A solar energy plant in India.
As a big carbon emitter, with national capital Delhi declared as one of the world’s dirtiest cities, India plans a massive increase in investments in the renewable energy, specifically in the solar sector, writes Siddharth Srivastava.
The Paris-based International Energy Agency in its annual “World Energy Outlook” report released last month, ahead of the UN climate change conference later this year has said, peak in global energy-related emissions is achievable by 2020 at no net economic cost. According to the WEO report, this is possible if governments implement five key policy measures: increasing energy efficiency in industry, buildings and transport sector; reducing or banning least-efficient coal-fired power plants; gradual phasing out of fossil-fuel subsidies to end-users by 2030; reducing methane emissions in oil and gas production; increasing investment in renewable energy technologies in the power sector from $270 billion in 2014 to $400 billion in 2030.
As a big carbon emitter, with national capital Delhi declared as one of the world’s dirtiest cities, India plans a massive increase in investments in the renewable energy, specifically in the solar sector. The country has significantly revised upwards its solar mission target to 100,000 MW and 60,000 MW of wind power by 2022. India’s current installed wind power capacity is 22 GW, while for solar it is 4.1 GW. India’s progress in wind capacity additions have been driven by attractive tax incentives for such investments. The focus, however, is on making solar the mainstay of India’s clean energy capacity addition efforts.
According to IEA, India’s energy sector emissions through 2022 will be guided by the targeted 175 GW, an almost fivefold increase from the current installed capacity, of renewable energy capacity addition, target to reduce carbon intensity by 20% to 25% below 2005 levels by 2020, fossil fuel subsidy reforms and increased taxation on domestic and imported coal. India has 11 of the top 20 cities with Earth’s worst air quality, the World Health Organization said in May 2014.
In comments to financial daily Hindu Business Line prior to the release of the WEO report, IEA chief economist and executive director-elect Fatih Birol said the infrastructure and regulatory framework of the country will need to be in sync to make the target achievable. “The current government has the intent. By putting energy at the top of the policy agenda, the Modi government is making commendable progress toward steering India’s energy system onto a more secure and sustainable path. India has set ambitious renewable energy targets. For example, achieving the Solar PV target would require investments of $17 billion annually. This is not impossible, but difficult and challenging,” he said.
India pushes renewable. Clean energy forms a crucial element in Prime Minister Narendra’s Modi’s electoral promise of power for all. Millions in rural areas do not have any access to electricity in India, while urban regions suffer acute shortages.
Solar power, including residential and commercial rooftop installations, are seen as playing a critical role in plugging electricity supply gaps for non-grid areas. Major entities such as Adani Enterprises, Reliance Power and SunEdison have already pledged massive investments to build solar parks around the country, with states such as Gujarat, Madhya Pradesh and Rajasthan with ample supply of sunlight through the year and barren infertile land focus of such projects.
The efforts are beginning to show. According to reports quoting Indian officials, the country is set to add more solar capacity than wind power for the first time this year.
India’s solar capacity additions should exceed 2,500 MW, this fiscal year ended March 31, 2016, overtaking 2,400 MW target for wind. “By next year (2016-17), solar installations will overtake those for wind by several fold,” said Tarun Kapoor, a middle-ranking official in India’s ministry of new and renewable energy. Commenting on the developments, Anish De, a partner at KPMG told news agency Bloomberg, “Solar can become cheaper than wind. As solar is getting more in focus, wind companies in India are looking to balance and expand their portfolios. Globally, wind has been existing alongside solar and growing. The same can happen in India.”
Good intentions can go so far. Nobody doubts that the intentions of the Modi government are good. Corporate interest is high as well. U.S.-based SunEdison recently announced plans to invest $15 billion in India by 2022. “We believe much of the growth in renewable energy in the next 15-years will be from emerging markets, and much of it will be from India and China,” said Pashupathy Gopalan, SunEdison’s top Asia executive. “SunEdison intends to develop solar and wind projects with a total power-generation capacity of 15 GW in India.” Japan-based telecommunications and Internet major SoftBank Corporation, meanwhile, has joined hands with Bharti Enterprises and Taiwan’s Foxconn to invest about $20 billion in solar energy projects in India.
The big question is whether targets and plans can be implemented and scaled up to the levels planned. Doubts remain about financing, an estimated $200 billion of funding needed to bring about the clean energy transformation in the country. Transparent regulatory frameworks need to be formulated and teething land acquisition problems addressed.
The Indian government has been negotiating with some success with several overseas financiers, including U.S. Export Import Bank, International Finance Corporation and German development bank KfW, to back renewable projects. However, the scale of capital required is huge.
Land acquisition is another major bottleneck, especially in states with high population densities such as West Bengal or industrialized states such as Maharashtra, Tamil Nadu and Karnataka where land is scarce and expensive. The process of acquiring land is a highly politicized subject in India as the bulk of the country’s population subsists on agriculture and farming. Despite efforts, the Modi government has so far failed to amend the Land Acquisition Bill that is more industry friendly, as it lacks majority support in the upper house of Parliament, the Rajya Sabha.
What Next? Given the investments being committed and the falling cost of generating solar power that is headed towards grid parity, India’s solar power generation capacity will rise significantly in next few years. Many other factors, will, however, need to be in place for the capacity additions to scale to the levels planned.