India renewables’ potential hit by costs: World Bank

India renewables’ potential hit by costs: World Bank

New Delhi: India could be producing 25% of its power from renewables, but prohibitive costs and regulatory hurdles mean its addiction to coal to fuel rapid growth is set to continue, a World Bank report said on Friday.

India’s energy crunch is seen as a potential drag on its economic growth prospects and Asia’s third-largest economy has struggled to meet funding and generation targets for the sector.

India tripled its renewable energy generation in the past five years to 15 gigawatts (GW) and plans to almost quadruple that by 2022. But only 3 GW added capacity is financially viable given the attractive price of coal, the report said, giving New Delhi a mountain to climb to meet its ambitious targets.

If a global environmental premium is applied to the current cost of coal power generation in India, renewable energy could account for 62 GW -- around 25% -- of the country’s energy needs, at a cost that is financially viable.

“About 3 GW of renewable energy is economically feasible at the avoided cost of coal-based generation," the report said, estimating India’s total renewable potential at 150 GW.

“At the financial cost of coal-based generation, renewable capacity is not financially viable."

The report estimates India would need to spend up to $17 billion in subsidies over the next 10 years to meet its renewable energy targets, adding that dozens of local, state and central regulatory hurdles are a drag on greater expansion.

“India needs to streamline bureaucratic processes for clearances and approvals through the use of light-touch regulation...(to guide) renewable energy projects through the regulatory maze," the report said.

For now, coal is king. Coal and gas account for more than 75% of power generation, and Coal India’s $3.5 billion IPO in October showed how thermal energy is seen as key to power economic and industrial growth in the Asian giant.

India’s overall power deficit stood at 11% in 2009, while the country’s per capita electricity consumption level is one of the lowest in the world.

But steps are being taken by Indian policymakers to curb thermal energy use, and there are efforts in India’s private sector to move into renewable sources of power generation.

Last month, Suzlon Energy, the world’s third-largest wind turbine maker, signed a $1.28 billion order for 1,000 megawatts of wind power projects with Caparo Energy India, while India’s Reliance Power announced the sale of 100 megawatts of solar power in December.

The government will launch an energy efficiency trading scheme in April to reduce emissions intensity by 20 to 25% by 2020 from 2005 levels, as it steps up investment in solar power to achieve the government’s target of 20 GW by 2022.