New Delhi: Realizing that India needs to diversify its energy mix, the government is focusing on alternative, renewable energy options.
The high production cost and its effect on state power utilities’ budgets, however, is viewed as a deterrent.
The country is among the top five nations in the world with a renewable energy production capacity of 20,000 megawatts (MW) and an additional 2,500MW of capacity being added every year, according to India’s ministry of new and renewable energy.
Capacity target: A wind farm at Satara in Maharashtra. India has the potential to reach 50,000MW in wind power generation in the next five years. Adeel Halim/Bloomberg
Even as India has to import nearly three-fourths of its energy needs because of a limited stock of conventional energy sources, the country’s renewable energy potential is 100,000MW from solar energy alone and an additional 85,000MW from non-solar sources such as hydro and wind.
The national action plan on climate change recommends India should generate 10% of its power production from solar, wind, hydropower and other renewable sources by 2015, and 15% by 2020.
The Central Electricity Regulatory Commission, the country’s apex power sector regulator, has also come up with guidelines on issuing renewable energy certificates to promote green energy. Certificate holders will be able to sell green energy to states, individuals or other trading entities. States have been allotted different renewable energy purchase obligations.
The interest in developing renewable energy options was evident when nearly 400 applicants showed interest in setting up solar power units that can generate 650MW as a part of India’s efforts to promote clean energy under Jawaharlal Nehru National Solar Mission. The solar mission aims to achieve 20,000MW of on-grid solar power and 2,000MW of off-grid solar applications by 2022.
Even state-owned hydrocarbon companies such as Oil and Natural Gas Corp. Ltd (ONGC), Indian Oil Corp. Ltd and GAIL (India) Ltd were among the applicants, indicating an enthusiastic response.
The eagerness was aided by the regulator’s decision to cap the tariff at Rs 19 per unit.
In an indication of the road ahead for Indian utilities, Arup Roy Choudhury, chairman and managing director of NTPC Ltd, said his company plans to generate around 70% of its electricity from renewable sources by 2032.
India’s largest power generation utility plans to increase its power generation capacity to 75,000MW by 2017 from its current installed capacity of 33,194MW. It plans to generate 35,840MW through non-fossil fuel sources by 2032, when it plans to have a generation capacity 128,000MW.
Experts are, however, cautious about the efficiency of the solar photovoltaic (PV) equipment in the country.
“Currently marketed solar PV equipment attains conversion efficiency of around 10%. Japanese and German technologies are claiming efficiencies between 13% and 18%. Efficiencies have to be balanced against per MW installation costs... Our policymakers would be well advised to offer a handsome cash award or grant for the development of any commercial solar technology, which can bring down the tariff to about Rs 8 a unit,” said Anil Razdan, former power secretary.
There has also been significant interest in wind power generation as well, aided by fiscal incentives including tax breaks for 10 years and depreciation benefits of 80% on investment in the first year of a project’s operation, besides earning carbon credits.
India has a wind power generation capacity of 15,000MW with a potential of reaching 50,000MW within the next five years.
“Wind is an extremely mature technology. It is not the only solution but it is a great solution,” said Tulsi Tanti, chairman of Suzlon Energy Ltd, India’s biggest maker of wind turbines.
The environmentally sound method of producing electricity is also finding new takers from oil and gas companies such as Hindustan Petroleum Corp. Ltd, Bharat Petroleum Corp. Ltd, Indian Oil and ONGC.
“Being a seasonal source, the current annual efficiencies range across locations from about 20-30%. The best global locations give about 40%,” said Razdan. “Given our resources, we would do well to give more attention to accurate wind mapping, micro-siting and design technology to suit low-wind speeds.”
While there is interest to develop renewable energy sources from conventional power generation utilities, funding of such efforts has become a concern.
Although capital investment in renewable energy sources are comparatively higher compared with conventional sources, these projects tend to save on fuel costs.
A case in point is wind power generation. It takes a capital expenditure of Rs 4.2-4.5 crore per MW of power generated through coal-based or gas-based projects, compared with wind-based projects requiring Rs 6-7 crore per MW.
To address funding concerns in the sector, state-owned Power Finance Corp. Ltd plans to form a unit named PFC Green Energy Ltd that will lend to the renewable energy sector.
Overseas Private Investment Corp., a US agency that helps American companies invest abroad, also plans to invest about $820 million in the Indian renewable sector by 2011.