According to reports, India is bound to become a major hub for development of renewable energy technologies, manufacturing & R&D. In an interview with K R Sudhaman(Financial Chronicle), Pradhan hints at possible measures to restrict unregulated flooding of Chinese equipment as done by the US. Excerpts:
What are the targets being set for renewable energy sector during 12th plan period? Is the government confident of achieving these targets?
The 12th five-year plan proposals are being finalised. But, we expect much higher level of deployment than that was achieved in the previous plan period. With around, 14 gw renewable power capacity additions done in the 11th plan, the present installed capacity has crossed 25 gw. It accounts for over 12 per cent total installed capacity of electricity. In addition, several million renewable energy household systems and devices have been provided cooking and lighting energy services. We have prepared ambitious plans for renewable power capacity addition and also a large number of off-grid and decentralised renewable energy systems during 12th plan.
Is there scope for wind energy companies to move towards renewable energy certificates (REC)-backed projects rather than relying on tax benefits like accelerated depreciation?
Accelerated depreciation that helped build a wind base in India has been withdrawn beginning April 1, this year. But, wind power investing companies will be eligible for 15 per cent, the rate applicable to plant and machinery. They are also likely to be eligible for a further 20 per cent available to power equipment. Thus, total depreciation benefit will be 35 per cent.
In other words, significant assets like wind turbine generators can be depreciated in three years. And in absolute terms, this is not a small benefit at all. Further, let us appreciate that wind sector has already achieved scale and the market has progressively been moving toward an independent power producer (IPP) model. IPP-based projects do not get accelerated depreciation benefits, instead they avail generation-based incentives (GBI).
The ministry is in the process of continuing this incentive scheme. The emerging situation is leading to a paradigm shift in approach for installation of wind energy wherein the incentive would be generation-linked instead of the installed capacity alone.
Further, where situation permits and the installations are over and above the states’ renewable purchase obligation (RPO) threshold, wind power developers can set up wind power projects under renewable energy certificate (REC) route.
Given the fact that EU markets are no more attractive, is the government planning any major policy measures to boost investments in solar sector?
The prevailing global financial market situation certainly provides investors a very good option to invest in solar energy in India. There is an assured market in terms of solar specific renewable purchase obligations, beginning with 0.25 per cent of total electricity next year, leading to three per cent by 2022. Firms are also eligible for fiscal incentives, depreciation allowance and other benefits.
Solar equipment makers have been raising concerns over Chinese imports. How would the government deal with this?
China is India’s second largest trading partner for identified renewable goods and equipments with strong imports by India. It is also a fact that many of Chinese imported solar panels are comparatively cheap vis-à-vis domestic ware. This has rendered many domestic solar energy firms uncompetitive. Recently, the US government has come out with a directive to impose anti-subsidy duties on imported photovoltaic products from China in the wake of complaints from US competitors that China provides manufacturers significant subsidies. We are taking a close look at the situation and our efforts are to create fair conditions for competition.
With Lok Sabha elections due in two years, there is a view that renewable energy industry may not be able to sustain its growth?
It is absolutely incorrect. There are strong sentiments in favour of larger role for solar energy in meeting energy requirements.
What needs to be done to develop strong indigenous solar cells and a module manufacturing base?
Indigenisation and local manufacturing are seen as very important tools to cut solar power costs and achieve energy security. The National Solar Mission is a policy-driven programme and contains government subsidies. It is seen as an opportunity to develop domestic manufacturing base for entire solar cell value chain. Domestic content condition provides equal opportunities for investment in setting up manufacturing units to both national and international developers.
The national clean energy fund raised a lot of hopes for the sector. But the resources are being diverted for purposes other than clean energy development?
Renewable energy projects have now started getting funding from the national clean energy fund. We are expecting a larger share in the coming years.
Has India missed the opportunity given the fact that China has grown leaps and bounds in wind capacity addition?
There is no comparison between India and China in economy and energy terms. Both countries have different sets of priorities. India’s wind sector is growing steadily and it accounts for around 70 per cent of the total renewable power installed capacity.
What is the update on REC? After completion of REC mechanism for one year, is RPO enforcement regulation in place for all states?
REC market has already started growing in value terms. Over 1.65 million RECs have been issued and around 1.5 million have been redeemed. We expect enhanced REC portfolio beginning this year.
When do you expect trading in solar RECs to take off?
Trading in solar RECs have already taken off. In June, India Energy Exchange traded 336 solar RECs at Rs 12,750 each. This was virtually the first year when solar grid and almost all plants were under one or other kind of power purchase agreement. We expect faster growth in solar REC market this year onwards.
How do you encourage newer and efficient technologies that would lead to cost moderation?
India’s renewable energy programme is confronted with a number of challenges. It is most important to create an ecosystem for developing renewable energy technologies indigenously and facilitate domestic manufacturing. Skewed global distribution of intellectual property rights (IPR) could represent an obstacle to speedier development of renewables. If adequate research and development platforms are established this situation could be alleviated by creating partnerships between IPR holders and local technology expertise. We are also encouraging targeted international technology collaboration.
By when would renewable energy projects become commercially viable and dependable?
We expect them to be fully cost competitive within a short time. Renewable energy is a variable source and if backed by appropriate storage it is quite dependable.
How close are we to using hydrogen from water as a major source of energy?
It is still at a research and development stage that is being vigorously supported by the MNRE.
Is storage a major problem for all these renewable energy products and how do we tackle this problem?
Storage is certainly a major issue. We are trying our best to get advanced storage techniques from across the world.