Focus on Renewable Energy

Why in news?

India will host the second edition of RE-Invest, its largest investor conference for renewables soon.

What is the objective?

• The RE-Invest series of Investors’ Meet & Expo will be hosted by the Ministry of New and Renewable Energy (MNRE).
• It showcases India’s renewable energy potential and the Government’s efforts to scale up capacity to meet the national energy requirement in a socially, economically and ecologically sustainable manner.
• This edition will also host the First Assembly of International Solar Alliance (ISA) and the 2nd Meeting of Indian Ocean Rim Association (IORA) Renewable Energy Ministers.

What is the current RE status?

• India announced a target of 175 gigawatts (GW) of renewable electricity capacity.
• Renewable power installed capacity has already reached over 70 GW and over 40 GW renewable power capacity is under construction/tendered.
• Globally, India stands 4th in wind power, 5th in renewable power and 6th in solar power installed capacity.
• Trends suggest that India’s target will not only be achieved but exceeded.
• Tariff based competitive bidding process has increased competition and lowered India’s RE tariffs, among the lowest in the world.
• Yet, annual investment is just 3% of the global total which has averaged $10 billion in the last four years.

What should be the focus areas?

• Decentralisation – There is a need to increase demand for renewables not only at the central level but also at state, district and city levels.
• Demand could be aggregated at the household level so that bottom-up, demand-driven RE growth be strengthened.
• Power purchase agreements - The rapid fall in RE tariffs has created expectations that each subsequent round of bidding will bring prices down further.
• While the resultant cheap RE prices are advantageous for discoms, utilities get lower financial realisations than they previously received.
• But the larger concerns that affects power utilities like poor procurement practices, system-wide inefficiencies, and cross-subsidised electricity still persists.
• This makes the utilities reluctant to sign PPA’s or failing to honour the discovered prices resulting in failed contracts.
• PPA’s have to be structured in a way that it balances transparent reverse auctions and the state-imposed tariff caps, so that it benefits both power producers and the consumers.
• Risk assessment – Currently, there is no compensation for RE developers if the grid doesn’t absorb variable renewable electricity.
• Hence, to reduce curtailment risk, a ‘grid integration guarantee’ is being designed to apportion risk across not just developers but also grid planners/operators for transmission related issues.
• With proper risk assessment, it should eventually lead to insuring developers against the curtailed power.
• Safeguard duties – SC recently lifted a stay on proposed duties of 25 per cent on solar cells and panels imported from China and Malaysia.
• On one hand, increased costs of these equipment could increase generation costs and make previously bid tariffs unviable, while on the other the government is also capping RE tariffs.
• This creates double burden on the project developers.
• Safeguard duties could give a temporary respite to domestic manufacturers, but cannot alone build a robust manufacturing base.
• Domestic manufacturing capacity should be boosted while reducing over-dependence on cheap/subsidised imports from China.
• This needs focus on the entire manufacturing value chain, including cells, modules, wires, inverters, and balance of systems.

What more could be done?

• India’s RE focus should not be restricted to solar photovoltaic and onshore wind.
• Emerging ones like Solar thermal technologies needs to be explored which reduces the need for storage and could increase domestic manufacturing value addition.
• Financial instruments that could de-risk projects or give easier access to credit for rooftop owners/developers should be developed.
• Utilities could develop new business lines to integrate RE, distributed generation and electric vehicle charging.
• Decarbonisation of the industrial sector could be done by leveraging industrial sector to invest in renewables.
• RE-Invest is an opportunity to reaffirm our commitments to targets, respecting contracts, reducing losses, and encouraging innovation.
• This will make India as the largest clean energy market in the world to operate on market-friendly principles.

Source: Business Standard