Govt intensifies move to raise renewable energy capacity

India’s effort to increase the role of renewable energy in its power mix has gained greater momentum with the government deciding to generate wind power offshore.

Minister of Power and Renewable Energy Minister R.K. Singh said at the National Energy Conservation Day function in Delhi on 14 December that the first auction for 5,000 MW (megawatt) of offshore wind power would be held in the next year. According to Central Electricity Authority’s October 2016 figures wind contributed 28.3 GW (gegawatt) to the country’s 308 GW power mix. There is every possibility that the CEA’s October 2016 data may have become obsolete as the developments in the renewable energy sector have been going at a tremendous speed.

Singh exuded confidence at the function that India would “not only achieve the target of 175 GW of renewable energy capacity by 2022 but would surpass that and have at least 200 GW by then”.

As against the target of installing 100 GW of solar power capacity by 2022, a capacity of 16,676 MW had been installed and another 6,500 MW capacity was under installation, he told the Lok Sabha during the Question Hour on 15 December 2015.

The trajectory of bidding of the rest of solar power capacity has been finalised as 20,000 MW in fiscal 2017-18, 30,000 MW in 2018-19 and 30,000 MW in 2019-20. This estimate excludes floating solar capacities which would go on the block.

As for wind power, 4 GW of wind capacity has already been auctioned, and preparations for auctioning 5 GW of offshore wind power projects in 2018 are under way. At present, wind power installed capacity is 32 GW.

Since the country does not have enough manufacturing capacity at present for solar cells and modules to meet the full demand, “both imported and indigenous solar cells and modules are being utilised for achieving the targets,” he said.

The minister said India’s installed power generation capacity would reach 1,000 GW eventually. At present, it is 330 GW which includes 60 GW from renewable energy sources. Since October 2016 the country had added 22 GW to its capacity. In October 2016 it 308 GW, drawn 187.5 GW (61%) from coal, 46.4GW (15%), from renewables, 43.1GW (14%) from Hydro, 25.1 GW (8%) from gas and 5.8GW (2%) from nuclear sources, according to Central Electricity Authority (CEA) figures as on 31.10.2016.

Among the renewables Solar provides 8.7 GW (19%), Wind 28.3 GW (61%) and Biomass 5 GW (11%) of the total installed capacity of 46.4 GW, according to the CEA..

Currently, India largely runs on coal, which contributes 61% to its power mix, while environmentally friendly renewable resources account for only 15%. The Modi government is working to radically alter this scenario: to raise the role of renewables to 40% and cut the share of coal to 30% by 2022.

Motivations for the move are many, but main ones include cutting the soaring oil import bills, taking electricity to every village, and accelerating urbanization and economic development. Added to this is the international pressure to meet climate change goals.

Soon after coming to power in 2014 the Modi Government launched a National Solar Mission, under which the construction of 25 solar parks, each with a capacity of at least 500 MW, were approved. As a result of this, grid-connected solar capacity nearly doubled between September 2015 and July 2016. The Ministry of New and Renewable Energy has announced that the total grid-connected solar power capacity has covered all 29 states and union territories in the country. The ministry said that work to install another 12 GW of solar power capacity was likely to be completed by March 2017. As of now utility-scale solar power capacity has reached at 17 GW, while 11.5 GW is in the pipeline and 5.6 GW was in the process of bidding. Furthermore, India is preparing to place orders for about 80,000 MW of solar power installations worth nearly Rs 2.44 lakh crore.
Thanks partly to government’s incentives, such tax concessions and financial assistance in the form of capital subsidy, even some traditionally coal-oriented players have shown enthusiasm for solar project. One such is Adani Group, which is working to set up the country’s largest, 10 GW solar park in Rajasthan. Other domestic establishments include Indosolar, Tata Power Solar, Jupiter Solar and state-run Bharat Heavy Electricals (Bhel).. Many foreign investors have also shown interest in setting up solar plants in India.

But challenges coming from China’s determined pitch to sell cheaper solar plant equipment are proving as dampener. Price differential between modules imported from China and domestic manufacturers has risen to around 12%, prompting developers to opt for overseas supplies rather than domestic products, manufactured under the government’s ‘Make in India’ programme.

Imported solar modules enable to offer extremely low power which plunged to Rs 2.44 per unit – lower than coal-fired electricity – in the recent bids. But this has driven domestic module makers to the brink and threatened to jeopardize their US$2 billion investment. Domestic manufacturers have around 3,000-4,000 MW of projects set up or tendered.

Industry sources complain that the Chinese government has helped their companies to build capacities far in excess of their requirement, which forces them to “dump” their products in India. Indian module makers want the government to levy a differential duty on imported module and prescribe some quality norms to level the field.

The All India Solar Industries Association (AISIA) has also expressed concern at a steep rise in taxes on solar equipment in the wake of implementation of Goods and Services Tax (GST). In a petition submitted to the government AISIA says that the cost of setting up a solar project has risen by 10-12% after the levy of GST on different items individually.

Earlier, solar modules were exempt from all duties in the pre-GST regime but after July 1 they are being charged 5% GST. In addition, inverters, cables, transformers and other equipment like module mounting structures, which were exempt from central sales tax and excise, are being charged at 5.8% tax post-GST. Service tax has gone up to 18 per cent from 15 per cent, while a 6% tax has been imposed on civil works.

The association demanded that since solar power generating systems are already charged a 5% per cent GST, there should be no GST on equipment which are part and parcel of the generating system.