Future of Renewables in India

Solar panels installed in India (Credits: Pixabay)

Energy is a key indicator for defining the living standards of citizens of any country and is quintessential in improving it. India accounts for 18 % of the world population and yet only uses 6% of the world’s primary energy.

A cursory study of the energy security in India reflects that due to environmental concerns off late and its commitment towards green energy it cannot utilise its abundant source in nature of coal as effectively as it would have loved to and is heavily dependent for imports for its reliance on oil & gas. This is however heavily subjected to several factors of ‘oil diplomacy’ and power tussle in the global arena.

Renewables in India possess a great potential to be the game-changer in terms of energy access and security. Although the central legislation is pending in Parliament to regulate renewable since 2015 yet there has been significant investment pertaining to renewables, more specifically in solar. It can be attributed to India’s ambitious efforts in soliciting the creation of International Solar Alliance (ISA) however experts have mooted that the geographically solar rich territory of India makes it desirable location for investment which the government over years have realized and placed its policy upon. Whatsoever be the reason for the growth of solar market and channelization of investment, in a considerably small amount of time India has emerged as the cheapest producer of solar energy worldwide and a lucrative place for foreign investment leading to 100% FDI in the sector and total of 4826 US$ investment since 2014.

The production has grown by leaps and bound but the price of solar energy has reduced drastically from Rs 17 when in 2010 first National Solar Mission was launched to Rs 2.44 in the latest bid. Solar Energy Corporation of India (SECI) has been instrumental and is to be credited along with the government’s effective PPA (Power Purchase Agreement) Model which made it effective and possible by competitive bidding adopted by the state. However, lately, the business environment for the development of Solar as primary renewable in India has been compromised due to trade disputes and political stunts, mostly because of the lack of forefront policy on renewable.

Wind energy farm in India (Credits: Pixabay)

The trade ministry levied 25% duty on import of solar panel from China and Malaysia with a pretext of the domestic players are at disadvantage and are not able to compete with foreign market in India’s nascent industry as these imports have had serious injuries to domestic players and were in public interest to impose safeguard duty. However, in a year since the imposition, there have been reports which identify the inability to propel the domestic market instead has un-intended stalled the major projects to circumvent the two years’ time frame as Bloomberg reports.

It has also been reported that since this imposition, the prices of solar panels and consequently power, rose high. It didn’t only hurt the consumer’s pocket but also investors in the construction contract. Private players like Waree Energies Limited, Jupiter energy limited has found another way to deceive the tariff safeguard by importing solar panels from Southeast Asian countries such as Thailand & Vietnam. These panels are way cheaper than the domestic solar panels and although they don’t match the cheap price offered by china yet the pressure on the purse is negligible.

Tariffs are approved by respective SERCs once it has been decided by the way of competitive bidding under the PPA with SECI. On 1 July 2019, the YS Jaganmohan Reddy government in Andhra Pradesh released an order “to review and renegotiate exorbitantly priced wind and solar projects” which was their election promise. This affects in as much as, three solar PPAs with NTPC and SECI and other 21 wind power sale agreements with Suzlon and Axis at varied stages from Construction to commissioning cumulating more than 5.6 GW at stake. This attempt to renegotiate and slash the prices in the garb of unfair advantage to some as it was not decided through competitive bidding, has no legal standing and may create distrust among the investors as it does not offer stability.

Narendra Modi laid the foundation stone for ISA in Gurugram, Haryana in January 2016 (Credits: ISA website)

Amidst all these industrial potentials and challenges, the debate goes back to whether there is a need to have an ‘only’ renewable specific regulatory framework to monitor the progress of the sector? With market transforming at such a rapid pace, a dedicated policy structure for renewables can capture the potential growth opportunities, streamline investments, address the conflicts arising within the industry and offer a roadmap for sustained growth.

Anubhav Kumar Author

Author is Managing Editor at The Analysis.