India’s big renewable energy push will require a million acres and over US$ 240 billion by 2030
In the small town of Chinsurah, about 40 km north of Kolkata, 33-year-old Shirshendu Bhattacharya, who works in the medical industry and travels a great deal on his two-wheeler, sold his petrol-guzzling bike this August and bought an electric scooter. The reason he switched is the increasing cost of fuel.
“I have calculated that for 100 km, my petrol cost would come to around Rs 200, while my electric vehicle would cost me less than Rs 20 per 100 km. The initial investment is high, but it is economical in the long run,” Bhattacharya said, adding, “Besides, it is eco-friendly.” There will be an additional cost when the battery life ends, but a three-year warranty on the battery makes it a viable proposition.
While his move will result in less fuel being burnt, he will use more electricity, at least 30 units a month. Last summer, Bhattacharya’s family also had to install an additional air conditioning unit to cope with the discomfort of heat and humidity. This, too, would add to the family’s electricity consumption.
In some remote villages of Jharkhand and Meghalaya, rural electrification is still a work in progress, as there are villages where only a handful of houses have power connectivity. In northern India, where a prolonged heat wave caused unprecedented discomfort last summer, the use of cooling facilities can be expected only to rise.
In July, Minister of Power and New and Renewable Energy R. K. Singh informed the Rajya Sabha that 28.6 million new consumers were added under the Saubhagya scheme and the country witnessed the power demand going up “exponentially” in the post-Covid period. Projections for 2030 by the Central Electricity Authority (CEA) estimate India’s installed power generation capacity to double.
According to Surya Prakash Sethi, India’s former principal adviser (power and energy) and core climate negotiator, the county must raise per capita energy usage by three-fold at the very least, as adequate and affordable access to modern commercial energy leads to a higher human development index and capacity to adapt to climate change. Currently, India’s per capita power consumption is one-third of the global average.
Now, if these new electricity demands are not met from renewable energy sources, India will be adding significantly to the problems of global warming and climate change. This prompted the Union government to launch a massive push in 2015 for tapping renewable energy resources, opening a huge market for the green energy sector.
Speaking to Outlook, Sethi says, “The choice for India is not which energy source it should pursue but which other energy resource can she pursue sustainably. India has to explore every option.”
The Achievements
In 2015, the country set a target of having an installed capacity of 175,000 megawatts (MW) from renewable energy resources by 2022–100,000 MW from solar, 60,000 MW from wind, 10,000 MW from bio power and 5,000 MW from small hydro projects.
This was a massive target, given that at the end of March 2015, India’s installed capacity of renewable energy stood at only 39,550 MW. This was 14.55% of India’s total power generation capacity of 271,720 MW. The new target meant the renewable energy capacity had to increase over four times in seven years.
The most striking aspect of India’s roadmap to energy transition was the thrust on solar power. By March 2015, the country’s installed renewable energy capacity stood at 39,550 MW of which 23,354 MW came from wind power, 8,397 MW from bio power, 4,055 MW from small hydro projects and 3,744 MW from solar. This meant the solar capacity had to increase by 26 times.
In the past seven years, the renewable energy share in India’s total power generation mix has gone above 28%–standing at 114,064 MW in July 2022. But this also means, the country could achieve only two-thirds of its 2022 target, with five months to go.
While the country has met its target for bio power and small hydro projects on which little thrust was given, solar and wind, the two pillars of energy transition mission, lagged behind by a mile. In July 2022, the installed capacity for solar stood at 57,706 MW and that of wind at 40,788 MW.
Dissecting the Shortfall
“In one of our recent reports, we have highlighted that India is projected to miss its target for 2022 of having 100,000 MW of installed solar capacity by approximately 27%,” says Vibhuti Garg, an energy economist and India lead at the Institute for Energy Economics and Financial Analysis (IEEFA), adding that India’s wind capacity development has also slowed down in the last few years.
She attributed the anticipated 27,000 MW shortfall from the 2022 solar target to multiple challenges, including regulatory roadblocks, duty-related policies, banking restrictions and access to finances and delayed or unsigned power purchase agreements.
In India, the renewable energy sector is being developed largely by the private sector. Power distribution companies and industrial units with captive power plants are among the main buyers.
If the Union government mandate for obligatory purchase of renewable energy is one of the reasons that prompts power distribution companies to buy power from renewable energy developers, another reason is the low long-term expenditure. According to the Reserve Bank of India, the average electricity price in auctions of renewable energy has been 30% lower than the power purchase agreements of thermal power plants during 2016–18.
However, apart from high initial investment requirements, there are other difficulties. In March 2020, Singh told Parliament that major challenges in solar power development included land acquisition and lack of transmission infrastructure, delays in payments by distribution companies in some states and delays in adoption of tariffs by state electricity regulatory commissions.
“We have nearly Rs 1 crore due from the state electricity distribution company,” says a senior official of a renewable energy developer based in a southern Indian state. They use some of their power production for captive requirements and sell the rest to the state distribution company. The official refused to be identified, unwilling to irk the distribution company.
The solar park project was initiated in 2015 with the specific aim of reducing problems related to land and transmission facilities. But many solar parks themselves got entangled in problems related to unavailability of large tracts of land without trouble.
According to Arul Balan, a renewable energy entrepreneur whose 1.2 MW solar power plant in Pasuvanthanai village in Thoothukudi district of Tamil Nadu was commissioned in July, the competitive lowest bidding process to bring out the lowest power tariff, technically known as ‘e-reverse’ bidding, had discouraged many entrepreneurs, as the lowest bids often appeared to be unsustainable. However, the Centre revoked it in July this year.
“Now that the government has revoked e-reverse auction, more realistic prices should come up and more entrepreneurs should feel encouraged to invest in the industry. However, there are still more policy reforms, including improvement of the power evacuation system and import duties, required to give the industry the desired growth fillip,” Balan said.
Of the 100,000 MW installed capacity that India planned for solar power by 2022, 40,000 MW was to come from grid-connected rooftop and 60,000 MW from ground-mounted projects, including 40,000 MW from solar parks. However, going by the latest data placed before the Parliament in July 2022, of the 57,706 MW that came from solar, only 7,000 MW was from grid-connected rooftop projects and another 10,000 MW from solar parks.
Mission 2030: Land, Finance, Environment
Considering that CEA has estimated India’s cumulative installed capacity in 2030 at 817,000 MW, with 50% coming from non-fossil fuel-based energy sources, non-fossil fuel energy installed capacity should reach about 410,000 MW in about eight years.
Of this, about 19,000 MW is expected from nuclear power and 61,000 MW from large hydel projects. Therefore, the installed capacity for solar, wind, bio and small hydel projects should reach about 330,000 MW. Since there is little thrust on bio power and small hydro, the solar capacity will have to reach around 200,000 MW and the wind capacity around 100,000 MW for India to achieve the target.
This will require huge tracts of land–about 1 million acres for the solar and wind power potential to go beyond 300,000 MW in 2030 from the present 98,000 MW. It takes around 5 acres of land per megawatt of ground-mounted solar power projects and around 4 acre per megawatt of wind energy. At present, 88% of India’s solar power installed capacity comes from ground-mounted projects.
India based its estimated solar energy potential largely on the availability of wasteland. Entrepreneurs, however, have been reluctant in choosing wasteland, because they are usually remotely located and lack infrastructure, ultimately leading to cost escalation. Rajasthan and Gujarat implemented large-scale projects in the past few years, because there were no land-related protests. But recent trends indicate that a section of landowner and cultivators are raising objections to large solar projects for the fear of adverse impact these projects might have on their livelihoods and environment.
After issues of adverse environmental impacts of large solar projects emerged in recent years, environmentalists have also started demanding environment impact assessment before such projects are implemented.
As far as wind energy is concerned, Class I sites–of high wind speed value–are getting exhausted in states with wind power potential. Class II sites will require taller windmills, needing higher initial investment.
There are investment gaps, as well, to plug. According to Garg, India is receiving investments to the tune of US$ 10–15 billion annually against a requirement of US$ 30–40 billion. Speaking to Outlook, Garg points out, “India needs policy certainty and clear targets for renewable energy development till 2030 to achieve its target. Introducing market design reforms like time of day pricing and improving financial health of distribution companies will play a pivotal role in accelerating integration of renewable energy, as India would need flexible generation sources along with renewable energy for maintaining grid stability and reliability at all times.”
Garg also opines that the country needs access to finance at competitive rates. “India, through its updated nationally determined contribution, has shown intent that it is serious about climate goals. International capital perceives this as positive. The country needs to tap a growing pool of environmental, social and governance (ESG) financing, which includes green bonds and other sustainability-linked financing,” she adds.