A recent positive trend, particularly for developers in the commercial and industrial (C&I) space, has been in the greater interest of consumers in renewable energy. They are looking to not only reduce their operational expenses, but also to get serious about their climate commitments. Developers are also exploring new opportunities in this space such as provision of clean energy to data centres, adoption of solar-wind and storage hybrids for the supply of firm power, and green hydrogen development for cement, petrochemical and fertiliser companies. However, developers continue to face the same old challenges. These include power curtailment, delays in signing of power sale agreements, frequent changes and lack of clarity in policies, increase in project costs due to the imposition of basic customs duty and GST. Besides, the Supreme Court order on the Great Indian Bustard and the increase in project costs due to high petrol/diesel prices have left developers more concerned. In an interview with Renewable Watch, Kushagra Nandan, co-founder and managing director, SunSource Energy shares his perspective on key opportunities, challenges and the policy environment. Excerpts…
With a greater push to renewable energy, from both the government and the industry, what changes (positive or negative) in the sector have you seen as a developer in the past year?
Clearly, renewable energy is an important agenda item for the current government. This push from the top meant that renewables became the second most significant source of domestic power in recent years. At the recently concluded COP26 summit, India has further committed to the cause by announcing that it will reduce its emissions by 1 billion tonnes and the emissions intensity of the GDP by 45 per cent by 2030. This means that 500 GW, that is, 50 per cent of its total generation capacity, will come from non-fossil sources of power. The country has therefore committed to serious targets without compromising India’s economic potential. This is real climate action and instills confidence in developers and investors about the sector’s investment environment.
Beyond the targets, the government has come up with a supportive policy framework to facilitate the growth of renewable energy. It has proposed amendments to the Electricity Act, which have been positively received by the industry and could greatly clarify the way forward for power and renewable energy investments. There is also a strong government focus on strengthening the power ecosystem, through the development of robust ancillary and round-the-clock (RTC) markets and building domestic manufacturing capacities. These augur well for the sector’s future capacity enhancements. This will also reduce the dependence on imports and foreign exchange.
Power being a concurrent subject in the constitution, regulatory and policy inconsistency across the states and the centre remains one of the key obstacles in fast-tracking the development of power in general, and renewable energy in particular, despite the positive intent
Post the second wave of the pandemic and the subsequent lockdown, we also find industries taking a close look at their operations from a new lens. Renewable energy is now automatically plugged into their expansion and decarbonisation plans. In terms of investments in the sector, capital markets are increasingly including emissions risks in asset prices, the greening of global supply chains is picking up pace, and venture investments in transition technologies are at an all-time high.
An ever-increasing number of companies now recognise the economic and environmental benefits of renewable energy and shifting investor preferences for climate positive expansion. It is evident from the fact that as part of the United Nations’ “Race to Zero” campaign, more than 3,000 global companies have already made net zero commitments. With 50 per cent of India’s total electricity demand originating from C&I customers, developers see encouraging macro-trends.
In the coming years, what will be the key focus area for renewable energy developers?
Both government and developers are now working towards building capabilities to deliver RTC clean energy solutions, which will mitigate intermittency and enable clean energy transition in a true sense. This will be driven by advancements in storage technology, favourable regulations for renewable energy trading, open access solar and wind projects, work on demand-side management, and increased focus on grid modernisation. As developers, we need to assess our offerings today and work in this direction as in the coming years. We do not expect to see vanilla solar tenders and purchases.
Currently, there is a growing demand for reliable clean power from C&I customers, but large utility-scale projects are seeing a temporary stall. We see more large-scale developers entering the C&I space by building open access solar projects, but also believe that as the large solar tenders make a comeback in the next few months, the focus may shift back to large utility-scale projects. We also expect the sector to see further consolidation due to the growing interest of international investors, and entry of several oil and gas strategic majors. This may also elevate entry barriers for smaller developers to scale up, but they will play a critical role in building a robust ancillary market and also working as EPC partners for larger developers.
At present, what are the biggest challenges or constraints that lie ahead of developers?
Power being a concurrent subject in the constitution, regulatory and policy inconsistency across the states and the centre remains one of the key obstacles in fast-tracking the development of power in general, and renewable energy in particular, despite the positive intent. For instance, the central government has allowed net metering for all consumers up to 500 kW, but most states are yet to confirm the consequential changes in regulations.
What are certain policy and regulatory changes that may be required to create a more conducive environment for renewable energy developers?
In addition to an updated Electricity Act, we need to ensure on-ground implementation of policy advisories. For instance, a National Open Access Registry could help harmonise open access across states since in certain states open access remains a theoretical concept despite them having issued their own open access regulations to meet market reform pressures. Capital is far less of a constraint, but project finance institutions currently do not prefer funding open access projects, for which a separate renewable energy promotion fund can also support further development.
A National Open Access Registry could help harmonise open access across states since in certain states open access remains a theoretical concept despite them having issued their own open access regulations to meet market reform pressures