There was frantic activity in the renewable energy sector in the first three months of this year. Many new and radical policy initiatives including Sristi (rooftop solar), Kusum (solar pumps), storage mission and ALMM were announced. Various government agencies led by Solar Energy Corporation (Seci) also issued a staggering amount of new tenders aggregating 30 GW in this period before the model code of conduct kicked in. The Modi government is of course known to be very supportive of the renewable sector. This article takes stock of real progress made in the last five years.
Arguably, the single biggest achievement of the Modi government has been to lay out an ambitious vision. It upscaled the 2022 capacity target by five times to 175 GW. It added further impetus to the sector by signing up to Paris climate accord and conceiving the International Solar Alliance. The overarching vision and bold targets have proved to be a huge draw for the international community and deep-pocketed investors around the world. Supply of capital has actually exceeded demand, helping address the critical challenge of financing renewable energy growth.
The ambitious vision was backed by a series of decisive policy measures. New initiatives were drawn up to tackle key challenges in the sector – Uday (restructuring of DISCOM finances), government solar park scheme (land and transmission connectivity) and DCR (domestic content requirement).
The mood was euphoric and complemented by on-the-ground progress. Solar and wind capacity addition rose steadily year-on-year until 2017. Indeed, solar sector added more capacity in 2017 and 2018 than all other sources combined.
On a slightly different note, the government’s drive to provide grid power connectivity to every single household in the country was equally notable. Saubhagya scheme – government statistics claim electrification of 99.99 percent households – has been a monumental landmark for the power sector. It lays strong foundation for higher electrification of the economy and more demand for renewable energy.
Unfortunately, somewhere around 2017, things began to go awry. Poor policy design, lack of planning and faulty execution have detracted from the government’s vision. Seemingly good ideas including safeguard duty on import of modules, local quality standards and GST have ended up creating confusion. Costs have mounted and profits are squeezed. Progress on the ground has been hamstrung by slow development of solar parks and delays in transmission network expansion. To add salt to injury, tenders are routinely undersubscribed and/ or cancelled. Domestic manufacturing remains in doldrums notwithstanding the avowed ‘Make in India’ mission. Increasing payment delays owing to deteriorating DISCOM financial position have spooked lenders and haemorrhaged investor confidence. Taken together, these measures have shaken the market and even forced many players out of the sector.
The new government has its work cut out to inject optimism back in renewable energy. First and foremost, the sector requires a stable policy regime and coordinated execution thrust on land acquisition, transmission, financing and offtake risk. Second, it warrants a shift in focus from huge concentrated solar parks to distributed generation. Developing smaller projects closer to consumption centres is the ideal mantra to mitigate land acquisition and grid management problems.
The hard yards for India to achieve energy transformation still lie ahead. Amendments to the Electricity Act need to be pushed through to create a market-based regime and free DISCOMs from the perilous business of buying and selling power. And as share of intermittent renewable power grows, the power grid is going to face increasing stability problems. The task of making the power
system resilient – more flexible generation, smart grids, adequate balancing reserves, ancillary services market and demand side management – is arduous and will take many years.
Vinay Rustagi is Managing Director, BRIDGE TO INDIA.