The growth of India’s renewable energy sector depends on specific segments that have either not taken off or have experienced slow progress. Fortunately, these segments have received government attention and policy impetus in recent months. The article highlights the recent developments and the way forward for these key segments…
Solar energy: Residential rooftop solar gets much needed attention
As of July 31, 2024, the cumulative solar capacity, the highest among all renewable segments, stood at 87.21 GW. This includes 67.52 GW from ground-mounted solar plants, 13.40 GW from grid-connected solar rooftop setups, 2.59 GW from hybrid projects (solar component) and 3.70 GW from off-grid solar.
In line with the earlier focus on utility-scale projects and solar parks to make the sector more cost competitive, a shift was expected towards decentralised solar projects (that too residential). Fortunately, in recent months, residential rooftop solar has been getting much-needed attention with the launch of the PM-Surya Ghar: Muft Bijli Yojana. The scheme targets 10 million household rooftop solar installations. The households are expected to receive 300 units of free electricity every month. The scheme has gained positive momentum, with around 1.4 million applications already received.
In August 2024, under this scheme, the Ministry of New and Renewable Energy (MNRE) released new guidelines for the model solar village component as well. While the scheme is aimed at the installation of solar panels on residential rooftops, this component aims to create one model solar village in every district of the country. The total budget outlay for the scheme is Rs 750.21 billion, with Rs 8 billion allocated to this component. Each model village will receive Rs 10 million as central financial assistance.
In July 2024, the MNRE issued guidelines for implementing the “Incentives to DISCOMs” component under this scheme, allocating Rs 49.5 billion for this purpose. In the same month, the MNRE allocated Rs 10 billion under this scheme to incentivise urban local bodies and panchayati raj institutions to set up rooftop solar systems by providing Rs 1,000 per installation. In June 2024, the MNRE introduced guidelines for the registration of solar PV modules and inverters under this scheme.
Overall, it is encouraging to see a strong government push to promote the residential rooftop segment, which previously seemed neglected within the solar sector. Going ahead, consumer awareness and private sector involvement will be key to driving the growth of this segment.
Wind energy: Betting on offshore wind to take off
As of July 31, 2024, India’s wind power capacity stands at 47.08 GW, making it the second highest within the renewables sector. This capacity is entirely comprised of onshore wind projects, despite the country’s potential for offshore wind development, which has long been considered the missing piece in the sector’s growth. However, the tide seems to be turning, with the government announcing several policy initiatives to promote offshore wind projects.
The most significant push has come from the announcement of a viability gap funding (VGF) scheme for offshore wind projects, with a total allocation of Rs 74.53 billion. This includes Rs 68.53 billion for the installation and commissioning of 1,000 MW of offshore wind energy projects — 500 MW each off the coasts of Gujarat and Tamil Nadu. An additional Rs 6 billion is set aside for upgrading two ports to meet the logistics needs of these projects.
This initiative is crucial for overcoming the high initial costs that have hindered offshore wind projects. The commissioning of 1 GW of offshore wind projects is expected to generate about 3.72 billion units (BUs) of renewable energy annually, reducing CO2 equivalent emissions by 2.98 million tonnes per year over 25 years. Additionally, the scheme will help create an ecosystem to support India’s ocean-based economic activities, paving the way for the development of an initial 37 GW of offshore wind energy with an estimated investment of Rs 4,500 billion.
In addition to the recently announced VGF, other key developments include the issuance of the first offshore wind seabed lease tender for 4 GW of projects off the coast of Tamil Nadu, alongside the notification of the Offshore Wind Energy Lease Rules, 2023, which will regulate the allocation of offshore wind sea blocks to developers. A revised strategy for developing offshore wind energy projects has also been introduced, featuring a bidding trajectory aimed at achieving 37 GW of offshore wind energy capacity. In addition, an inter-state transmission system (ISTS) waiver for the segment has been announced for a period of 25 years from the date of commissioning of the project. While onshore wind power projects will continue to be eligible for this waiver up to June 30, 2025, offshore wind projects will now be treated separately and receive waivers up to December 31, 2032, (and graded charges afterwards).
The current installed wind capacity is low compared to the country’s potential. In a written response to the Rajya Sabha on August 8, 2023, the union minister for power and new and renewable energy highlighted that India’s estimated wind power potential is about 695.5 GW at 120 meters and 1,164 GW at 150 meters above the ground level. Additionally, the National Institute of Wind Energy has identified approximately 70 GW of offshore wind potential off the coasts of Tamil Nadu and Gujarat. Further, the government has outlined an auction plan for 37 GW of offshore wind energy capacity by 2029-30, and offshore wind is expected to be a key part of the Central Electricity Authority’s (CEA) National Electricity Plan. It projects that wind installations will reach 72.9 GW by 2026-27 and 121.9 GW by 2031-32 under the base scenario.
Therefore, to fully realise India’s wind power potential, focussing solely on the onshore wind segment is not viable; offshore wind will play a crucial role in achieving this goal. As such, the government’s efforts to advance the offshore wind segment are a welcome move. The industry is now eagerly waiting for the results of Solar Energy Corporation of India’s offshore wind auction, which had been postponed previously.
Bioenergy: Ethanol blending and CBG uptake to revive the sector
As of July 31, 2024, the total bioenergy capacity in the country is 10.96 GW, encompassing various segments. This figure is low compared to the sector’s potential in India, given the availability of surplus biomass and municipal solid waste. To harness the full potential and revive the bioenergy sector, discussions have long centered on adopting new technologies and tapping new markets. This revival was expected with the uptake of compressed biogas (CBG) projects and ethanol blending with petrol. Fortunately, both segments have received proactive support from the government.
The CBG segment is gradually receiving the recognition it merits due to its substantial potential of 40 mmt. India’s considerable CBG production capability is primarily due to the availability of surplus feedstock. Given this potential and the opportunities available, the CBG segment has garnered interest from numerous private and public companies. As of April 2024, there are 68 CBG plants and 194 retail CBG outlets that have been established, and approximately 750 plants are expected to become operational by March 2029. Additionally, large urban waste-to-energy projects, with a combined installed capacity of about 591 MWeq, are generating around 824,647 cubic metres of biogas daily and producing 450,735 kg of CBG each day.
Meanwhile, the country has been achieving ethanol blending targets ahead of schedule, contributing not only to the decarbonisation of the mobility sector but also ensuring an additional revenue source for farmers. Recently, Suresh Gopi, Minister of State for Petroleum and Natural Gas, gave an update on the Ethanol Blended Petroleum (EBP) programme in a written reply to the Lok Sabha. In the period of 2013-14, the production of ethanol blended with petrol was 380 million litres. This surged to 3,023 million litres by 2020-21, marking a sevenfold increase. Additionally, the blending ratio escalated from 1.53 per cent to 8.17 per cent. Oil marketing companies (OMCs) achieved a 10 per cent ethanol blending target five months ahead of schedule in June 2022. In 2022-23, the ethanol blending percentage reached 12.06 per cent, with over 5,000 million litres produced. The Indian government has advanced its target for 20 per cent ethanol blending in petrol to 2025-26, moving it up from the initial goal of 2030.
To facilitate this, the government has developed a comprehensive roadmap for ethanol blending and has implemented several initiatives, such as expanding feedstock sources for ethanol production, providing a profitable procurement price for ethanol under the EBP Programme, reducing the GST rate on ethanol for the EBP Programme to 5 per cent, amending the Industries (Development & Regulation) Act of 1951 to allow free movement of ethanol between states, introducing an interest subvention scheme to boost ethanol production capacity, and regularly issuing expressions of interest by public sector OMCs for ethanol procurement. Moreover, the National Policy on Biofuels, 2018, revised in 2022, has identified various feedstocks for ethanol production, which include heavy molasses, sugarcane juice, sugar, sugar syrup, biomass such as grasses, agricultural residues and starch-containing foodstuff.
Recently, the union cabinet has approved several amendments to the PM JI-VAN Yojana, which provides financial support to advanced biofuel projects. With the approved amendments, the timeline of the scheme has now been extended by five years until 2028-29. In addition, the scope of the scheme includes advanced biofuels produced from lignocellulosic feedstock, that is, agricultural and forestry residues, industrial waste, synthesis gas and algae. In addition, preference will now be given to project proposals with new technologies and innovations in the sector, in a bid to promote multiple technologies and multiple feedstocks.
While the government has been achieving ethanol blending targets before targeted years, it is significantly falling behind the target of 5,00 CBG projects under the Sustainable Alternative Towards Affordable Transportation scheme, which needs to be addressed going forward.
Hydropower: Pumped hydro storage capturing industry’s focus in a bid to support RTC renewables
As of July 31, 2024, India’s small hydro and large hydro installed capacities are 5.04 GW and 46.93 GW respectively. The government has implemented various measures to capitalise on hydroelectric potential, including hydro pumped storage. These measures encompass recognising large hydropower projects (exceeding 25 MW) as sources of renewable energy, establishing a hydro purchase obligation as part of the non-solar renewable purchase obligation, reducing hydropower tariffs, allocating budgetary resources for flood moderation and storage hydroelectric projects, supporting infrastructure development (such as roads and bridges), issuing guidelines to encourage the development of pumped storage projects, waiving ISTS charges for hydroelectric projects and pumped storage projects (PSPs), and shortening the approval timeline for detailed project reports by the CEA.
Within the sector, both industry and government focus and interest appear to be moving towards the establishment of PSPs, which was long due given the need for long-duration storage to support the setting up of round-the-clock (RTC) renewable energy projects.
To promote the segment, PSPs have been declared as renewable sources and budgetary support is being provided. The Ministry of Power has issued guidelines to promote PSP development, outlining four modes for the allotment of PSP sites to developers. Several other incentives, including the ISTS waiver, have also been announced. A central-level policy for the segment is also expected soon, despite the fact that state-level policy launches have already been initiated.
This bodes well for the segment, as it needed significant attention, especially considering the critical role PSPs play in ensuring grid stability amid the increasing penetration of intermittent renewable energy in India.
The way forward
Significant plans are being developed for different renewable energy segments to meet India’s climate goals. According to Shripad Naik, Minister of State for Power, in a recent written reply to the Rajya Sabha, the projected generation capacity additions (both under construction and identified) by 2032 include at least 80,000 MW of thermal, 25,010 MW of hydro, 14,300 MW of nuclear, 50,760 MW of PSPs, 510 MW of small hydro, 143,980 MW of solar and 23,340 MW of wind. Therefore, the total expected capacity addition by 2032 is 337,900 MW.
As per the CEA, the total capacity additions expected in 2022-27 and 2027-32 are 211,819 MW and 291,802 MW, respectively. Capacity additions during 2022-27 will comprise 31,880 MW of conventional capacity addition (coal and lignite with 25,580 MW, and nuclear 6,300 MW) and 179,939 MW of renewable energy-based capacity addition (hydro 10,814 MW, solar 131,570 MW, wind 32,537 MW, biomass 2,318 MW and PSPs 2,700 MW), excluding 5,856 MW of anticipated hydro-based imports. Capacity addition in 2027-32 will comprise 32,080 MW of conventional capacity addition (coal and lignite 25,480 MW, nuclear 6,600 MW) and 259,722 MW of renewable energy-based capacity additions (hydro 9,982 MW, solar 179,000 MW, wind 49,000, biomass 2,500 MW, PSP 19,240 MW) excluding 5,856 MW of anticipated hydro-based imports. In addition, 8,680 MW/34,720 MWh and 38,564 MW/201,500 MWh of capacity additions for battery energy storage systems are being planned for 2022-27 and 2027-32, respectively.
By Sarthak Takyar
