By Sarthak Takyar
India maintained its renewable energy growth momentum in 2023. The sector witnessed several positive policy and industry developments, laying the groundwork for promising growth in the coming years. This article outlines the progress made in 2023 and explores the key trends that are expected to shape the sector going forward…
Sustained renewables growth; positive bidding trajectory to enhance investor confidence
As per the International Renewable Energy Agency’s Renewable Capacity Statistics 2023, India ranks fourth globally in renewable energy (133,886.18 MW) and wind power (44,736.24 MW) installed capacity and fifth in solar power capacity (73,318.49 MW). According to the Ministry of New and Renewable Energy (MNRE), approximately 13.5 GW of renewable energy capacity was expected to be installed during calendar year 2023, with an investment of about Rs 740 billion.
To ensure that the momentum continues in the coming years, the MNRE has prescribed an annual bidding trajectory for renewable energy projects. Bids for 50 GW per annum, with at least 10 GW per annum of wind power capacity, are to be issued each year from 2023-24 to 2027-28. During financial year 2023-24 (as of December 12, 2023), bids for 35.51 GW have been issued by four renewable energy implementing agencies – the Solar Energy Corporation of India (SECI), NTPC, NHPC and SJVN. Going forward, virtual power plants are also expected to gain traction, with the increasing use of power markets.
A key policy move of 2023 that will define 2024 will be the renewable purchase obligation trajectory from April 2024 to March 2030, notified by the government for designated consumers under the Energy Conservation Act, 2001. The minimum share of renewable energy is set to progressively increase over the years. In the first year, 2024-25, 29.91 per cent of the total energy must come from renewable energy sources. This will rise to 33.01 per cent in 2025-26, 35.95 per cent in 2026-27, 38.81 per cent in 2027-28, 41.36 per cent in 2028-29 and 43.33 per cent in 2029-30.
Significant strides in utility-scale solar; need for similar growth in the decentralised segment
The solar segment continued to demonstrate impressive growth in 2023. As of November 2023, the MNRE has approved 50 solar parks with an aggregate capacity of around 37,490 MW across 12 states. Of the total sanctioned capacity, 10,401 MW has been commissioned, including 284 MW added in 2023. In the rooftop solar space, about 741 MW of capacity was installed under the grid-connected rooftop solar programme from January 2023 to November 2023. Overall, an additional approximately 2.77 GW of rooftop solar capacity was installed across different segments, with or without central financial assistance, in the past year.
The solar pump space also attracted the government’s attention in the past year. The PM KUSUM scheme was expanded with revised targets of 4,900,000 pumps to be installed/solarised under Components B and C. Several amendments were introduced in order to simplify the policy and thus promote uptake. For instance, the guidelines were revised to simplify the land aggregation process in Component C. In addition, the scheme was amended to remove the mandatory state share provision and extend the exemption of the domestic content requirement (DCR) under Component C till March 31, 2024. The introduction of distributed renewable energy in the RPO trajectory reflects the government’s commitment to further promote the segment.
Domestic solar manufacturing initiatives yield positive outcomes; greater private participation expected
In the past year, domestic manufacturing of solar components remained a key focus area for the government. However, the policy measures in this space proved to be a double-edged sword. The Approved List of Models and Manufacturers, one of the policies that led to increased government control, was exempted for projects to be commissioned by March 31, 2024. As mentioned earlier, the DCR was also waived for select segments. Meanwhile, positive policy tools, such as the production-linked incentive (PLI) scheme for high efficiency solar PV modules received an enthusiastic response from the industry. In April 2023, letters of award were issued for setting up 39,600 MW of fully/partially integrated solar PV module manufacturing units under Tranche II with an outlay of Rs 195 billion.
Government efforts in this space have led to positive outcomes such as the commencement of thin-film solar PV module production at First Solar’s facility at Sriperumbudur, Tamil Nadu. Solar PV module production also started in ReNew’s facility at Mahindra World City, Jaipur, Rajasthan; Grew Energy’s facility in Dudu, Jaipur; and Tata Power Solar’s facility in Gangaikondan, Tamil Nadu. Several other players announced joint ventures and expansion plans in the solar manufacturing space.
As per the All India Solar Manufacturers Association, Indian solar manufacturers exported 3,900 MW of solar modules in 2023 and have the potential to expand to 30 GW per annum, earning $7 billion-$8 billion in foreign exchange. The PLI scheme is likely to help add another 40 GW of module manufacturing capacity by the end of financial year 2024-25. This expansion strategically prioritises backward integration, ensuring a reliable supply chain for domestic solar installation, projected to reach upwards of 30 GW per annum.
Sluggish growth in onshore wind despite government efforts; focus to shift to offshore wind
In 2023, the government made concerted efforts to revive the onshore wind power segment, which was grappling with sluggish installations. In the segment, the government prioritised capacity additions over efficiency as it transitioned from reverse auctions to closed bidding, aiming to bid a cumulative capacity of approximately 8 GW each year from January 1, 2023 until 2030. Further, to ensure the development of wind energy capacity in all eight windy states, each bid will be composite, consisting of state-specific sub-bids. The power generated from the capacity established through each state sub-bid will be pooled and offered at a pooled tariff to all procurers. The pooling process will be as per the Electricity (Amendment) Rules, 2022.
Meanwhile, the government is turning its attention to the offshore wind segment. Among its initiatives in this segment during the past year was the issuance of a revised strategy for the development of offshore wind energy projects, with a bidding trajectory for 37 GW of offshore wind energy capacity. In addition, the central transmission utility drew up plans for the transmission infrastructure required for 5 GW of offshore wind projects each off the coasts of Gujarat and Tamil Nadu. Other notable policy amendments were the notification of the Offshore Wind Energy Lease Rules, 2023, to regulate the allocation of offshore wind sea blocks to developers, and the agreement between the Gujarat and Tamil Nadu governments to purchase power from the initial offshore wind projects at Rs 4 per kWh.
Going forward, the country’s installed wind capacity is expected to reach 68.1 GW by 2027 in an ambitious scenario, 63.6 GW in the base case and 59.3 GW in a conservative scenario, according to the Global Wind Energy Council India. In the wind repowering space, the country is still moving at a slow pace to realise its full potential, with fundamental issues regarding business models remaining unresolved despite policy initiatives. In 2024, industry associations and policymakers may discuss the need for a PLI scheme for select components of wind turbines.
India drives global initiatives in the bioenergy space but domestic issues remain unresolved
In the bioenergy space, an annual installation target of 46,000 small biogas plants was allocated for financial year 2023-24 to the designated programme implementing agencies of states. During the year, 105 MWeq of biomass and waste-to-energy (WtE) projects have been installed. Moreover, 12,693 small biogas plants, 1.107 MWeq of medium-sized biogas plants, and more than 180 tonnes per hour capacity of briquette/pellet projects have been installed. The ever-increasing height of garbage, particularly at Delhi’s landfills, and the associated health hazards highlight the need for more WtE plants. However, the progress in this space has been quite slow.
The total biomass potential available in India is 754.50 million tonnes, according to the “Evaluation Study for Assessment of Biomass Power and Bagasse Cogeneration Potential in the Country” released by the Administrative Staff College of India, Hyderabad, in March 2021. Notably, around 75 per cent of this potential, equivalent to 525.98 million tonnes, is being utilised, leaving a surplus of 228.52 million tonnes. The surplus is often burned, leading to air pollution. Therefore, steps are being taken by the government to collect the excess biomass and use it for producing bioenergy or co-firing it in thermal power plants (TPPs). In 2023, the government implemented initiatives to discourage biomass burning and promote its conversion to bioenergy, focusing on 20 districts in Punjab, Haryana and Uttar Pradesh using bio–CNG-driven vans. Approximately 164,976 metric tonnes of agricultural residue-based biomass has been co-fired in 47 coal-based TPPs as of May 2023. Last year, the Ministry of Power also revised the biomass policy of 2021, and made it mandatory for TPPs to implement 5 per cent biomass co-firing, starting from financial year 2024-25. This obligation will increase to 7 per cent in financial year 2025-26. Despite these efforts, the issue of stubble burning persists, contributing to the ongoing air pollution problem in north India.
According to the International Energy Agency (IEA), government policies such as the National Bioenergy Programme can help the segment produce 130 million tonnes of oil equivalent or about 15 per cent of India’s total energy demand by 2040. The overall biomass market is slated to reach Rs 32 billion by 2030.
The Indian biofuel segment also holds significant potential, with 2024 poised to be a defining year for the segment. According to IEA, emerging economies led by Brazil and India are expected to drive 70 per cent of global demand for biofuels over the next five years. India launching a “Global Biofuels Alliance” at the G20 meet in New Delhi bodes well for the segment going forward.
Higher than expected progress in electrolyser manufacturing and green hydrogen production; slow progress in hydrogen mobility
The Indian green hydrogen segment underwent a transformation in the past year. In January 2023, the central government approved the National Green Hydrogen Mission with an outlay of Rs 197.44 billion. Of this, Rs 174.9 billion was earmarked for the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme. Two financial incentive mechanisms were proposed under the programme for the domestic manufacturing of electrolysers (Component I) and for the production of green hydrogen (Component II). In 2023, the MNRE notified the scheme guidelines for the implementation of both components and announced tenders. Auctions for both components took place in January 2024. The government also notified hydrogen standards for India. Similar industry and government enthusiasm and progress are yet to be seen in the hydrogen fuel cell space. This segment is expected to face greater challenges going forward given the heavy competition from electric vehicles.
RTC renewables with energy storage to compete with thermal, hydro and nuclear power to meet baseload requirements
A key conflict in 2024 and beyond will be the aggressive promotion of TPPs while also promoting renewables. The development of TPPs may be considered a practical move given the need for a reliable energy source that can fulfil the baseload requirement. In a written reply to a question raised in the Lok Sabha on December 14, 2023, the union minister for power and new and renewable energy noted that the country’s energy security cannot be achieved by renewable sources alone. Hence, the dependence on coal-based generation is likely to continue till cost-effective energy storage solutions are available.
The required coal-based installed capacity will be 283,000 MW by financial year 2032 as against the current installed capacity of around 214,000 MW, as per the generation planning studies carried out by the Central Electricity Authority. In order to achieve the projected requirement by 2032, an additional 80,000 MW of coal/lignite-based capacity is being planned. Against this requirement, 27,180 MW is under construction, 31,010 MW is at advanced stages of planning/development, and 29,720 MW capacity is further identified for development to meet the minimum target of 80,000 MW of coal-based capacity addition by 2031-32.
To meet the baseload, 18,033.5 MW of hydro capacity (including stalled projects) is also under construction and the total anticipated hydro capacity addition by 2031-32 is expected to reach 42,014 MW. In addition, 78,935 MW of renewable energy capacity is currently under construction, with an anticipated capacity addition of 375,279 MW by 2031-32. In the nuclear energy space, 8,000 MW of capacity is under construction with a total anticipated nuclear power capacity addition of 12,200 MW by 2031-32. Thus, the total capacity under construction stands at 132,148.5 MW and the total anticipated capacity addition by 2031-32 is projected to be 517,403 MW.
Going forward, it is crucial for policymakers to debate on the preferred source of energy to serve as the baseload. The current installed nuclear power capacity is just around 2 per cent of the total installed capacity, even lower than the total biopower capacity of the country. Is India missing out on the opportunity to establish a clean baseload and achieve self-reliance at the same time by underutilising its huge thorium deposits? This question calls for attention in the coming years.
According to the National Electricity Plan, the projected all-India peak electricity demand and electrical energy requirement is 277.2 GW and 1,907.8 BUs for the year 2026-27 and 366.4 GW and 2,473.8 BUs for 2031-32, respectively. Meticulous planning for all energy sources will, therefore, become crucial, especially as the share of intermittent renewable energy increases in the energy mix.
