I was at a conference on energy security and, inevitably, renewables was part of the discussion. Just as inevitably, it was the last session of the day. This reflects our belief about renewable energy: we need it, but it’s not critical to addressing our energy problems. I would like to contest that view.
We need to add generation capacity from as many sources as possible. Renewables can help bridge this gap. It has shorter lead times for capacity creation and proximity to load centres.
Renewables can play a critical role in plugging the energy shortfall. Solar can be set up on a disaggregated basis as well. It does not need to be set up in large utility scale, grid connected situations only. It is just as amenable to rooftops. With net metering, and given the solar resource all over the country, we have the clear possibility of using our residential and commercial rooftops for power generation on a distributed basis.
This can initially meet peak demand, and as solar capital expenditure becomes more competitive, it can become the main source of power to homes and offices. We can leapfrog technologically in the power sector much as we did in telecom.
Second, renewables, given the modular and smaller nature, can be used to find off-grid solutions for rural India. Once such models are developed, we can export this to other developing countries. There are many entrepreneurs working on finding such a solution.
Once a renewable farm is set up, the costs are known for the next 25 years. There is no uncertainty in the levelised cost of energy ( LCOE), which in the case of conventional, has to make assumptions about fuel costs many years out. At some point, the world will begin to run out of conventional fuels and prices will rise. As there is no fuel in case of renewables, this does not matter. The entire cost is known upfront. There are no further logistics involved and needs very little maintenance.
In the case of coal, mining has to be carried out and the coal has to be shipped over great distances. As we import more fuel from overseas to meet our needs, we use up foreign exchange reserves, and also open up the cost to rupee variability.
As a country, we are not dependent on anybody else. Our natural resource is inexhaustible and is entirely within our borders. Hence, with solar, there is no dependence on any other country. That puts us in a better position geopolitically.
Last, and perhaps most importantly, is the issue of climate change. The case for renewables in India is mostly made on the basis of energy access and energy deficit — seldom on the basis that climate change is real and we in India must, as all countries must, put our best efforts towards combating climate change. At a national level, the government did indeed enunciate a National Action Plan for Climate Change with a game plan out to 2022. The 12th Five-Year Plan too sets out modest targets in renewable energy capacity.
But at the state level, there is still a poor articulation of the need to set and meet defined renewable targets, or progress towards clear policies. It is not enough to kick the climate-change ball towards developed countries — all countries, including India, must do their bit to reduce emissions — else, the frequency and intensity of unnatural climate occurrences will become worse.
The longer-term effects of the more than 2° C temperature increase, which is almost set in stone, are well documented and will be extremely disastrous for a country such as India. We cannot escape our obligation to do what we can, and changing our paradigm of carbon usage, however difficult given our stage of development, is a must.
However, lack of will and regulatory uncertainty, particularly at the state level, are stymieing the development of investment plans and blocking the entry of equity that is needed to kick-start the renewable sector more actively. Debt financing will follow equity interest.
Today, we are adding 2,000-3,000 MW of renewable energy capacity every year: the 12th Five-Year Plan targets 6,000 MW annually, and to meet our NAPCC targets, we need more than 15,000 MW every year.
We need a different mindset and approach to meet these targets — which is doable provided we plan well.
We will need to improve our grid capacity, make renewables mandatory and enforce such obligations diligently, and we need to ensure that across states, processes are standardised and, most importantly, ensure that tariffs and targets are set independently by the regulators. We must do more on renewables. And, it can be done.
The writer is chairman and CEO, ReNew Power.