Is India’s Renewable Energy Transition on Track?

The epochal energy transition currently sweeping the world constitutes two fundamental waves of change. Firstly, electricity is becoming the primary mode of energy used in lighting, heating, cooling, cooking, driving and whatever else. Secondly, electricity is being increasingly generated using renewable resources and technologies, ie, solar, wind, biofuels and the like. This opinion piece is about the second transition. The UK, which introduced and mainstreamed coal as the principal energy provider, giving birth to the industrial revolution, shuttered its last coal power plant at Ratcliffe-on-Soar on 30 September. This marks an important milestone in energy transition.In 2023, as per the International Energy Agency's (IEA) Renewables 2024 report, the world added 565 gigawatts (GW) of renewable electricity (RE) capacity, an increase of 60 percent compared to the previous year, taking RE's share in overall electricity consumption to 30 percent. Where is India in this rapidly transforming landscape? India's goal is 500 gigawatts of renewable electricity capacity by 2030. Are we on track for the same?Decentralised Renewable Energy Set to See Increased Jobs in Rural IndiaIndia’s installed RE power generation capacity, as per the data published by the Central Electricity Authority (CEA), at the end of 2014-15, was 39.950 GW, out of a total installed capacity of 275.895 GW (for utilities; excluding captive capacity), a little less than 15 percent of the total capacity. The government announced in 2015 an RE capacity target of 175 GW by 2022 (addition of 135 GW capacity) and increased it in 2020 to 500 GW by 2030.At the end of 2022-23, India’s installed RE capacity reached 125.16 GW (30 percent of the total installed capacity of 416.059 GW). In eight years, India added 85.210 GW RE capacity at 10.65 GW per year, falling short of the 2022 target by about 40 percent. Achieving the goal of 500 GW RE capacity by 2030 would require an annual RE capacity addition of about 54 GW per year for seven years, which certainly is a difficult task.RE capacities have a much lower ‘plant load factor’. Consequently, the RE share of actual power generated is still smaller. In 2022-23, the RE power of 203.555 TWh (terawatt-hour) was 12.6 percent of the total power generated of 1617.905 TWh. While the RE power share has more than doubled since 2014-15 (from 5.6 percent), the annual growth of about one percent a year will not achieve even a 25 percent share of RE by 2030. India's Energised Future: Major Hits for Renewable Energy in Interim Budget 2024The IEA 2024 report informs that the global RE increased from about 5,800 TWh in 2015 to 8,500 TWh in 2023, growing by about 45 percent. China added 350 GW of RE capacity in 2023 alone, which made up more than 60 percent of the global RE capacity addition, and surpassed its goal of adding 1,200 GW capacity by 2030, six years in advance in July 2024 itself. China is expected to add a whopping 3,207 GW of RE electricity generation capacity by 2030.The rest of the world, taken together, is also moving faster than India. The Good, Bad & Ugly: What To Expect in the Climate Arena in 2024Solar power costs per unit have come down massively over the last decade. 96 percent of the global RE capacity in the world in 2022 was producing electricity cheaper than coal. In India also, the auctions conducted by Solar Energy Corporation of India Ltd (SECI), which is the Government of India’s channelising agency for tendering and auctioning RE projects, have been routinely discovering prices cheaper than coal-generated electricity.In November 2020, the SECI auctioned 1,070 megawatts (MW) of solar projects in Rajasthan at a record-low tariff of Rs two per unit (kWh- kilowatt hour), heralding the end of viability gap funding (VGF) for solar power plants. Wind power generation has been competitive for decades. In August 2024, the SECI got a tariff bid of Rs 4.98 per unit for a 625 MW solar power plant — a round-the-clock power plant — described as a floating solar and renewable energy (FDRE) project with guaranteed demand fulfilment ratio (DFR) of 80 to 90 percent per month. This tariff is comparable to the cost of power supplied by a standard coal-based thermal power plant. G20 Global Biofuel Alliance: Advancing Sustainable Energy and India's Role India’s un-reformed distribution sector is the first constraint.All electricity generated in the country, whether by the central, state, or private sector, has to be sold to consumers (industries, households, farmers or any other consumers) through the state DISCOMs. The monopoly of DISCOMs has made electricity distribution and supply highly inefficient technically and costlier commercially. These constraints apply equally to RE power as well, disincentivising investments in RE capacities. The SECI has become the second constraint.It is effectively the virtual monopolist RE capacity auctioneer in India. The SECI has sought to relieve the DISCOMs constraint by ‘buying’ the electricity generated from successful RE bidders, adding a small ‘trading’ margin and ‘selling’ the power to DISCOMs. While this guaranteed payment arrangement brings some assurance to RE generators, in practice, there are delays in payments as DISCOMs delay the payment to SECI. Moreover, no other power generator offers this guarantee arraignment, bringing down overall investment in RE capacity addition. There has been, of late, a noticeable lack of interest in SECI tenders. Instead, quite a few foreign investors are in the market to sell their RE investment portfolios in order to exit. The smothering of captive power generation is the third constraint.Captive RE electricity generators are subjected to high wheeling charges for transmitting their power and have to pay many types of unjustified charges if they want to sell their excess power to others. As a result, despite some forward-looking policy announcements of late, the addition of renewable power capacity in the captive/non-utility sector has been quite small. At the end of 2022-23, captive RE generation capacity was only 7.047 GW (less than nine percent of the total 78.400 GW).Will Escalation in the Middle East Harm the Indian Economy? Last week, newspapers reported that the Singapore sovereign fund GIC was mulling over selling its five billion dollar investment stake in India’s major RE company Greenko. Currently, in complete contrast to the situation a few years back, there is much less talk about new investment flowing in RE projects as compared to the FPIs, pensions, and sovereign funds intending to exit. India added only 18.485 GW of RE generation capacity in 2023-24 (total capacity added 25.699 GW). While this was better than the average capacity addition of 10.65 MW in the last eight years, it was far short of the required run rate of 54 GW per year. There was also a decline in annual growth as well.India is not on track to achieve its own goals of RE transition or becoming any significant player in the global RE sweepstakes.We must make a big move to remove the constraints listed above if we want to be reckoned as a major player in the global RE transition. We have to liberate RE power generation from the clutches of DISCOMs. Let anyone, the power generators, the industry or the consumers, invest in RE generation capacities with complete freedom to use themselves (own/captive consumption) or to sell to any third party or even to DISCOMs. RE generators are subjected to nothing except business wheeling charges to the agency whose transmission/distribution network they use. With this reform, there will be no need for a canalising agency like the SECI to exist. Central and state power producers would also be able to undertake RE investments on their own.India should also permit foreign RE equipment, solar cells, module producers and every other agency involved in the RE power generation chain, including Chinese companies, to establish their manufacturing and service bases here.Only then will India be able to realise its energy transition goals and reap the super-benefits of the RE transition revolution that the world is witnessing.(The author is former Economic Affairs Secretary and former Finance Secretary of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)Is Climate Change Messing With India's Elections? New Report Sheds Some Light

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Is India’s Renewable Energy Transition on Track?

India's goal is 500 gigawatts of renewable energy capacity by 2030.

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