The global shift to RE
Two burning questions for India and the world are how fast the use of renewables and related clean energy technologies can scale, and to what extent can they mitigate the increase in fossil fuel use. As the second-largest coal-producing and -consuming country on earth and the third-largest emitter of greenhouse gases, India’s transition from carbon-intensive resources is a critical front in the global climate change fight.
The government has announced ambitious plans to achieve 227 GW (revised by the Prime Minister from earlier 175GW) of renewable energy capacity addition by 2022. This push for a cleaner energy supply comes against a backdrop of massive economic and demographic change. India’s population is growing fast and by 2025 is expected to overtake China as the world’s biggest, with more people than ever living in urban areas. This, along with the world’s fastest economic growth, is forecast to quadruple India’s demand for electricity by 2050. Modi government has set a target of 100 per cent electrification by 2022 and is modernising and extending the electricity grid to all of the country’s villages.
According to the International Energy Agency (IEA) India is entering a “solar-powered revolution” that will see it edge out coal as the nation’s top electricity source. Solar power currently makes up just 4 per cent of the nation’s power supply, but it is set to grow 18-fold and become the new “king of India’s generation fleet” by at least 2040.
While the government is committed to prioritising renewables, India’s soaring demand for power means that coal and natural gas will continue to sit alongside clean sources in India’s energy mix for some time. India’s total demand for coal is expected to double from current levels by 2050, though the rise of renewables will see a sharp shift in the country’s energy mix. The Government acknowledges that coal will have an ongoing role in India’s energy mix for some time, it is also committed to limiting its expansion, announcing that coal capacity will remain at current levels, with little additions.
The sector is losing its sheen, with dropping capacity addition, lukewarm response to new auctions, and a plummeting manufacturing sector. Wind power saw a steady growth in India for about three decades (1985-2015). The country currently ranks fourth in the world in wind power, with 37.5 gigawatt (GW) of capacity installed, most of which was driven by incentives such as accelerated depreciation and generation-based payments and attractive feed-in tariffs (FiT).
In 2015, India announced an ambitious goal of installing 175 GW of renewable energy (RE) by December 2022. However, it accorded a somewhat modest target of 60 GW to wind as the focus shifted to solar power. At that point, the domestic wind industry had already matured, with an installed capacity of 25 GW. Over the last few years, policy missteps have meant achieving even this limited target will be difficult. According to the Union Ministry of New and Renewable Energy (MNRE), wind projects aggregating 13 GW are in pipeline (at different stages: tendered, awarded, under-development), and another 10 GW is expected to be tendered in the coming months to meet the target. Recent research by Crisil says wind installations may reach only 45 GW by March 2022.
India has high wind energy potential — 302 GW at 100 metres hub height and 695 GW at 120 metres. Nearly 97 per cent of this potential is concentrated in seven States — Gujarat, Karnataka, Maharashtra, Andhra Pradesh, Tamil Nadu, Rajasthan and Madhya Pradesh.
Hit by a slowdown
The wind sector dominated the RE capacity addition for almost three decades, but its share has been declining in recent years. Wind capacity addition peaked in 2016-17, with about 5.5 GW of installations. Leveraging on this growth, a target of achieving 60 GW wind installations by 2022 required 5 GW additions for the next seven years, which was unambitious for the growth the industry was witnessing.
Wind-solar hybrid (WSH) is fast becoming the preferred renewable energy (RE) option in India. Although the Ministry for New and Renewable Energy (MNRE) has not yet set a generation target for the nascent sector, WSH has received strong support from the central public sector undertaking Solar Energy Corporation of India (SECI) and several state governments.
SECI intends to set up 5 GW of solar and wind projects with storage under the engineering, procurement and construction (EPC) mode over the next 10 years, adding to the country’s total of 37.69 GW of wind energy capacity and 35 GW of solar capacity as of fiscal 2020. WSH projects, which harness both solar and wind energy, are expected to account for a good chunk of the pipeline. In January this year, SECI invited bids for 1.2 GW WSH capacity under its tranche-III tender for RE projects.
Among the states, Andhra Pradesh formulated a Wind-Solar Hybrid Power Policy in 2018 and has set a 5 GW generation target from WSH projects by 2022. Other windy states such as Gujarat and Maharashtra have also identified land parcels to develop WSH projects.
Given this, CRISIL Research estimates approximately 15 GW of WSH power to come up in the country over the next five years, compared with only 100 MW today. Of this, 10 GW is already in the works—either under construction or being tendered—and will start feeding the grid by 2024.
WSH has found favour globally, too. Among others, China, Germany, Spain, Netherlands and the US have set up such projects to unlock value from hybrids. The advantages include lower capex costs, improved power integration and matching with the demand profile of the market. According to CRISIL’s research, the average tariff for WSH projects in India hovers within the range of Rs 2.80 to Rs 2.90 per kWh, as determined by SECI and other state government auctions. It believes if the co-location clause is done away with, tariffs can drop further down by another Rs 0.10 ($0.0013) per kWh.
Analysts see the growth of this segment being supported by the state governments and the Solar Energy Corporation of India (SECI) even though there is no national target for it in the National Wind-Solar Hybrid Policy of the Ministry of New and Renewable Energy. Such projects are gaining popularity owing to their lower capex costs, improved power integration and matching with the demand profile of the market.
Renewable purchase obligation (RPO) is a mechanism by which the State Electricity Regulatory Commissions oblige entities to purchase a certain percentage of power from renewable energy sources. Under the scheme a liability has been imposed on the end user of renewable energy to buy minimum percentage of renewable energy so that the renewable energy generators can be promoted in order to achieve the object of reducing emission of such gases which would have an impact on environment further likely to damage ozone layer resulting in global warming. However Centre’s regulations do not specify whether cogenerated power is renewable, leaving industrial units which recover waste heat in a fix.
Of the 29 states, 27 have imposed RPO on power distribution licensees, captive users and open access consumers. Karnataka, in its RPO regulation, specifically recognises biofuel cogeneration as renewable energy source along with all the other (Ministry of New and Renewable Energy) MNRE-recognised sources. However, some states, such as Uttar Pradesh and Tamil Nadu, have added “sources identified as per state policies” as renewable power. This has increased the confusion as different stakeholders have different interpretations for this.
Many industrial units like the cement, steel and other sectors, which use coal or natural gas as primary fuel, have been demanding exemption from RPO. Many of these units, which have filed petitions with their respective state electricity regulatory commissions, want that energy produced through the waste heat recovery (WHR) system should be considered valid for meeting the obligation.
WHR should be considered renewable, contend industrial units. The United Nations Framework Convention on Climate Change considers electricity generated through WHR as green, therefore, such projects are eligible for earning carbon credits, they say. However, carbon credits are earned for reducing CO2 emissions, not for generating renewable energy.
However, the Ministry of New and Renewable Energy (MNRE) accepts cogeneration only as part of biomass utilisation, specifically focused on bagasse-based cogeneration in sugar mills. It does not accept any other form of cogeneration as renewable energy. “Section 86 (1) (e) of the Electricity Act specifies cogeneration using renewable sources of energy only. Cogeneration from fossil fuel-based source is neither intended nor relevant in the context of meeting RPOs.” The Gujarat Electricity Regulatory Commission is of the view “Cogeneration should be considered as an energy efficiency option and should not be linked with RPO.”
Some states do not associate cogeneration with bagasse-based cogeneration alone. The Maharashtra Electricity Regulatory Commission exempts captive users from meeting the RPO target. The Rajasthan Electricity Regulatory Commission classifies waste heat power generation as renewable energy. The Kerala State Electricity Regulatory Commission classifies waste heat power generation under cogeneration. Clearly there is a cloud of confusion but we feel that WHR should not be considered as renewable.
Down to earth published by the Centre for Science and Environment, New Delhi
KPMG report on renewables
Crisil Report – The new power couple in town.