Over the past decade, India’s net power generation capacity has increased by 212 GW – nearly the total grid size of France. Roughly 40 per cent of this addition came from renewable energy sources, including large hydro. India’s renewable power installed capacity (excluding large hydro) also quadrupled over the decade to reach 89 GW in 2020. This is no small achievement. At this rate, renewables will outpace thermal power capacity in the years to come. In terms of cost, solar and wind power have already proven to be more viable than coal-based power. The key reasons behind the sharp jump in renewable capacity and steep decline in tariffs are private sector-led development, falling technology costs, auction-led project allocation, and proactive government policies. During this decade, India became the most attractive emerging market for clean energy investment. In BloombergNEF’s Climatescope 2019, the country moved up to the topmost spot.
In this 10th anniversary issue of Renewable Watch, we attempt to chart the growth trends across renewable energy segments in the past decade. The sections that follow highlight the top developments, policies, regulations, technology trends, financing moves and events that marked the decade. We also provide an in-depth performance analysis of all segments in 2020, the year that will be remembered for an unprecedented global health crisis that impacted all spheres of development.
The decade that was – From acceptability to growth
The decade of 2010-20 will be noted most for the transition of the power sector from coal-led development to the mainstreaming of renewable energy. The decade witnessed renewable capacity addition overtaking coal-based project development for the first time in global as well as Indian history.
While renewables witnessed significant overall growth over the decade, the experience varied across segments. The solar segment clearly outshone others in terms of growth and uptake. Having recognised the potential of solar power at the end of the previous decade, the government took several steps to ensure consistent growth in the segment. The Gujarat solar policy of 2009 and the Jawaharlal Nehru National Solar Mission became the stepping stones for this growth. They were followed by solar policies in multiple states, and together these helped the solar industry reach economies of scale in a short span of time, making India the cheapest producer of solar power. In 2010, the total installed solar capacity in the country stood at 10 MW; today, it has reached
36 GW, a steep 3,600 times increase in a decade. Most of this growth took place post 2016 – between March 2016 and March 2019 – with the total installed solar capacity increasing to 30 GW, an increase of five times in three years. Growth in 2020 has been hampered by the Covid-19 crisis, but overall, solar has reached 36 per cent of the 2022 target of 100 GW and currently accounts for 4 per cent of the renewable energy generation mix.
Within the solar power space, the share of rooftop solar has also started increasing over the past few years. Driven by a significant decline in equipment cost and supportive government policies, rooftop solar projects are rapidly finding their way into the energy mix of institutional, commercial and industrial consumers. Residential consumers have, however, been slow to adopt these systems.
Niche solutions such as floating and canal-based solar photovoltaics have also emerged as attractive alternatives to ground-based projects. Canal-top projects were first conceptualised at the 2011 Vibrant Gujarat summit as a means to utilise the space above canals and thus save on the costs and time associated with land acquisition. Soon thereafter, the concept of floating solar plants also emerged. However, actual growth in this space is only set to happen now as cost efficiency starts setting in. The country has abundant waterbodies in the form of reservoirs inside hydro and thermal power plants, as well as a number of lakes and ponds, which present ample opportunities for installing floating solar projects.
Overall, India’s solar story statistics are a testament to the focused approach of the government and the positive response from solar developers and their investors, leading to exponential growth.
In comparison, the wind, biomass and small-hydro power (SHP) segments have been on a downward spiral. Wind power saw steady growth in India for about three decades (1985-2015). The country currently ranks fourth in the world in wind power capacity, with 38 GW of capacity installed as of October 2020, most of which was driven by incentives such as accelerated depreciation (AD) and generation-based incentive (GBI) payments, alongside attractive feed-in tariffs. In 2015, India announced an ambitious goal of installing 175 GW of renewable energy by December 2022. However, it accorded a somewhat modest target of 60 GW for wind as the focus had shifted to solar power. AD and GBI were also eventually phased out. At that point, the domestic wind industry had already matured, with an installed capacity of 25 GW. After several years of industry resistance, the government introduced competitive bidding for wind power project allocation in 2017, which led to a substantial tariff decline. While the auction route helped the wind power segment compete with solar power, challenges related to offtake agreements, and land and transmission constraints slowed down capacity addition. In fact, a number of policy and regulatory missteps over the past few years have led to a situation where achieving even the limited target of 60 GW may prove difficult.
According to the Ministry of New and Renewable Energy (MNRE), wind projects aggregating 13 GW are in the pipeline, at different stages (tendered, awarded, under development), and another 10 GW is expected to be tendered in the coming months to meet the target. However, the fact is that the wind power segment is losing its sheen, with dropping capacity addition, a lukewarm response to new auctions, and a plummeting manufacturing sector. Recent research by Crisil states that wind installations may reach only 45 GW by March 2022.
Biomass generation is yet another segment where the achievement remains below potential. Biomass generation has a potential of 18 GW, though restricted to a few states with strong agricultural sectors. While it has largely underperformed its potential, it is the only segment that has already achieved its target of 10 GW of installed capacity, much ahead of schedule.
A related segment is that of waste-to-energy (WtE). As the country moves ahead with industrialisation and urbanisation, significant waste generation is expected. Since the 1990s, many WtE plants have been set up across the country; however, a number of them have shut down. The primary reason for the closures is the inability of the plants to handle mixed solid waste. Despite receiving financial assistance, the tariffs for WtE projects remain high – around Rs 7 per kWh. After the Tariff Policy was amended in 2018 by the Ministry of Power, tariff is no longer a bidding parameter for awarding WtE projects. Meanwhile, some states are encouraging open access-based power offtake. WtE business models have evolved to include various combinations of tipping fee, viability gap funding and per unit tariffs. Public-private partnership is another emerging model in the waste management space which may prove beneficial.
Finally, the growth of the SHP segment has been sluggish. The segment has fallen short of its target year after year. Future projections do not look too optimistic either, with the segment caught between policy uncertainty and investor reluctance. Dwindling investor interest and lack of government attention indicate bleak times ahead for the SHP segment.
The growth trends may vary across segments, but the overall progress made by renewables in India has been possible largely due to timely energy market reforms and policy decisions that helped the sector compete with conventional sources of power. For instance, AD benefits attracted companies with taxable profits from other industries to invest in clean energy projects. As the sector matured, pure-play independent power producers took the lead in building new capacity. Capital subsidy is still available for segments that are relatively less developed, such as residential rooftop solar and small-scale solar in agriculture. Meanwhile, the announcement of a further decrease in the tax rate boosted investor appetite further.
Renewable energy has also been backed by several support structures. It has priority despatch (must-run status), which means it gets access to the grid ahead of other technologies. Curtailment of renewables generation is not allowed, except when required to preserve grid security. The waiver of interstate transmission system charges for wind and solar projects commissioned before 2022 helps reduce the delivered cost of electricity for offtakers by up to Re 0.65 per kWh.
Timely policies have also helped create demand for renewables and attract investors. India’s large and regular wind and solar auctions are tied to the target of reaching 175 GW of renewables by 2022, excluding large hydro. The Solar Energy Corporation of India (SECI) was created with the objective of ensuring timely auctions and keeping a check on project development under schemes such as the Solar Parks and Rooftop Programme. The MNRE, too, has regularly tracked the tendering trajectory. The government’s renewable purchase obligation trajectory has not been implemented by all states, but it remains a key driver for distribution companies signing long-term power purchase agreements for renewables.
Technology advancements have complemented this policy progression. The decade saw the emergence of bigger and more efficient wind turbines, high performance solar modules, smart grid solutions, cost-effective O&M techniques, remote monitoring applications, and accurate renewable energy forecasting techniques. There has been significant progress on the supply chain front as well, both in terms of cost and efficiency. Take, for instance, the case of solar inverters. There has been a trend of decreasing costs with compactness increasing. A 100 kW inverter can now be squeezed into a few square metres. String inverters have transformed in capacities to 255 kW from 10 kW.
The next decade – From application to innovation
As the energy transition accelerates, the next decade will bring new challenges and opportunities for all the actors in India’s clean power revolution. By 2030, India aims to reach a new goal of 450 GW of renewables. This will require not just a clear policy direction but also a flexible power system capable of integrating such large volumes of variable generation. Apart from battery storage and peak power gas plants, lessons from around the world highlight the importance of demand-side measures.
The market is already experiencing new dynamics. New bids such as hybrid, round-the-clock, peak power supply and open trade of power have opened up avenues for innovation. Better asset management and demand-side management will be key, made possible through data analytics and digitalisation of storage. With digitalised systems, it should be possible to realise the idea of prescriptive maintenance over preventive maintenance. Advancements in the design of solar plants and in maintaining grid stability will also cater to changing regulations and standards, as solar continues to increase in capacity and status.
The 2030 target also brings momentum to the goal of capturing more domestic value from the transition, spelt out in the Make in India strategy. The wind power segment has already seen leading equipment manufacturers open factories to supply to national and international markets.
Accelerating deployment calls for better coordination on land issues to ensure that grid availability matches the commissioning of new power projects. Simplifying land acquisition procedures and digitalising land records would remove a major bottleneck affecting project development across the sector today.
The immediate challenge is to get the state governments to turn around the finances of their electricity sectors. This can be done by a combination of improved governance, higher tariffs, and timely provision of subsidies to ensure free/highly subsidised electricity for agriculture. Wherever this is not possible, getting the private sector to manage distribution would be a proven solution. The success of the private sector in managing distribution in Delhi has enabled the state government to provide subsidy from the budget for free supply of 200 units of electricity per month. The proposal to privatise discoms is thus one big step the industry will be awaiting in the coming decade.
While the government seems to be doing its job, there are several interesting trends emerging on the industry front. Driven by electric vehicles and grid-scale demand, energy storage is emerging as a mainstay, with its costs on a declining trajectory. That is good news for the sector. If 24×7 renewable energy is to become a reality, storage will be a critical part of the growth story.
As India moves towards more decentralised energy resources and intermittent generation with rooftop solar and large-scale wind and solar, electrolysers (with their ability to provide large flexible loads) could prove to be the missing piece in the renewables’ growth story. An electrolyser is a device that splits water into hydrogen and oxygen using an electric current. When this current is produced from renewable energy, it can create green hydrogen. SECI is already working on a hydrogen energy pilot and, if all goes well, India may soon witness a green hydrogen project auction.
There have been innovations in other technologies as well that will impact the unit rate of solar plants. Silicon-based solar cells, for example, are a well-established technology. They may, however, be taken over by perovskite solar cells – synthetic hybrid organic-inorganic compounds – in the coming decade. The unit rate realised from a solar plant also depends on the cost, rating and performance of balance of system items such as inverters and cables. These are maturing and evolving according to the solar industry’s demand.
Overall, the opportunities for innovation in the field of renewables are immense. This decade will see the sector embrace some of the anticipated developments, and it could see some surprising new path-breaking discoveries. In the coming years, it will be interesting to see how India leverages these emerging technologies and what its own contribution to innovation will be, given that it is struggling to develop the manufacturing sector and lacks in research and development. India can, however, become a world leader in developing information technology-based solutions for the best performance of systems.
By Dolly Khattar