According to reports, Oil India Ltd plans to invest Rs.600 crore to set up renewable energy capacity in the wind and solar space as it seeks to diversify into clean energy sources. Oil India has already set up a 57.6 megawatt (MW) wind power capacity at an investment of Rs.400 crore and plans to build a 5 MW solar power project in Rajasthan this year.
“We plan to invest a total of Rs.1,000 crore in the renewable sector in the current financial year,” said Ananth Kumar.
The investments will help the company take advantage of the government’s plans to revive interest in the wind energy sector by reintroducing tax and other incentives that were removed last year. India has reintroduced generation-based incentives aimed at discouraging investments that were merely aimed at availing of tax concessions.
There has been a considerable interest in India’s renewable energy space as India moved to so-called feed-in tariffs that effectively compensate generators of wind and solar power by setting a price per unit that covers their cost and guarantees a certain rate of return.
India has an installed power generation capacity of 225,793.10 MW, of which 27,541.71MW, or 12.2%, is fuelled by renewable energy. Of this, 19,618MW is wind power capacity.
While there is interest in developing wind energy sources, funding has become a concern. It takes capital expenditure of Rs.4.2-4.5 crore per 1 MW of power generated through coal-based or gas-based projects, while wind-based projects require Rs.6 crore per 1MW.
According to the Renewable Energy Country Attractiveness Index, published by EY in May this year, India slipped from fourth to eighth position. The factors for this drop revolve largely around high entry barriers for foreign investors and increasing cost of financing.
“Renewable energy anywhere in the world has had government support to help it grow. This has also been the case with regard to Wind Power in India. The encouragement to wind power began substantially in the 1980s. So, in that sense producers at the moment are clearly reaping benefits of a longer story that has emphasized power generation through wind power,” said Amit Kumar, director of the energy environment technology development division at The Energy and Resources Institute.
The National Action Plan on Climate Change recommends India generate 15% of its power from solar, wind, hydropower and other renewable sources by 2020.