India, China surpass US as most attractive renewables markets: EY report

New Delhi: Thanks to strong government support, India has moved up to the second spot in the ‘Renewable energy country attractiveness index’ 2017 from the third position it held for the last two years, said a report released by Ernst & Young.

The report released globally on Tuesday stated that China, which tops the index, and India have surpassed the US.

“The fall—the first for the US since 2015—to third in the ranking of the top 40 countries follows a marked shift in US policy under the new administration,” the report said.

It identified the US government’s executive orders to roll back many of the past administration’s climate change policies, revive the US coal industry and review the US Clean Power Plan as key downward pressures on renewable investment attractiveness.

The report also highlighted that economically viable renewable energy alternatives coupled with security of supply concerns are encouraging more countries to support a clean energy future.

“Kazakhstan (37), Panama (38) and the Dominican Republic (39) have all entered the index for the first time,” it said.

The report noted that India continued its upward trend in the index to the second position with Indian government’s plan to build 175GW in renewable energy generation by 2022.

“The country has added more than 10 GW of solar capacity in the last three years—starting from a low base of 2.6GW in 2014,” the report said.

“In the medium term, as renewable energy penetration rates increase, the Government will have to turn its attention to the ability of India’s grid to manage intermittent renewables, especially around the evening peak, when solar availability falls away. The cost and availability of energy storage technology could dictate how close India gets to meeting its renewable targets,” said Somesh Kumar, partner and leader, power and utilities, EY India.

“Meanwhile, India’s regulators must be mindful of the erosion of electricity market peaks caused by growing volumes of renewables and storage—this can undermine the economics of thermal power plants, risking the stability of the system as a whole,” Kumar added.

The report suggested that the Indian government needs to increase compliance with the Renewable Purchase Obligation (RPO), as well as ensure that India’s distribution companies, many of which are financially distressed, have the capacity to continue to purchase renewable electricity, especially if bid prices level off or rise.

The EY report also stressed that the availability of capital remains a concern.

“The Government could ease rules around tapping foreign debt. Also, the Government’s additional emphasis on photovoltaic (PV) parks will help to plug the gap, but it needs to do more to encourage rooftop solar installations,” the report said.

Rooftop solar has been a weak area for India. Of the targeted 100,000MW solar power by 2022, 40GW is targeted from rooftop solar alone. But its progress has been very slow. India’s total installed rooftop solar capacity is estimated at only 1,247MW (till 31 December 2016) which is about 3% of the targeted 40GW by 2022.

A recent report had even said that India is unlikely to achieve 40GW rooftop solar given the slow pace of the programme.