Interview: Chandra Bhushan

Deputy Director General at Centre for Science and Environment

Mr. Chandra Bhushan talks about CSE Analysis on ‘State of the Renewable Energy Sector in India"

April 13, 2019. By News Bureau


Que: Recently, CSE released new analysis on the ‘State of the Renewable Energy Sector in India’. What are the key outcome and recommendations of this study? How will it benefit the Indian RE Sector?

Ans: Renewable energy in India has made remarkable progress in recent years. Centre for Science and Environment's book takes stock of this progress, analyses segment-wise trends to highlight strengths and weaknesses, examines fundamental risks and provides solutions to ensure sustained growth.

So far, RE growth has been concentrated in the utility-scale solar segment. Driven by favorable policies and good market conditions, its capacity in the last four years has increased by over 70 per cent annually and the average tariffs have declined to under Rs 3 per unit, making it cheaper than coal power. However, there are multiple risks that threaten to derail this growth. Slowdown is already being witnessed, triggered in 2018. Meanwhile, key segment like wind and solar rooftop have suffered due to policy uncertainties.

At the root of it, the multiple challenges facing renewable sector stem from Discoms under-performance, be it curtailment, delayed payments, reluctance to net metering, lack of PPAs and contract enforcement, or opposition to open access. UDAY, like past reform attempts, has not produced desired results. This is partly the reason why we believe grid connectivity by itself will not ensure availability of electricity or consistent supply.

Having said that, thanks to the changing economics, renewables have arrived in the mainstream and decarbonisation of electricity appears feasible in near future. The challenge now is to ensure that India manages this transition quickly and efficiently by charting out an ambitious low-carbon growth pathway.

This transition would have a number of elements. Expanding the share of distributed renewable generation, with the support to smart grid and inexpensive energy-storage technologies would be key. This would also force us to rethink the existing Discoms-based model of power delivery.

Que: India set an ambitious target of achieving 175 gigawatt (GW) renewable energy capacity by 2022. How feasible is this target? What steps do you recommend for the same?

Ans: India’s installed renewable capacity at the end of 2018 was 75.8 GW, which reflects commendable growth. However, achieving the 175 GW target requires installation of another 99 GW of solar and wind capacity in a short span of four years. This may be technically feasible, but requires major policy push to fill the gaps.

In the utility-scale solar segment, where another 35.5 GW needs to be added, the pipeline of upcoming projects is strong as capacity auctions have regained momentum in recent months. However, the segment continues to face fundamental risks arising from the poor financial health of Discoms, which are unlikely to improve in immediate term and can potentially disrupt growth.
The challenge for the rooftop segment is even bigger with only 1.4 GW out of the 40 GW target installed so far. Recent initiatives like rooftop capacities auctioned by states in recent months and approval of the Phase II of MNRE’s grid-connected rooftop solar programme are good news, but the sector has a long way to go.

As for the wind power segment, where 25 GW of new capacity is required, ideas like re-powering of old projects and setting up hybrid projects would be essential to meet the target.

Que: The country aims to generate 100 GW of solar capacity by 2022. According to you, what factors will play an important role in achieving this target?

Ans: Reaching the ambition of 100 GW solar by 2022 requires the government to fill multiple policy gaps. In the State of Renewable Energy Sector in India book, we go into detailed recommendations for each segment to help spur growth.

For the utility-scale solar segment, it is crucial that the government takes steps to restore the sanctity of the auction process by removing barriers like ceilings and refraining from cancellations. Government should also explore other auction models like the uniform pricing auction for better average tariff discovery and implement alternate mechanisms to protect developers against Discoms risks such as insurance funds created by industry contributions. For ensure market maturity, it is crucial that SECI’s role as intermediary off-taker is gradually reduced and that solar become accessible to all end-users including corporate. Also, this growth needs to be supported by adequate investments in grid development, and upgrading management practices.

As for rooftop, the government supporting 22 GW of capacity under the new programme by providing incentives to Discoms and residential consumers will not be adequate. For sustainable growth, far greater support is needed to help create alternative business and financing models. Discoms-driven models could be the solution as it would help avoid revenue losses, even generate profits. More involvement is needed from city governments and administrations to drive change by bridging the information barrier and streamlining clearance processes. The industry should also take steps to gradually develop solar rooftop as an off-the-shelf product for mass deployment.

Que: How important a role will energy storage play in realizing the Indian vision of sustainability-covering renewables, EVs and energy efficiency?

Ans: Inexpensive and high efficiency energy storage technologies will prove to be game changer for renewables. Large-scale grid integration of wind and solar power hinge on the system flexibility to manage generation variability. While system flexibility may not be a concern at an installed renewable capacity of 175 GW, storage support will be crucial as the ambition expands.

Affordable and reliable battery technology would certainly revolutionize distributed generation, as consumers would be able to reduce and gradually wean off dependence on the inefficient distribution grid. It would be a determining factor in EV affordability and thus driving the transition in mobility – crucial for addressing the pollution problem in cities.

The good news is that prices of the battery storage have been continuously declining in leading markets, much faster than projections made by market experts. In fact, levelized price of solar combined with four hours of storage at 25 per cent peak capacity discovered in recent auctions in the US is down to almost Rs 2 per kWh for 2021 delivery, five times lower than prices discovered just a year ago. Supportive policies can help India fast-track progress in this field.

Que: What role will Renewable Energy Policy which focuses on decarbonizing the economy play in enhancement of the sector?

Ans: Ambitious targets and policy clarity have a crucial role to play in energy transitions. Despite being arbitrary and unscientific, we can see that the 175 GW target catalyzed massive investments. For the next stage of development, we must clearly define the longer term vision for the country. This should look beyond the existing easily achievable goal of 40 per cent non-fossil fuel-based capacity by 2030, and put in place more ambitious target of 100 per cent power from non-fossil fuel sources by 2050-2060. Such a policy should clearly define balanced targets for the various sub-segments, the plan for fossil-fuel based capacity, and the grid development and management strategy.

Que: Cabinet has approved steps to revive stressed power plant in the country. What effects will it have on the overall power sector?

Ans: The government’s attempt to revive stress power plants is welcome but we believe that it must be accompanied by a comprehensive strategy for the coal-based power sector. CSE has been calling for shutting down of old and inefficient power plants for environmental and economic reasons. This would have the added benefit of freeing up coal and PPAs for the newer stressed plants. The government also needs to ensure that compliance to new emission regulations is achieved within prescribed timelines. Further, given the state of air pollution and climate change, investments in new coal-based power plants need to be strongly discouraged.

Que: What future do you see for the Indian Renewable energy sector?

Ans: The dominance of renewable energy sources in electricity generation is inevitable for India. The technology is already mature and the economics has turned favorable. The pace of this transition however will be partly determined by the way policies shape up going forward and partly by the decline in prices of crucial technologies like batteries.

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