The introduction of renewable energies in India has so far seen remarkable and rapid growth and is currently at a critical point. Ensuring the viability of future projects and addressing political weaknesses will be critical to maintaining this momentum. India is running the largest clean energy program in the world and aims to reach 175 GW of renewable energy capacity by 2022 to help mitigate the effects of climate change.
The country has an even more ambitious plan to achieve 60% of its installed power generation capacity from clean energy sources by 2030, with the goal of reaching 450 GW of installed capacity to produce renewable energy. As of the second quarter of fiscal 2021-21, India has reached roughly half of its 2022 target for expanding new renewable energy generation capacity. India was ranked third in its renewable energy investments and plans and the fifth largest energy economy in the world by revenue, according to UK-based analyst British Business Energy. However, this groundbreaking growth path comes with some challenges of its own.
India now has one of the cheapest solar power tariffs in the world, according to recent SECI project auctions. What began with high double-digit numbers is now touching record lows. The Indian Minister for MNRE has indicated that tariffs could fall further. In fact, the winning bids at Gujarat Urja Vikas Nigam Ltd (GUVNL) auctions for 500 MW solar projects in December 2020 were Rs 1.99 / unit. This was a shadow among the previous lowest tariff bids at the last SECI auction in November 2020, where the two combined winning bids for 600 MW of solar power were Rs 2 per unit. This raises relevant questions about the long-term viability of such projects.
The falling tariff offers had a further impact on the financing side. Debt funding for clean energy projects has declined as many leading banks have raised concerns about the viability of renewable energy projects that have committed to tariffs less than Rs.3 per unit and are therefore unwilling to loan these developers to grant.
In order for India's renewable energy story to move forward, a number of issues need to be addressed, both at the political level and through technology-based interventions that take into account the uniqueness of renewable energy sources.
Search for solutions
Renewable energies are seen as the perfect answer to the world's increasing energy demand and environmental degradation, but they pose completely new challenges. The most important are the aspects of integrating renewable energies into the grid and ensuring a 24/7 power supply (RTC). One solution that has emerged is the hybrid energy model that India can use to meet its decarbonization goals and reduce electricity costs.
Hybrid energy systems (HES) can help integrate renewable electricity into the grid by overcoming the interruption and, in combination with a battery storage system, make it reliable and ready for dispatch on a supply scale. In connection with battery storage, HES solutions have gained enormous traction in recent years due to these inherent advantages. In developing countries like India, hybrid energy systems can help accelerate the electrification of rural and remote areas because of their lower cost and faster installation compared to building large transmission lines from conventional central power plants.
Also Read: India's unicorn base is six times smaller than that of the US, China, although it remains the third largest in the world
Storage has proven to be a critical but under-leveraged element of renewable energy growth around the world, and India is no exception. A more robust enforcement of the Renewable Purchase Obligation (RPO) mechanism to achieve RTC performance will provide the much-needed boost to the growth of storage systems in the country. A sustained decline in battery prices will further encourage investment in energy storage systems, while greater use could in turn lower battery storage prices.
According to some estimates, the prices of lithium-ion cells going into battery storage systems could fall by as much as 46% by 2029. This is expected to lead to greater acceptance of battery-based energy storage devices. According to research and consulting firm Wood Mackenzie, the global energy storage market will grow 13-fold to 230 GW by 2025. The report also estimates that total energy storage investments will increase from $ 18 billion in 2019 to $ 100 billion in 2025.
As RTC renewables become the norm in India, we are likely to see more front-of-the-meter use of energy storage solutions. Technology will also play a major role as legacy systems cannot meet the new demands of a dynamic and complex network of energy sources. Smart grid systems will serve as crucial support in this transition and enable a more stable and effective integration of renewable energies.
Another development that will stimulate further investment in renewable energy is regulatory approval of a renewable energy trading mechanism. Leading power exchanges Indian Energy Exchange (IEX) and Power Exchange of India have received permission from the Central Electricity Regulatory Commission (CERC) to open the Green Term Ahead Market (G-TAM).
This move should help make renewable energy affordable for consumers while helping inconvenience in meeting their renewable energy purchase obligations (RPO) and allowing renewable energy producers to consume excess electricity as they would on the real-time electricity market (RTM) to sell.
Increasing the share of renewables in India's overall energy mix requires additional political scrutiny and ensures that the interests of all stakeholders – developers, consumers, lenders and government – are taken into account and protected.
There is enough evidence that the country is firmly on its way. More recently, Indian politics has moved towards a more integrated renewable energy roadmap that includes solar, wind, and hydropower, as well as battery storage.
Here are lessons from the state of California, which has taken unprecedented leadership in adopting renewable energy. The state of “sunshine” was a pioneer in weakening the intermittent nature of renewable energies through large battery storage systems for integration into the grid. This was, of course, boosted by an estimated drop in lithium-ion storage battery prices in the US by an estimated 70% between 2015 and 2018. The state is hosting the construction of the world's largest battery storage system at the Moss Landing substation to be fully functional until mid-2021.
California can serve as a model for some of the Indian states – especially Gujarat, Rajasthan, Maharashtra, Tamil Nadu, and Andhra Pradesh. With the abundant availability of solar or wind resources, these states have the potential to become RE hubs in the country.
The laying of the foundation stone for a 30 GW hybrid renewable energy park in Gujarat's Kutch district by the Honorable Prime Minister, who is reportedly the largest of its kind in the world, could pave the way for another move in this direction. This is in line with the government's UMREPP (Ultra-Mega Renewable Power Plants) policy, which began with Gujarat and Rajasthan and has more recently been supported by Uttar Pradesh. These parks can also help solve core land availability and transmission connectivity issues.
Finally, India's path to self-reliance through the Atmanirbhar Bharat Route can best be accomplished by promoting innovation and research and development in the field of renewable energies. This is important to reduce reliance on imports of solar modules, battery modules and other components in a significant and relevant way. Domestic producers urgently need to invest in innovative and innovative technologies that could provide new and more efficient alternatives for the rest of the world. It is a process that needs appropriate regulatory support to provide an appropriate ecosystem for such investments. Building a specific business potential that supports such a volume of production will also take some time before the results become apparent. However, everyone involved needs to take their first steps. This is a strategic imperative to position India as a global renewable energy center.
Deepak Thakur, CEO, Hybrid & Energy Storage, Sterling and Wilson Pvt Ltd. The views expressed are those of the author.
Get live stock quotes from BSE, NSE, US market and current net asset value, portfolio of mutual funds, read the latest IPO news, best performing IPOs, calculate your taxes with Income Tax Calculator, you know them Top gainers, top losers and best equity funds in the market. Like us on Facebook and follow us on Twitter.
Financial Express is now in the telegram. Click here to join our channel and stay up to date with the latest news and updates from Biz.