The adoption of renewable energy in India has seen remarkable and blazing growth so far and is at a critical juncture now. Ensuring the economic viability of future projects and addressing policy pain points will be vital to sustaining this momentum. India runs the largest clean energy programme in the world and aims to achieve 175 GW of renewable energy capacity by 2022 in line with its commitments to mitigating the effects of climate change.
The country has an even more ambitious plan to achieve 60% of its installed electricity generation capacity from clean energy sources by 2030, with a target of achieving 450GW of installed renewable energy generation capacity. As of the second quarter of FY 2021-21, India has achieved roughly half of its 2022 target for the addition of new renewable energy generation capacity. According to UK-based analytics firm British Business Energy, India has been ranked third on its renewable energy investments and plans, and as the world’s fifth-largest energy economy by revenue. This trailblazing growth trajectory has come with a few challenges of its own, though.
India now has among the cheapest solar power tariffs in the world, as seen in recent project auctions by the SECI. What started with high double-digits, is now touching record low levels. India’s minister for MNRE has indicated that tariffs could fall further. In fact, the winning bids at the auctions by Gujarat Urja Vikas Nigam Ltd (GUVNL) for 500MW of solar projects in December 2020 stood at Rs 1.99/unit. This was a shade under the previous lowest tariff bids at the last SECI auction conducted in November 2020 where the two combined winning bids for 600MW of solar power came at Rs 2 per unit. This raises pertinent questions about the long-term viability of such projects over the long term.
The plummeting tariff bids have had yet another fallout, on the funding side. Debt financing for clean energy projects has seen a drop as many leading banks have expressed concern about the viability of renewable energy projects that have committed to tariffs of less than Rs 3 per unit and are therefore reluctant to lend to these developers.
For India’s renewable energy story to keep powering ahead, a host of issues will have to be addressed, both at the policy level and through technology-based interventions that keep in mind the unique nature of renewable energy sources.
While renewable energy is seen as the perfect answer to the world’s rising energy demand and environmental degradation woes, it poses a whole new set of challenges of its own. Foremost among these are the aspects of integrating renewable energy into the grid and ensuring round the clock (RTC) power. One solution that has emerged is the hybrid energy model, which can be the way forward for India to meet its de-carbonisation goals and to bring down the cost of power.
Hybrid energy systems (HES) can help integrate renewable power into the grid by overcoming intermittency and making it reliable and dispatchable when combined with utility-scale battery storage. Coupled with battery storage, HES solutions have gained tremendous traction in recent years due to these inherent benefits. In developing economies such as India, hybrid energy systems can help ramp up electrification of rural and remote locations due to their lower costs and quicker installation, compared to building extensive transmission lines from the conventional centralised power plants.
Storage has been proven to be a crucial yet underleveraged piece in the growth of renewable energy around the world, and India is no exception. More robust enforcement of the renewable purchase obligation (RPO) mechanism in achieving RTC power will provide the much-needed push for storage systems to grow in the country. A continued fall in battery prices will further encourage investments in energy storage systems, while more large-scale deployment could, in turn, push down battery storage prices as well.
By some estimates, prices of lithium-ion cells that go into battery storage systems could fall by as much as 46% between now and 2029. This is expected to lead to higher adoption of battery-based energy storage. According to research and consultancy firm Wood Mackenzie, the global energy storage market is poised to grow 13-fold to 230 GW by 2025. The report also estimates the total energy storage investment to jump from $18 billion in 2019 to $100 billion by 2025.
With RTC renewable energy becoming the norm in India, we will likely see more front-of-the-meter deployment of energy storage solutions. Technology will also play a big role, as legacy systems cannot cope with the new demands of a dynamic and complex network of energy sources. Smart grid systems will serve as crucial support in this transition, lending a more stable and effective integration of renewables.
Another development that will spur further investments in renewables is the regulatory approval for a renewable energy trading mechanism. Leading power bourses Indian Energy Exchange (IEX) and Power Exchange of India have been permitted by the Central Electricity Regulatory Commission (CERC) to start the green term-ahead market (G-TAM).
This move should help make renewable energy affordable to consumers while supporting discoms in fulfilling their renewable purchase obligations (RPO) and allowing renewable energy producers to sell excess power like in the real-time electricity market (RTM).
Growing the share of renewable energy in India’s total energy mix will require additional policy oversight and ensuring that the interests of all stakeholders involved – developers, consumers, discoms lenders, and the government – are considered and protected.
There are enough signs that the country is firmly on this path. More recently, Indian policymaking has been moving towards a more integrated renewable energy roadmap that incorporates solar, wind, and hydropower, coupled with battery energy storage.
There are lessons here from the US state of California, which has taken an unprecedented lead in the adoption of renewable energy. The ‘sunshine’ state has been a forerunner in mitigating the intermittent nature of renewable energy through large scale battery storage installations, towards integration with the grid. This, of course, has been spurred by an estimated 70% drop in lithium-ion storage battery prices in the US between 2015 and 2018. The state is hosting the building of the world’s largest battery energy storage system at the Moss Landing substation, due to be fully operational by mid-2021.
California can serve as a model for some of the Indian states – notably 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 for a hybrid renewable energy park of 30GW capacity in Gujarat’s Kutch district by the honourable PM, reportedly the world’s largest such model when ready, could pave the way for a further push in this direction. It is in line with the government’s ultra-mega renewable energy power parks (UMREPP) policy, which began with Gujarat and Rajasthan and more recently joined by Uttar Pradesh. These parks can also help address the core issues of land availability and transmission interconnectivity.
Finally, India’s path to self-reliance through the Atmanirbhar Bharat route can be best realised by fostering innovation and R&D in the renewables space. This is important to bring down dependence on imports of solar panels, battery modules, and other components in a significant and relevant manner. Domestic producers will need to urgently invest in cutting edge and innovative technologies that could show new and more efficient alternatives for the rest of the world. It is a process that will need suitable regulatory support in providing a suitable ecosystem for such investments. The build-up of tangible business potential which supports such manufacturing volume will also take time before results are seen, but all stakeholders need to take their first steps. This is a strategic imperative to position India as a global hub in renewable energy.
Deepak Thakur, CEO, Hybrid & Energy Storage, Sterling and Wilson Pvt Ltd. Views expressed are the author’s own.