Renewable targets outstrip policy enablers

Source: The post is based on the article “Renewable targets outstrip policy enablers” published in the Business Standard on 29th April 2023.

Syllabus: GS-3:  Energy

Relevance: About renewable energy targets.

News: Indian renewable energy project developers are facing progressively higher hurdles each year. This raises the question of whether India needs new targets or supportive policies.

About India’s previous renewable energy targets

India set a previous target in 2015 for variable renewable energy installations (VRE) of 175 gigawatts (GW) by 2022. This included 100 GW from solar power, 60 GW from wind power, 10 GW from bio-power and 5 GW from small hydro power.

What is the performance of India on previous renewable energy targets?

According to the government, at the last count, VRE capacity totalled around 122GW, or 30% of the 412 GW of installed power capacity in the country.

Another research points out that only around 68% of the 175 GW target was achieved. Nearly 24 GW of solar and hybrid tenders were issued between 2020 and 2021 but only 13-15 GW of capacities were installed in 2022.

About India’s updated renewable energy targets

India set a new tendering target of 250 GW of renewable energy by the financial year 2027-28. This is over twice the yearly bids that have been called for in the past to set up solar facilities and wind farms.

Most of the record 50 GW of renewable tendering annually over five years will comprise solar, with an all-time high of 10 GW allocated for wind capacity.

Note: India has around 82 GW of renewable capacity addition at various stages of implementation and about 41 GW under tendering stage. This includes 64 GW of solar, 42 GW of wind power and around 11 GW of biomass power.

What are the present challenges associated with renewable energy generation?

-Variable renewable energy tenders issued annually in India have fallen by 30% since 2019.

-There are high import taxes and other barriers such as mandating domestic sourcing of solar panels.

-Lower supply of modules from China, and slow installations indicate the imposition of the ALMM (Approved List of Models and Manufacturers) regime and basic Customs duty of 40% on modules and 25% on cells.

-High taxes have also impacted capital costs. For instance, there is a rise in module prices by 10-15% last financial year from a year earlier and increases capital costs higher by 20-25%.

-Distressed discoms will not be able to absorb such high tariffs in a price-sensitive market such as India.

-The long-term benefits of manufacturing most things locally are also debatable. The programme focus on import barriers and local sourcing rather than on innovation and productivity.

-India’s targets are also colliding with a volatile global environment, higher financing costs and supply chain issues.

If India is trying to get to net zero by 2070, and generate half of its electricity from non-fossil fuels, then the 50 GW a year of tendering goal needs to be supported by policy measures. \

What should be done to bring renewables back on track?

The industry needs policy enablers, grid upgrades and incentives for green financing rather than a focus on installations.

Instead of announcing new goals, the government should study the reasons behind India’s missing targets and the reason for the slowdown in renewable additions.

The government needs to ramp up grid infrastructure to enable the evacuation of high renewable capacity.

India should include streamlining procedures and reducing bureaucratic hurdles such as using e-tendering platforms and reaching out to more local and international companies.