RECAI: Country focus

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RECAI 41 - Country Focus: India


Change at the top. India’s renewable energy sector has always enjoyed broad political support, but Narendra Modi’s Bharatiya Janata Party’s May election victory is expected to reinvigorate a sector still far from fulfilling its potential. Modi, previously Chief Minister of Gujarat state, home to a third of India’s installed solar capacity, has always strongly advocated a clean energy revolution in India.

Beyond ambition. The challenge ahead should not be understated. India has suffered a power deficit every year since 1984 and while this creates an imperative for new capacity and transmission infrastructure, it also hinders efforts to combat slow economic growth and inflation. The poor financial health of the country’s debt-ridden energy companies has also prompted a US$31b government bailout and weakened state-run distribution companies’ ability to meet renewable portfolio obligations.

Budget woes. Financial pressures have also produced a backlog of more than INR10b (US$ 171m) in subsidy payments owed to wind and solar developers, now facing potentially unviable projects. The Ministry of New and Renewable Energy (MNRE) received just one third of its INR15.2b (US$260m) budgetary allocation for FY14, and the next fiscal year’s budget has been cut by 71% to just INR4.4b (US$75m), potentially jeopardizing state-level rootop solar programs that partly rely on MNRE funding.

No lack of opportunity. Despite the various challenges, it is clear there is significant appetite. Sarus Solar, a consortium of three Canadian firms, plans to invest about US$1b in a 500MW solar park and PV panel production unit in Odisha state. The Tamil Nadu state government is targeting 3.4GW of solar capacity with 700MW operational this year, and Solar Energy Corporation of India (SECI) plans to build a 1GW solar complex in Andhra Pradesh as part of a goal to install 10GW of solar capacity by 2017.

Meanwhile, GE has invested US$24m in Welspun Energy’s 151MW solar plant in Madhya Pradesh, now India’s largest solar PV project and GE’s first major investment in the Indian solar sector. The Government has also initiated a program to construct a series of 4GW mega-scale solar projects across the country as part of a target to install 20GW capacity by 2020. Market forecasts project an additional 15GW of solar capacity by the end of 2018, up from around 2.2GW at the end of 2013.

Wind back in play. After a policy vacuum in FY13 caused new wind installations to plummet more than 50%, the reinstatement of generation-based incentives in 2013 and the anticipated launch of a National Wind Energy Mission (NWEM) later this year should help India install 15GW of new capacity by 2018 as per market forecasts (current installed wind capacity is 19GW, the fifth highest globally).

The Government hopes the NWEM will boost capacity to 100GW by 2020, though this seems overly ambitious. While the NWEM would not involve capacity auctions like the JNNSM, it will focus on strengthening grid infrastructure for wind installations, identifying high wind power potential zones, easing land clearances for projects, regulating tariffs and incentivizing investment.

Looking ahead. Wind power has already achieved grid parity for many projects, and solar is getting close, but India needs to look at how its policies, infrastructure, global trade disputes and macroeconomic stability affect its ability to create a sustainable and competitive renewable energy sector.

Also in this article:

  • Changing policy
  • On a mission
  • Controversy
  • Mixed signals

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   Sanjay Chakrabahti