According to reports, with climate change emerging as a critical factor in contemporary policy making, priorities in energy security infrastructure planning and development have also changed accordingly. Despite being a relatively new area, renewable energy is becoming increasingly important in India’s energy security matrix. Luckily for the country, it is rich in renewable energy resources and the government has unveiled right policies to tap the potential. Now it is high time the transmission and distribution network was also strengthened to remove bottlenecks in supply of renewable energy, which is infirm in nature. Besides, the government should also encourage development of innovative business models in this segment.
India is the fourth largest country in installed power generation capacity in renewable energy. This means that the country has tremendous potential and it needs to harness energy from such sources. The chief sources of renewable energy in India are wind, solar, hydro, biomass and bio-fuel. But there is huge potential in ocean and tidal energy, too.
As policymakers and the power industry become increasingly aware of the potential of renewable power in aiding the move towards greater energy security, the share of renewables in India’s power mix is likely to increase.
Today, India has 288 million people living without electricity access, according to a November 2011 International Energy Agency report. This means that the energy demand-supply gap will increase over the decade. As India continues to grow at 7-10% annually, industrial growth and higher disposable income with the burgeoning middle-class will drive energy demand, which will lead to the energy deficit.
At the policy level, the National Action Plan on Climate Change has been a major driver for promoting renewable energy in India. On the regulatory front too, there have been several enabling developments.
The central regulator has issued directions for the pricing of major renewable energy sources. The laying down of some key tariff parameters such as economic life, capital cost, return on equity and operation and maintenance is a move towards ensuring a fair economic pricing of grid-connected renewable generation.
The notification of the renewable energy certificate (REC) is another development for the sector, which provided an avenue for renewable energy generators to enhance their returns through trading of RECs. As per the Icra report on India’s wind energy sector, more and more new wind-based projects are likely to take the REC route rather than the preferential tariff route. Even the revised Indian Electricity Grid Code, 2012 is expected to facilitate wind and solar power capacity addition.
The initial challenges facing renewable energy in India have largely been overcome. Generation has become cheaper, efficient and scalable.
However, the companies operating in the renewable energy segment need to continuously innovate to increase efficiencies and further bring down per-unit costs. Also the power generated through renewable energy is considered as infirm and difficult to predict. Then there are technical and financial challenges.
Indian power distributors are becoming a major hurdle in the growth of renewables. There is a need for grid modernisation to withstand more large-scale connected projects. Also, power distribution companies are the main buyers of renewable power and their financial health is deteriorating rapidly.
Power generation is just part of the challenge involved in exploiting India’s renewable energy potential, a major challenge is transmission and distribution of the power to far-flung areas. Providing end-to-end solution remains a difficult. Price fluctuations and supply constraints often affect timely implementation of projects. Due to the variable nature of renewable power, grid integration remains a challenge.
Inflation, high interest rates and other factors stand in the way of growth, too. But the $4.2 billion India invested in solar in 2011 is reassuring for this relatively new sector. Despite these challenges, the combination of policy support, regulatory incentives and the energy-deficit scenario are expected to be key factors that will continue to drive growth of the renewable sector.
Hydro power too has taken giant strides in the recent past. India is endowed with rich hydro-power potential; it ranks fifth in the world in terms of usable potential. However, less than 25% has been developed or taken up for development. Currently, the total installed capacity from small hydro-power projects (less than 25 MW) is 2953 MW, and 914 MW of power projects are under development. Thus hydro-power is one of the potential sources for meeting the growing energy needs of the country. A judicious mix of hydro-power in the energy portfolio can also contribute to energy security, reduction of greenhouse gas emissions, meeting the peak demand and also increased flexibility in grid operation.
In the case of biomass-based generation, the government is looking at forming a National Bio-Energy Mission to push sustainable development of the renewable energy sector. About 70% of India’s population lives in rural areas and has limited access to the grid electricity. This mission can create much-needed opportunities for generation and distribution of biomass-based electricity where grid supply is not possible, feasible or of low-quality.
It is estimated that the total surplus biomass availability in India is around 150 million tonnes, having a capacity to generate 16 GW of power. Currently, the total installed power generation capacity of India is around 2 lakh MW. As per the latest statistics published by the ministry of new and renewable energy, biomass-based power, including bagasse co-generation contributes about 2,790 MW.
Each of these factors in itself and in combination presents new opportunities and challenges for the renewable sector. With the continued support from the government and investor bullishness on the sector, the renewable sector is bound to reach higher levels of adoption and significance for India’s national grid and energy mix.