Renewable energy sources have been increasingly adopted for building a sustainable future in India’s energy landscape. This transformation took time to develop; it is the product of coordinated efforts by the government, business and scholars, besides regional and global cooperation. The country has taken significant strides in renewable energy development, especially over the past few years. India currently has 132 GW of installed renewable energy capacity, which is about 31 per cent of the country’s total power capacity as of October 2023.
The diversification of renewable energy sources and the rise of utility-scale solar power have both been garnering greater attention. Offshore wind, green hydrogen, energy storage and round-the-clock (RTC) renewables are a few of the segments that have begun to gain traction as well. Corporate power procurement and trading activities have improved the capability to meet energy demand as various business models and power offtake agreements are being progressively utilised to secure sustainable energy supply. To ensure a steady supply in the future, domestic production of solar cells, batteries and green hydrogen electrolysers has also begun to show promise.
Radiant rise of solar power
The Indian solar power market has expanded rapidly over the past several years, surpassing all other clean energy sources, with 72 GW of total installations as of October 2023. With a strong government push to promote solar energy adoption, this trend is expected to continue, as it will significantly help India reach its goal of 500 GW of non-fossil fuel electricity by 2030. Several projects and tenders have begun to take form in recent months. PFC Consulting Limited announced a tender to commission 1.25 GW of interstate transmission system-linked solar power projects in September 2023. In the same month, SJVN Limited also released a request for proposal for developers to construct up to 1.5 GW of connected interstate wind-solar hybrid projects. More projects were announced in the preceding months as well.
Projects in areas including off-grid solar, rooftop solar, solar pumps and floating solar are also picking up rapidly. Overall, all the solar power subsegments are seeing exciting new developments. The utility-scale and floating solar segments continue to see significant auctions and project announcements build a robust pipeline of solar projects for the short term, while the open access and residential solar segments have seen encouraging regulatory support. It is also anticipated that domestic manufacturing will take off significantly, on the back of the government’s encouragement as well as private sector engagement.
Winds of change
Currently, India has a total installed wind capacity of about 44 GW. Due to difficulties such as cost inflation, delays in concluding power purchase and power sale agreements, and competition from less expensive alternatives, the wind segment has not grown as rapidly as its solar counterpart. However, a number of regulatory modifications have been made in recent months, which are intended to address significant bottlenecks in the sector. The Ministry of New and Renewable Energy revised the wind energy project auction procedure earlier this year, to switch from reverse auctions to closed bidding.
India needs to add around 57 GW of capacity in order to achieve the 100 GW wind energy target by 2030. Towards this end, the government has established a target trajectory for the next five years of bidding 10 GW annually. As a result of this, India is expected to add at least 50 GW of new capabilities as well as an additional 7-8 GW from those that are now under development by 2030. Models are also being developed for offshore wind. First, the government has given in-principle approval to provide viability gap funding for the first 1 GW wind farm. Following the receipt of final approval, Gujarat will receive the first tender, followed by Tamil Nadu. Hybrids and RTC renewable energy projects are also significantly advancing the development of wind power. With the launch of fresh projects, bids and collaborations as well as the growing emphasis on RTC power supply, the wind-solar hybrid market has experienced greater development over the past year. Recent prices found through hybrid project bidding were quite competitive. In addition, hybrid tariffs are far less expensive than wind tariffs, attracting investors.
Green hydrogen gains traction
With the recent announcement of a clear strategy for the indigenous production of electrolysers and incentives for green hydrogen generation, India is also paying closer attention to the green hydrogen arena. The National Green Hydrogen Mission was earlier approved by the government with a budget of Rs 197.44 billion till 2029-30. Moreover, several Indian businesses have recently announced plans to make investments in the hydrogen economy. Reliance Industries plans to invest $10 billion over the next three years to develop low-cost electrolysers with the aim of reducing the cost of green hydrogen production to around $1 per kg. Adani New Industries Limited plans to invest over $50 billion over the next 10 years in green hydrogen and its associated ecosystem. In May 2023, the ACME Group and Indraprastha Gas Limited, a city gas distribution company, signed an MoU to jointly explore potential business opportunities in the green hydrogen segment. Ocior Energy India Private Limited will establish a 1 million tonne per annum (mtpa) green ammonia plant in Andhra Pradesh at an investment of Rs 400 billion. The company will also invest Rs 400 billion to establish a 1 mtpa facility for green hydrogen and ammonia in Gujarat’s Kutch district. Green hydrogen plants are being installed by Indian Oil Corporation Limited at its refineries in Panipat and Mathura. In addition, GAIL has a polymer electrolyte membrane electrolyser plant in the Vijaipur complex in Madhya Pradesh’s Guna district, with a 10 MWh capacity. Each day, the project aims to create 4.3 million tonnes of renewable hydrogen. Going forward, domestic players are also engaging in international cooperation on green hydrogen applications, electrolyser manufacturing and project prospects in India and throughout the world.
Small-hydro power and biomass
The abundant perennial rivers in India could be leveraged as a hydropower treasure trove. The potential environmental effects of drawing hydropower have been reduced by the use of new technologies and strategies, such as smaller run-of-the-river projects that do not need building of substantial dams. India now has a total installed small-hydro power capacity of 5 GW. The small-hydro category has not added any significant capacity since June 2022 and overall segment growth has been moderate. The sector has a number of difficulties, including financial restrictions on project approval, land acquisition, opposition from local residents, geological and environmental issues and the lack of regulatory momentum in comparison to other sectors.
India has 11 GW of built bioenergy capacity as of October 2023. Even though India met its modest 10 GW objective for 2022, this segment’s growth has been comparatively sluggish. Yet, it holds immense promise. Utilising bioenergy is essential not only for turning abundant raw materials into energy but also for giving farmers another source of income and addressing a significant environmental issue – the burning of stubble, which poses serious health risks, particularly in north India.
Challenges and the way forward
India’s transition to renewable energy has its share of difficulties. Issues with intermittency, grid integration and land acquisition need continuous fixes. Due to the intermittent nature of solar and wind energy, the grid must be strengthened and made more robust. To fill these supply shortfalls, innovative energy storage technologies are required. Transmission projects and renewable energy projects have different construction schedules as the latter have a much shorter gestation period, which causes project delays. Grid curtailment incidents have a negative impact on the credit profile of wind and solar power projects.
Land acquisition for renewable energy projects may be a difficult and long-drawn process. Securing the required acreage might be difficult since large-scale solar and wind farms need a lot of space. In addition, it might be difficult, especially in remote areas, to create the necessary infrastructure to link these projects to the grid. Land acquisition for renewable energy projects has to be simplified, while taking local ecosystems and population into account. Moreover, administrative and regulatory barriers may still exist despite the government’s attempts to encourage renewable energy. Investors and project developers may be put off by frequent policy changes and ambiguity around incentives. The way policies are created at the central level and how they are actually put into practice at the state level is out of sync and needs to be streamlined.
The rapidly evolving regulations in India’s renewable energy sector, particularly in terms of open access, import taxes and tax restrictions, have a negative impact on investor confidence. Additionally, there have been cases of tariff renegotiations by states such as Andhra Pradesh and Uttar Pradesh, which jeopardise millions of dollars’ worth of investments and this lowers the confidence of developers in this market. Discoms also do not pay power procurement developers on schedule. Therefore, it is necessary to implement severe penalties and compliance methods.
Constraints in supply chain also exist. Imported crucial components such as modules and inverters are a major source of dependence for India’s solar industry. Under the Make in India programme, improvements are being made in domestic manufacturing, but until those improvements can be scaled up, India will continue to rely heavily on imports. Further, it can be difficult to finance renewable energy projects, especially for small- and medium-sized businesses. Access to inexpensive funding and investment options for renewable energy initiatives must be made more broadly available. Additionally, India has made significant investments in renewable energy technology, but more research and development is still required to increase the efficacy and cost-effectiveness of these technologies. This is especially crucial in developing areas such as energy storage technologies. The expansion of the renewable energy industry also needs skilled workers that can set up, run and maintain advanced technological systems. In this sense, training and capacity building are necessary. On the positive side, the country is actively pursuing regulatory reforms, financial investments and technology advancements to address these problems while maintaining its commitment to renewable energy objectives. These measures will help the country maintain its current momentum in the renewable energy space and continue to be a leader in the global renewable energy space.