New Delhi: By 2015, every state in India will need to source at least 10% of its energy from clean sources. Coupled with this is the mammoth solar mission, which mandates 20GW of solar energy in the country by 2022.

Although both are the outcome of the National Action Plan on Climate Change, the move towards renewable energy, experts hold, is more pertinent from an energy security point of view than climate-change mitigation.

“India is a rapidly growing economy and energy demand, and the Indian government is already facing difficulties in facing the growing demand," said Matthias Fawer, vice-president, Sarasin Sustainable Investment, a branch of Bank Sarasin and CIE AG, which focuses on sustainable investments. “In this respect, renewable energy starts making more and more sense."

At this point, carbon reduction is sort of an add-on, he said.

Graphic: Yogesh Kumar/Mint

The Central Electricity Regulatory Commission (CERC) has already asked state counterparts to notify Renewable Energy Certificate (REC) regulations in order for utilities to meet their renewable purchase obligation (RPO). The CERC had issued guidelines on issuing RECs from September to promote green energy. Those who hold the certificates will be able to sell green energy to states, individuals or other trading entities.

Among states, however, only Gujarat, Himachal Pradesh, Maharashtra, Manipur and Mizoram have already notified final regulations. Uttar Pradesh, Uttarakhand, Tamil Nadu, Orissa, Madhya Pradesh and Kerala have notified draft regulations. Some states such as Delhi, Andhra Pradesh, Bihar, Chhattisgarh, West Bengal, Punjab and Karnataka are yet to make a move.

“Some of the SERCs (state electricity regulatory commissions) haven’t specified RPO guidelines so far primarily because of three reasons," said a renewable energy analyst, who did not wish to be identified. “Firstly, yes, there is relatively lower potential in some states and the SERCs need to ensure that the RPO trajectory specified by them is achievable. Secondly, the SERCs need to assess the impact of the RPO on the retail tariffs. Thirdly, the delay is also due to the REC mechanism, which is in the final stage of implementation."

The REC mechanism is expected to be an effective tool for meeting RPO and to some extent this tool will also address the problem of renewable energy potential being specific to certain states and regions. States have been allotted different renewable energy purchase obligations because of differences in potential. While Gujarat met its target for 2009-10, states such as Tamil Nadu came close.

Sixteen state electricity regulatory commissions have specified the RPOs for their licensee distribution companies. They have also notified regulations to determine the tariff of energy generated from renewable sources, according to the Forum of Regulators, a platform which consists of the chairpersons of CERC and SERCs.

India has huge potential for renewable energy sources, especially solar energy. Theoretically, India has solar potential of 5 trillion kWh per year. The potential for non-solar resources is another 85,000MW, according to a recent Crisil Infrastructure Advisory report. Of that, only around 17,220MW has been tapped. This includes 69% from wind energy, 16% from small hydropower units and 8% from co-generation. The remaining 7% covers solar energy and other sources, according to Crisil.

“India is still in its developing phase in terms of installation of solar energy projects and solar photovoltaics (PV) are still very far behind," said Fawer. “According to our estimate, over the next 5-10 years, there will be 100% annual average growth in terms of PV. It makes more sense, especially in rural Indian areas, who don’t have access to electricity."

He added that weaning rural households way from the use of diesel and kerosene as power sources will enable better indoor air health.

Last year saw wind capacity of 1200MW of being installed, while solar was way behind at 80MW, but photovoltaics will catch up, he said. The decentralized use of solar, as well as biomass energy plants, is the most touted solution to millions of households, mostly rural, lacking access to power.

Still, transmission in remote areas remains a challenge because of the low and dispersed capacity of renewable energy plants.

For Ratnesh Yadav, an entrepreneur in Bihar’s hinterland in biomass energy, the bottlenecks are somewhere else.

“The ministry of new and renewable energy has been trying a lot to promote clean energy. They have been giving subsidy but they lack foresight," said Yadav. “We need policy, which will promote entrepreneurs but if we want to scale up, are there enough manufacturers? Biggest problem is we don’t have enough gensets."

At present, his company, Husk Power Systems, operates about 40 plants in Bihar and supplies power to about 20,000 households, including shops.

For Vivek Gupta, director, Saran Renewable Energy Pvt Ltd, which is another Bihar-based biomass energy company, raising capital is the biggest problem.

“Capital is a constraint. The normal banker is reluctant. We have managed somehow but it is hard," said Gupta. “I spent a year to raise money but if the government had helped us, it would have been quicker. Secondly, we set up plants in an area and then the grid came to the same area. The government, in this manner, is also disturbing business plans."

Despite this and international negotiations on climate change practically grinding to a halt, India’s domestic clean energy scenario is abuzz with activity. Till 2020, India has a formidable target.

“The 2020 target is far but is a milestone which makes sense," said Fawer. “Of course, it might need need some adjustments on the way but it’s a realistic goal."

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