karnataka’s growth story should be studied and appropriate guidelines formulated so that other states can follow its example and scale up their renewable energy capacity.
Tamil Nadu: Losing steam
Around two decades ago, Tamil Nadu faced a yawning gap between power demand and supply, mainly from industries. To address this demand, favourable policies and attractive incentives were formulated, which, along with the availability of rich resources, facilitated a surge in wind power development in the state. In fact, with around 9,232 MW of capacity as of October 2019, Tamil Nadu tops the states in terms of installed wind power capacity. In 2018-19, it drew 15.04 per cent of its total electricity from wind farms. Meanwhile, with solar gaining ground around 2010, the state witnessed a second wave of renewable growth. As of October 2019, Tamil Nadu is in fifth position in the solar segment with 3,098 MW of capacity.
However, over the past few years, the state’s growth in both segments has slowed down as compared to its peers. The slowdown can be attributed to power evacuation problems and a history of curtailment and payment delays, which are acute in Tamil Nadu because of the large share of renewable energy in its power mix. Stakeholders also say that the state’s energy regulators are hampering renewable energy growth.
Gujarat: Thinking ahead
With an installed renewable energy capacity of 10,031 MW, Gujarat has the third largest renewable energy portfolio in the country as of October 2019. The state, one of the early movers in the renewable energy space, has always been known for its planned approach and effective implementation. In 2019, it released a separate land policy for solar and wind power projects, and another policy for small solar projects. It also launched a few tenders at the end of 2018-19 to revive activity in the renewable energy sector. Of late, Gujarat has adopted a stricter approach to the allocation of renewable energy projects in order to avoid land and transmission-related challenges in the future. While this may have led to a temporary slowdown in capacity development, stakeholders value the state government’s clarity in policy, the favourable payment track record, hassle-free permits and approval processes, and minimal risk of the state discoms refusing to buy electricity from them. Gujarat has taken the initiative to address some of the most critical issues in renewable energy development by concentrating on not just capacity addition but also on transmission and land issues. In addition, it has released forecasting, scheduling and deviation settlement norms for better grid integration.
In terms of future capacity addition, Gujarat has scaled up its renewable energy target from 17 GW to 30 GW by 2030. While this would lead to a dramatic shift in Gujarat’s electricity sector composition, with renewables forming 70 per cent of its capacity and 48 per cent of generation by 2029-30, for developers, it will be a big opportunity to set up the balance 20 GW of capacity in a low-risk regime.
Andhra Pradesh registered the second-largest renewable capacity addition in the past three years after Karnataka. About 5.5 GW of capacity was added across its wind and solar segments between April 2016 and October 2019.
As of October 2019, Andhra Pradesh has around 7,500 MW of solar and wind projects. It is home to India’s sixth-largest installed capacity of clean energy, accounting for around 10 per cent of the country’s green energy capacity. However, of late, Andhra Pradesh has emerged as the most controversial state in terms of setting up new projects and operating existing renewable energy projects in the state. Its move to renegotiate and revisit PPAs of solar and wind power generators disrupted the solar and wind industries, freezing project development and lending activity during 2019. Moreover, it created a ripplie effect in which states like Karnataka and Uttar Pradesh also started questioning the prices set under their PPAs.
While the situation seems to now be getting in control with the central government’s intervention, the Andhra Pradesh government’s move had sent the wrong signal to international investors, with serious implications for India’s ability to attract overseas investments and perception about the sanctity of legal contracts.
Rajasthan: Taking a cautious approach
One of the early movers in the solar power segment, Rajasthan ranks second amongst all the states in terms of its installed solar power capacity. Its solar capacity grew consistently at an average rate of 35 per cent between 2013-14 and 2018-19, to reach 3,227 MW in March 2019 and 4,737 MW (including rooftop solar) as of October 2019. In the wind power space, it has not added any significant capacity in recent years, despite the massive potential. Its upcoming solar power capacity is also owing to tenders issued by SECI, while the state agencies have taken a back seat in bidding activity. The state revised its renewable purchase obligations (RPOs) in January 2019, and specified a non-solar RPO of 8.6 per cent and a solar RPO of 4.75 per cent for 2018-19, significantly less less than the Ministry of Power’s (MoP) targets of 10.25 per cent and 6.75 per cent respectively.
The state has faced a lot of criticism in the past for generation curtailment, unavailability of adequate land and transmission facilities and payment delays by discoms. Thus, these new developments could be due to the state agencies’ preference to undertake planned development of renewable energy projects and transmission capacities. Summing up, Rajasthan is positioning its power sector for greater renewable energy uptake by aligning itself with the right set of policies and regulations. Although this might hit its capacity pipeline in the short term, it will certainly promote more sustainable growth in the future.
Maharashtra: Lagging behind
Over the past few years, the Maharashtra government has been taking several initiatives to promote renewable energy development. The state has emerged as the leader in the rooftop solar segment with the highest number of installations. It came up with utility-scale tenders for both solar and wind projects and received a huge response from the industry. Besides, it is actively taking steps to encourage investments in the bioenergy and decentralised renewable energy generation segments. But overall, the growth in the state has not been as impressive as its potential.
A late mover in the solar energy segment, only 1,661 MW of solar power has been installed as of October 2019, against the targeted capacity of 11,926 MW till 2022. However, many believe that this delay has proven to be in the state’s favour, which is now leveraging the declining solar power prices to meet its target capacity. More than 50 per cent of the total solar capacity in the state has been installed after March 2017. In the wind power space, Maharashtra has the third highest wind power potential of 45 GW, of which it has been able to develop only 4.8 GW. Due to high feed-in tariffs (Rs 3.82-Rs 5.56 per kWh) and zone-based tariffs in favour of developers, capacity addition remained high initially. However, policy uncertainties and transmission constraints slowed down project development. Less than 150 MW of capacity has been added since 2016 as the state discoms did not sign any new PPAs. Going forward, with the recent wind auctions conducted by Maharashtra State Electricity Distribution Company Limited for 500 MW of projects, the situation is expected to improve.
Madhya Pradesh: Beyond traditional
Madhya Pradesh has been continuously striving to increase its power generation capacity in order to meet the state’s growing energy demand. However, unlike other states, the share of wind power has dropped from 13 per cent in 2014-15 to 11 per cent in 2019-20, while that of solar power has increased from a mere 3 per cent to around 10 per cent during the same period. This could be due to the fact that solar power became much cheaper than wind, and the state did not want to put further financial stress on its already burdened discoms. Thus, low-cost renewable energy uptake assumes importance in the state’s future plans.
In the current scenario of aggressive competition for low tariffs and capacity additions across states, Madhya Pradesh has set examples of many innovative scalable investment models for the industry. Breaking out of the traditional mindset and truly reflecting the essence of the Electricity Act, 2003, the Rewa project in Madhya Pradesh looked beyond state-owned discoms and sought to supply solar power to the Delhi Metro Rail Corporation. The state is now planning to supply solar power to another institutional customer, Indian Railways, through its upcoming 1,500 MW solar project in Neemuch-Agar-Shajapur, which will require power to be scheduled to many states across many regions.
In the rooftop space as well, it has taken a calibrated approach in order to ease the project development process. In August 2018, Madhya Pradesh Urja Vikas Nigam Limited’s tender for developing 35 MW of grid-connected rooftop solar capacity under the renewable energy service company (RESCO) model saw bids as low as Rs 1.58 per unit. The state’s next rooftop tender saw a further tariff drop to Rs 1.38 per kWh. The creation of a verified data bank of potential consumers with the help of the Wolrd Bank, pre-clearance of PPA terms with these consumers and the facilitation of finance helped reduce the risk profile of projects and enabled more informed participation by bidders. Apart from solar parks and rooftop projects, the state authorities are actively promoting other renewable energy options such as floating solar, waste to energy and solar pumps.
Telangana: Distributed approach
Telangana’s total power consumption potential was around 6,500 MW at the time of its formation in 2014, but its total contracted power capacity was just 4,500 MW. Thus, the state had a huge power deficit, especially during peak hours of the day. However, the state’s power supply situation has improved dramatically over the past few years with solar power playing a key role in this. The state had only 167.05 MW of installed solar capacity at the time of its formation. In a very short span of time, Telangana has been able to increase its solar power capacity by over twenty one times to reach 3,620.79 MW of installations as of October 2019. The share of solar power in the total power capacity of the state has increased from 1.73 per cent in 2014-15 to 23 per cent. In fact, around 50 per cent of new power capacity additions between 2014-15 and October 2019 have been through solar power. As of today, despite its small size, the state ranks third in terms of installed solar power capacity in the country.
The state’s solar power development strategy has been slightly different from that of other states. While other states auctioned large capacities for solar power park development, Telangana opted for a distributed solar power generation programme. To this end, tenders were issued for solar power plants of capacities in the range of 50 MW to 200 MW to be set up through the distributed route. In this manner, Telangana has already tendered about 3,500 MW of solar plants for private players through competitive bidding. Interestingly, about 1,543 MW of the total solar power capacity in Telangana is on account of projects ranging from 16 MW to 50 MW.
TSREDCO has been making efforts to encourage renewable energy uptake through various tenders and programmes. In June 2019, NTPC Limited gave investment approval for a 100 MW floating solar project at its Ramagundam Coal Power Station in Karimnagar, Telangana. Recently, TSREDCO also proposed to implement a 100 MW floating solar power plant for the existing lift irrigation scheme on a pilot basis on Annaram Barrage. In March 2019, TSREDCO issued a tender for 31.12 MW of rooftop solar power plants under the RESCO model. Based on recent developments, the next extensive solar growth cycle in the state is not in the offing.
Uttar Pradesh: Warming up to renewables
A late mover in the solar power space, the state has in recent years been making significant efforts to promote this energy source with back-to-back solar power tenders and enabling regulatory interventions. With over 1 GW of commissioned capacity as of October 2019, Uttar Pradesh’s solar power uptake may seem limited compared to other states; notably though, almost all of it has been commissioned in the past three years. This is sizeable progress for a state that ranks among the lowest in terms of the ease-of-doing business index.
For a long time, the solar power segment in the state was marked by policy irregularities, poor power supply infrastructure and unavailability of adequate land near major load centres. To make solar power development in Uttar Pradesh attractive for both developers and investors, the state authorities have introduced a slew of measures and revamped their existing policies. The state has revised its land allocation laws and stepped up efforts to expand transmission infrastructure in the solar-rich Bundelkhand and Purvanchal regions. The state authorities are planning to add about 7,250 MW of solar power by 2023-24.
To make up for the limited available solar potential, Uttar Pradesh authorities have been encouraging large-scale rooftop solar deployment through innovative regulatory interventions. For instance, Gautam Buddha University in Greater Noida, which has a sanctioned load of 4,000 kVA, wanted to expand its rooftop solar project from 0.5 MW to 3.34 MW for captive consumption. In a landmark order in November 2018, the Uttar Pradesh Electricity Regulatory Commission (UPERC) allowed net metering for a 3.34 MW rooftop solar project, thus relaxing the provisions of the UPERC (Rooftop Solar Grid-Interactive System Gross/Net Metering) Regulations, 2015. Further, Uttar Pradesh is one of the few states in the country that are allowing large solar open access projects. The state authorities have sanctioned around 500 MW of open access projects as of October 2019.
Meanwhile, with over 2.1 GW of installed capacity, Uttar Pradesh is in the second position in the bioenergy space, after Maharashtra, owing to the abundance of sugar industries in the state. Apart from bagasse-based power projects, Uttar Pradesh is one of the few states to promote the uptake of waste-to-energy projects. While it can be concluded that the state is warming up to renewables, developers in the state continue to face several policy and regulatory uncertainties. Like Andhra Pradesh and Karnataka, Uttar Pradesh too reneged on contracts with investors, leading to developers question the sanctity of PPAs in the state. Such issues only discourage developers from investing in the state.
Punjab: Marching ahead slowly
Punjab has increased its installed solar power capacity by almost hundred times over a span of five years. The small state has 947 MW of installed solar power capacity as of October 2019. This impressive growth in solar power capacity can be largely attributed to the state government’s initiatives to promote ease of doing business. In comparison, despite tremendous potential, biopower and small-hydropower have not seen significant investments in the past few years. Punjab has installed 174 MW of small-hydro and 327 MW of biopower capacity as of October 2019.
A big driver for solar developers to invest in the state is the provision of a single clearance mechanism, with a one-time submission of online applications and documents as outlined in Punjab’s New and Renewable Sources of Energy (NRSE) Policy, formulated in 2012. The NRSE Policy offers several fiscal and non-fiscal advantages to developers including exemption from electricity duty, external development charges or change of land use charges, stamp duty for land registration and land lease, and parallel operation charges. It also eases the process of pollution clearances and land acquisition. Apart from the NRSE policy, the state has a robust intra-state transmission infrastructure in place, and well-developed roads and rail networks. These have created a favourable investment and development environment in the state.
In October 2019, the Punjab government launched a draft version of its renewable energy policy, which aims to meet 21 per cent of its power requirement through renewables by 2030. The policy has set a target of deploying 3,000 MW of solar projects by 2030. While it may not sound as significant a target as compared to the other states, the lower risk profile of working in Punjab makes it an attractive proposition for developers to plan their foray in the state.
By Dolly Khattar