Home / Opinion / Views /  Mint Explainer: India's dash to a clean energy future

Prime Minister Narendra Modi wants India to speedily transition to a future of clean energy, and Sunday's high-profile inauguration of the first solar village at Modhera in Gujarat was the latest instance of this ambition. The government is persuading and incentivizing the private sector to shape India's clean energy future and make it a sunrise sector, just like IT services after the 1991 economic reforms. The public sector has been called upon to join the cause too, with state-run giants such as NTPC Ltd and Coal India Ltd crafting solar plans. However, though India is taking rapid strides in renewables, its mass adoption remains a challenge.

India’s story so far in renewables

The government has committed to achieve net zero carbon emissions by 2070. By 2030, India plans to meet half of its electricity needs from renewable energy. The intent is backed by action, with India already among the fastest-growing renewable electricity markets in the world. It is also among the top countries in overall installed capacity in wind and solar.

About 40% of India’s aggregate installed power capacity comes from renewables, and the government hopes to almost treble it to 450 GW by 2030, with 60% of it coming from solar.

By 2030, India plans to meet half of its electricity needs from renewable energy.
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By 2030, India plans to meet half of its electricity needs from renewable energy.

Solar capacity has surged over 17-fold to 59 GW since Modi came to power in 2014. India already has a wind capacity of 41 GW, the fourth largest in the world, and the Centre has set a wind power target of 140 GW (out of 450 GW) by 2030.

The role of the private sector in renewables

Over half of the country’s installed power capacity, largely thermal, is contributed by public sector entities. But India’s renewables march is led by private developers such as Adani Green, JSW, Tata Power and Renew Power, all of whom have aggressive capacity expansion plans.

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The Adani Group plans to invest $50 billion in renewables by 2030, while JSW hopes to become carbon-neutral by 2030. Tata Power, which operates large thermal power plants, has decided against building new coal-fired plants, and is eyeing carbon neutrality over the next three decades. Reliance Industries too plans to invest billions of dollars in solar projects.

So far, PSU energy maharatnas have been rather conservative in their renewable energy investments. It’s estimated that their investments in renewables (excluding large hydro projects) is a tenth of their investments in fossil fuel projects.

However, all this may change soon. India’s largest power utility NTPC plans to have a renewables portfolio of about 32,000 MW, or about fourth of its overall capacity. Meanwhile, NHPC is planning solar projects in Odisha and Telangana, in addition to its giant hydropower footprint, while mining and power generation company NLC is eyeing wind and solar projects. Even Coal India plans to build a renewable footprint and will set up several rooftop and ground-mounted solar power projects adding up to 3,000 MW by FY24.

Encouragement from the government, market

The government has been incentivizing domestic manufacturing and production of renewable energy equipment. The production-linked incentives (PLI) scheme will infuse another 35,000 crore into domestic manufacturing of solar photovoltaic cells and modules, reducing dependence on Chinese imports. In subsidized schemes such as the Rooftop Solar Programme Phase-II for rural households, it is mandatory to source solar cells and modules from domestic sources. A Basic Customs Duty has also been imposed on import of solar cells. In the wind sector, some of the assembly and manufacturing has to be done in India.

Meanwhile, the government’s commitment to renewables has driven up stock prices of many companies in this sector. Many of them have sizeable debt and weak earnings. However, the market is clearly thinking long-term, as the world makes the transition to clean energy.

Renewables vs fossil fuel power

Average solar tariffs are down about 70% since 2010, and some studies have shown that renewable energy is already cheaper than lowest-cost fossil fuel in India and China, unlike in many other parts of the world. Sliding module and component costs and intensively competitive reverse auction for projects, with well-funded corporates entering the fray, explain this phenomenon.

Also, rooftop solar power has immense possibilities for the future in a sun-baked country like India. It’s not very costly either: A 1 kw rooftop solar system costs 50,000-90,000, and the government offers a subsidy of 40% up to a 3 kW capacity.

Still, challenges remain in the adoption of solar energy on a mass scale. Domestic manufacturing of solar cells and modules is still limited in India , thanks to infrastructure constraints and the absence of a skilled workforce. Wind has lagged behind the solar sector, with capacity only doubling since 2014, due to difficulties in finding land at windy sites, and insufficient power evacuation infrastructure. A highly competitive bidding process for projects has pushed tariffs down to unsustainable levels, and many developers have focused on a handful of states with high wind speeds.

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