Renewable Energy: Changing the Energy Scenario and Achieving Sustainable Growth

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1 Renewable Energy: Changing the Energy Scenario and Achieving Sustainable Growth Vivek Sharma Practice Leader & Director Energy & Natural Resources August 21,

2 CRISIL Risk & Infrastructure Solutions Energy & Natural Resources Advisory NOTABLE WORK IN RENEWABLE ENERGY Study on impact of Accelerated Depreciation (AD)/Evaluation of Generation Based Incentive (GBI) scheme for Wind Power Programme Ministry of New & Renewable Energy Assessment of achievable potential of new and renewable energy resources in different states during 12th Plan period and determination of RPO trajectory and its impact on tariff Forum of Regulators Challenges to Scale-up Renewable Energy Manufacturing Industry in India: Horizon 2032 C-STEP & WISE Green Energy Corridors KfW,Germany Arranging Low cost long term financing for renewable energy sector ClimateWorks Foundation/Shakti Foundation 2

3 Key Messages Target for RE in 2030: 33% contribution to installed capacity 16% contribution in energy generation Present Contribution: 12% in capacity terms 5.3% in energy terms Actionable Ideas for Development of RE in India Consistency in FIT across the country, with wind zone classification. Repowering of good quality wind sites to increase capacity per unit of land. Identification and potential assessment of offshore wind sites. Policy support for rooftop and off-grid solar energy. Setting up mini-solar UMPP with modifications to bidding guidelines. Development of Green Corridor/T&D network including intra-state A biomass energy policy to address existing issues in the sector. Enhancing IREDA-NCEF refinancing scheme including provision of low cost long term financing for solar Capacity building of stakeholders including financiers for greater understanding of sector and accurate risk assessment. Integrated RE Policy that includes Waste to Energy (WtE), tidal, geothermal, Grid Management planning etc. 3

4 Drivers for Renewable Energy in India Electricity demand-supply gap in terms of peak power requirement as well as in energy terms is 4-5% Rapid Economic Development in future is expected to push the energy demand further Rural Electrification can be effectively achieved using RE sources which can be tapped locally Energy Security concerns of the country can be addressed by utilizing domestic RE and reducing the import dependence Climate change mitigation can be effectively achieved by widespread use of RE sources thereby reducing emissions Cost Competitiveness of RE has increased with fall in prices of equipment due to high competition and large scale manufacturing Government Interventions for promoting the RE sector has played a key role in the development of the sector so far 4

5 The ambitious capacity addition targets require large scale deployment of RE every year India s RE Capacity Targets (MW) Achievement 12 th FYP 54, th FYP 99,617 Planning Commission Target 33% of the total capacity Present annual capacity addition in in the range of MW per annum 7000 MW per annum required to meet 12 th FYP Target from hereon 9000 MW per annum required to meet 13 th FYP Target if 12 th FYP target is met Require a long term policy for having 33% of the installed generating capacity and 16% of the energy from RES by

6 Wind energy has been the highest contributor to RE capacity; still has huge untapped potential Capacity (GW) India s RE Capacity Current installed capacity : 21 GW C-WET potential at 80m height : over 100 GW CHALLENGES & WAY FORWARD State-wise variation, and uncertainty in FIT over long term in different states makes project planning difficult. Single FIT for all regions in the country with zonewise classification may be specified Long term FIT trajectory may be specified to resolve uncertainty Most high wind areas have evacuation issues due to inadequate T&D infra. T&D development planning to be done after considering RE capacity addition targets. Faster implementation of green corridors through PPP in states is envisaged. There is limited land available at reasonable price in wind-rich areas Repowering of high potential wind sites having low rating turbines Identification and resource assessment of off-shore wind sites 6

7 Solar energy has witnessed a rapid growth in India; some issues yet to be addressed India has 300 sunny days in a year with solar insolation of 4-7 kwh per m 2 per day 5,000 trillion kwh of solar energy is incident on India per year. CHALLENGES & WAY FORWARD Bidders are often required to match the lowest bid, this reduces capacity addition due to withdrawal of bidders Qualified bidders may be allowed to sign PPAs at their quoted tariff within limits set by procurer. India s solar capacity addition trend (MW) Solar purchase targets are stipulated for short term and not enforced Until solar attains cost competitiveness with other RE sources, separate solar RPO may be stipulated for long term, and strict time bound compliance could be enforced Solar can be effectively exploited through roof-top and off-grid applications but there is lack of awareness among potential consumers Incentives for physical infrastructure for promoting off grid and rooftop solar. The utilities may be encouraged to provide RE services to consumers. 7

8 Biomass energy resources are abundant; capacity development requires policy support Biomass contributes up to 32% of the primary energy of the country As per MNRE, the Bio-power potential is over 25 GW Installed biomass (incl. bagasse) capacity is about 4 GW presently CHALLENGES & WAY FORWARD Existing biomass power projects facing operational hurdles, as a result capacity addition is also impacted A Monitoring and Verification program may be formulated prescribing periodicity and format for collection of information from existing biomass power plants on operational performance, fuel source, price, quantity and quality. A repository of this information may be created to enable regulatory commissions to stipulate operational norms for biomass power projects in the state A biomass energy policy may be formulated to address the existing issues such as reviving of existing plants, fuel pricing and sourcing, provisions for fuel cost pass-through The policy could also set annual capacity targets based on future energy demand and resource assessment. 8

9 Waste to Energy to be provided policy support and mainstreamed Current Installed capacity: 106 MW (Grid-connected) & 132 MW (Off-grid) India can produce: 440 MW in 5-7 years, 1100 MW by MW by 2050 from refuse derived fuel CHALLENGES & WAY FORWARD Enhanced State or Central policy support required for faster annual capacity addition A roadmap for the development of WtE and annual targets for capacity addition may be formulated A number of support mechanisms such as Viability Gap Funding, performance based incentives and tax exemptions may be provided to project developers WtE being in nascent stage, there is limited awareness among stakeholders An institutional capacity building program for regulatory commissions, SREDAs, urban local bodies, etc. may be organized. The program would sensitize the agencies about various aspects of development of WtE projects and key success factors. 9

10 Innovative methods for long term low cost financing to be evolved RE projects require high initial investment, followed by low variable costs and require unique financing structures. CHALLENGES & WAY FORWARD Long term policy uncertainty makes investments risky, and impact financial projections and certainty of cash flows Long-term regulatory policies, and clarity on the policy period & terms may be provided Developers may be granted pre-approvals for availing low cost financing schemes Limited access to capital markets Pension funds, insurance companies, and sovereign funds with long-term horizons could invest in RE projects if the securitization and debt capital markets are developed Entities with better understanding of RE may provide guarantees to qualifying projects after credit appraisal in exchange for a guarantee fee Mechanisms such as inflation-linked/ floating rate bonds can also be considered for raising finances by renewable energy financiers. RE development fund could be created for lending to priority sector RE assets 10

11 Key Messages Target for RE in 2030: 33% contribution to installed capacity 16% contribution in energy generation Present Contribution: 12% in capacity terms 5.3% in energy terms Actionable Ideas for Development of RE in India Consistency in FIT across the country, with wind zone classification. Repowering of good quality wind sites to increase capacity per unit of land. Identification and potential assessment of offshore wind sites. Policy support for rooftop and off-grid solar energy. Setting up mini-solar UMPP with modifications to bidding guidelines. Development of Green Corridor/T&D network including intra-state A biomass energy policy to address existing issues in the sector. Enhancing IREDA-NCEF refinancing scheme including provision of low cost long term financing for solar Capacity building of stakeholders including financiers for greater understanding of sector and accurate risk assessment. Integrated RE Policy that includes Waste to Energy (WtE), tidal, geothermal, Grid Management planning etc. 11

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