The Indian renewable energy sector is the second most attractive renewable energy market in the world.1 The country ranks fourth in the world in terms of total installed wind power capacity.2 It added record 11.0 GW in wind and solar power capacity in 2016-17. The focus of Government of India has shifted to clean energy after it ratified the Paris Agreement. With the increased support of government and improved economics, the sector has become attractive from investors perspective and India ranked second in Renewable Energy Attractive Index 2017. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role.
- India has the fifth largest power generation portfolio in the world and its current renewable energy contribution stands at 44.812 GW which includes 27.441 GW of Wind power and 8.062 GW of Solar power installed capacity in the country.
- Fourth largest installed capacity of wind power.
- Third largest installed capacity of concentrated solar power (CSP)
- Renewable energy contributes 14.7% of the total installed capacity in the country as on 31.07.2016.
- Ambitious target of 175 GW of renewable power by 2022 which will include 100 GW of Solar power, 60 GW from wind power, 10 GW from biomass power and 5 GW from small hydro power.
Total installed renewable energy capacity in India touched 58.3 GW as of September 2017, which is around 17.7 per cent of total energy capacity of the country (329.3 GW).
During September 2017, total installed wind power capacity in the renewables mix stood at 32.5 GW (55.8 per cent), while solar power capacity was 13.1 GW (22.5 per cent). Total solar capacity is expected to touch 18.7 Gigawatt (GW) by the end of 2017, which is about 5 per cent of global solar capacity, and further increase to 8 per cent by 2035.
With a potential capacity of 363 gigawatts (GW) and with policies focused on the renewable energy sector, Northern India is expected to become the hub for renewable energy in India.
- Wind energy accounts for nearly 61% (27.441 GW) of renewable installed capacity, thereby making India the world’s fourth largest wind energy producer.
- The Government of India has set targets which will take the total renewable capacity to 175 GW by the end of 2022. This includes 60 GW from wind power, 100 GW from solar power, 10 GW from biomass power and 5 GW from small hydro power.
REASONS TO INVEST
- India has the fifth largest power generation portfolio worldwide with a power generation capacity of 304.76 GW.
- Economic growth, increasing prosperity, a growing rate of urbanisation and rising per capita energy consumption has led to increased demand for energy in the country.
- Huge renewable resource availability and potential.
- The target of National Solar Mission has been up-scaled to 100 GW from 20 GW of grid connected solar power by 2022, which creates a positive environment among investors keen to tap into India’s renewable energy potential.
- Government of India has a target of adding 175 GW of renewable power in the country by 2022, which will offer massive investment opportunities across the value chain.
1. India is the fourth largest importer of oil and the 15th largest importer of petroleum products and Liquefied Natural Gas (LNG) globally. The increased use of indigenous renewable resources is expected to reduce India’s dependence on expensive imported fossil fuels.
2. The government of India through Ministry of New and Renewable Energy (MNRE) is playing a proactive role in promoting the adoption of renewable energy resources by offering various incentives such as generation-based incentives (GBIs), capital and interest subsidies, viability gap funding (VGF), concessional finance, fiscal incentives etc.
- The National Solar Mission aims to promote the development and use of solar energy for power generation and other uses, with the ultimate objective of making solar energy compete with fossil-based energy options.
- The objective of the National Solar Mission is to reduce the cost of solar power generation in the country through long-term policy, large scale deployment goals, aggressive R&D and the domestic production of critical raw materials, components and products.
- The government has created a liberal environment for foreign investment in renewable energy projects. The establishment of a dedicated financial institution – the Indian Renewable Energy Development Agency (IREDA), makes for renewed impetus on the promotion, development and extension of financial assistance for renewable energy and energy efficiency/conservation projects.
3. Renewable energy is becoming increasingly cost-competitive as compared to fossil fuel-based generation, like the prices of solar modules have declined by almost 80% since 2008.
4. Reserve Bank of India (RBI) has revised the guidelines for all scheduled commercial banks including renewable energy in the categories priority sector, in addition to existing categories making significant inroads for renewable energy in the priority sector lending, also bank loans for solar rooftop systems to be treated as a part of home loan/ home improvement loan with subsequent tax benefits.
5. Focus on skill development of workforce: “Suryamitra Scheme” launched in May 2015 to create 0.05 million trained personnel within a period of 5 years (2015-16 to 2019-20).
According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in the Indian non-conventional energy sector between April 2000 and June 2017 stood at US$ 5.9 billion.
The Central Electricity Authority (CEA) expects investment in India’s power transmission sector to reach Rs 2.6 trillion (US$ 40.3 billion) during the 13th plan (2017-22), and to enhance the transmission capacity of the inter-regional links by 45,700 megawatt (MW).
Some major investments and developments in the Indian renewable energy sector are as follows:
- Private Equity (PE) investments in India’s wind and solar power have increased by 47 per cent in 2017 (January 1 to September 25) to US$ 920 million, across nine deals.
- JSW Energy has signed a memorandum of understanding (MoU) with the Government of Gujarat for setting up an electric vehicle (EV) manufacturing unit in Gujarat at an estimated cost of Rs 4,000 crore (US$ 608.88 million).
- Tata Capital Ltd and International Finance Corporation (IFC) have invested Rs 200 crore (US$ 31.0 million) in their joint venture (JV), Tata Cleantech Capital Ltd (TCCL), to increase its loan book for investing in renewable energy projects.
- The Asian Development Bank (ADB) and the Punjab National Bank (PNB) have signed a financing loan worth US$ 100 million, which will be used to support solar rooftop projects on commercial and industrial buildings across India.
- India’s first ever multi-modal electric vehicle project has been launched at Nagpur, which will bring together a fleet of 200 electric vehicles including taxis, buses, e-rickshaw and auto rickshaws, on cab aggregator Ola’s app platform in Nagpur.
- Private equity (PE) investment firm, Actis LLP, is planning to invest about US$ 500 million in Solenergi Power Pvt Ltd, its second renewable energy platform in India.
- Larsen & Toubro (L&T) Construction bagged an order worth Rs 5,250 crore (US$ 814.6 million) from Qatar General Electricity and Water Corporation (Kahramaa) for electricity transmission and expansion of network.
- The Government of India and the Asian Development Bank (ADB) have signed a loan agreement for US$ 175 million to be provided to Power Grid Corporation of India Limited (PGCIL) for construction of interstate transmission systems for solar power projects which will enable the transfer of surplus solar energy to power-deficit states.
- The Government of India and the Government of UK plan to jointly invest up to GBP 240 million (US$ 298.95 million) in an India-UK fund, which will invest in India’s energy and renewables sector.
- Greenko Energy Holdings has raised US$ 155 million from its existing investors, Abu Dhabi Investment Authority (ADIA) and Singapore’s sovereign wealth fund GIC, which will be utilised for expanding its clean energy portfolio to 3 gigawatts (GW) from 2 GW at present.
- Renewable energy company ReNew Power has announced securing US$ 390 million debt funding from its existing investor Asian Development Bank (ADB), and will use the funds to develop and expand capacities of 709 megawatt (MW) across various states of India.
- International Finance Corporation (IFC), along with IFC Global Infrastructure Fund, the private equity fund of IFC Asset Management Company, has announced investment of US$ 125 million equity in Hero Future Energies, which will help the firm set up 1 gigawatt (GW) of greenfield solar and wind power plants.
Some initiatives by the Government of India to boost the Indian renewable energy sector are as follows:
- The Maharashtra State Government plans to set up a 500 MW capacity solar park in its Dhule district with private bids planned in FY18 and has already selected 1,000 acres of land for the first phase of the project.
- The Government of India has announced plans to implement a US$ 238 million National Mission on advanced ultra-supercritical technologies for cleaner coal utilisation.
- The Ministry of New and Renewable Energy (MNRE) has decided to provide custom and excise duty benefits to the solar rooftop sector, which in turn will lower the cost of setting up as well as generate power, thus boosting growth.
- The Indian Railways is taking increased efforts through sustained energy efficient measures and maximum use of clean fuel to cut down emission level by 33 per cent by 2030.
- The Union Cabinet has approved raising of bonds worth Rs 2,360 crore (US$ 366.2 million) by the Indian Renewable Energy Development Agency (IREDA), which will be used in various renewable energy projects in FY 2017-18.
- The Union Cabinet has approved construction of 10 units of indigenous Pressurized Heavy Water Reactors (PHWR), with a nuclear capacity of 700 MW each, which is expected to bring substantial economies of scale and maximise cost and time efficiencies, and thereby boost India’s nuclear industry.
- Prime Minister of India, Mr Narendra Modi, has proposed building model cities where power demand is met only by solar energy and further stated that bio-ethanol refinery projects should be accelerated to control India’s dependency on fossil fuels.
- Mr Ashvini Kumar, Managing Director, Solar Energy Corporation of India (SECI), outlined Government of India’s plan to tender 750 MW of solar capacity, along with offering deals covering four GW of wind capacity during FY 2017-18.
The Government of India is committed to increased use of clean energy sources and is already undertaking various large-scale sustainable power projects and promoting green energy heavily. In addition, renewable energy has the potential to create many employment opportunities at all levels, especially in rural areas. The Ministry of New and Renewable Energy (MNRE) has set an ambitious target to set up renewable energy capacities to the tune of 175 GW by 2022 of which about 100 GW is planned for solar, 60 for wind and other for hydro, bio among other.
It is expected that by the year 2040, around 49 per cent of the total electricity will be generated by the renewable energy, as more efficient batteries will be used to store electricity which will further cut the solar energy cost by 66 per cent as compared to the current cost.*
- Foreign Direct Investment (FDI) up to 100% is permitted under the automatic route for renewable energy generation and distribution projects subject to provisions of The Electricity Act, 2003.
Guidelines for Green Large-Area Developments by MNRE:
- These guidelines cover various fiscal and promotional policies for the development of grid interactive solar and wind energy.
- The package of incentives includes fiscal concessions such as 80% accelerated depreciation, concessional custom duty for specific critical components, excise duty exemption, income tax exemption on profits for power generation etc.
- Generation based incentives (GBI) of USD 0.007/unit subject to max of USD 153,846.2/MW for wind power projects (not availing the benefits of AD).
- Viability Gap Funding (VGF) support up to USD 153,846.2/MW based on reverse e-auction for 5000 MW Viability Gap Funding (VGF) scheme to be implemented in 4 years by Solar Energy Corporation of India (SECI).
The Provision of Central Financial Assistance for Small/Micro Hydro-Power Projects:
- The MNRE is providing central financial assistance to set up small hydro projects both in the public and private sectors. Support is also given to state governments for the identification of new potential sites, including surveys, the preparation of detailed project reports and the renovation and modernisation of old projects.
The Setting up of the Solar Energy Corporation of India:
- The mandate of the SECI allows wide-ranging activities to be undertaken with an overall view to facilitate the implementation of the National Solar Mission and the achievement of targets set therein. The SECI has the objective of developing renewable energy (RE) technologies and ensuring inclusive RE power development throughout India.
The Announcement of the Offshore Wind Energy Policy:
- To explore and promote deployment of offshore wind farms in the Exclusive Economic Zone (EEZ) of the country.
- To promote investment in energy infrastructure.
- To promote spatial planning and management of maritime renewable energy resources in the exclusive economic zone.
- To achieve energy security and reduce carbon emissions.
- To encourage indigenisation of offshore wind energy technology.
- To promote R&D in the offshore wind energy sector.
The Policy for Repowering of the Wind Power Projects:
- To promote optimum utilisation of wind energy resources repowering policy has been issued.
The National Policy on Biofuels:
- To encourage the accelerated development and promotion of the cultivation, production and use of biofuels to increasingly substitute petrol and diesel for transport and be used in stationary and other applications.
The Policy for Grid connected Solar Roof-top Projects:
- Joint Electricity Regulatory Commission (JERC)/State Electricity Regulatory Commissions (SERC) of 29 States/UTs namely Andhra Pradesh, Assam, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Meghalaya, Odisha, Punjab, Rajasthan, Sikkim, Tamil Nadu, Uttar Pradesh, Uttarakhand, West Bengal, Andaman & Nicobar and Lakshadweep Islands, Chandigarh, Dadra & Nagar Haveli, Daman & Diu, Delhi and Pondicherry have notified regulations/tariff order for grid connected solar rooftop projects.
- State Electricity Regulatory Commissions in Andhra Pradesh, Haryana, Punjab, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, Gujarat, Kerala, Punjab, Orissa and West Bengal have announced preferential tariffs for purchase of power from wind power projects.
- New Solar Policy in 2016 – Delhi, Himachal Pradesh and Haryana.
- New Solar Policy in 2015 – Telangana Jharkhand, Gujarat, and Andhra Pradesh.
- FINANCIAL SUPPORT
- Full exemption on excise duty is being provided on Pig Iron (SG grade) and ferro-silicon-magnesium for use in the manufacture of cast components of wind-operated electricity generators.
- The excise duty on solar water heater and system is restructured from 12% to NIL without CENVAT credit or 12.5% with CENVAT credit.
- Full exemption on excise duty is being provided on round copper wire and tin alloys for use in the manufacture of solar PV ribbon for manufacture of solar PV cells.
- Full exemption from basic customs duty (BCD) is being provided on evacuated tubes with three tyres of solar selective coating for use in the manufacture of solar water heater and system.
Incentives offered by Government for the development of the Solar Energy sector include:
- Exemption from excise duties and concession on import duties on components and equipment required to set up a solar plant.
- A 10-year tax holiday for solar power projects.
- Wheeling, banking and third party sales, buyback facility by states.
- Guaranteed market through solar power purchase obligation for states.
- Reduced wheeling charges as compared to those for conventional energy.
- Special incentives for exports from India in renewable energy technology under renewable sector-specific SEZ.
- A payment security mechanism to cover the risk of default by state utilities/discoms.
- A subsidy of 30% of the project cost for off-grid Photovoltaics (PV) and solar thermal projects.
- Loans at concessional rates for off-grid applications.
Fiscal Incentives for Biomass Power Projects:
- Accelerated depreciation: a claim of 80% depreciation in the first year for certain specific equipment.
- A 10-year income tax holiday.
- Concessional customs duty and excise duty exemption for machinery and components during the setting up of the project.
- An exemption of sales tax in certain states.
- Financial assistance from IREDA for the setting up of biomass power and bagasse co-generation projects.
- A subsidy of USD 30,769 per MW for biomass power projects and USD 23,076 per MW for Bagasse Co-generation projects limited to USD 230769.2 per project.
Fiscal Incentives for Small Hydro Power Projects:
- Central financial assistance to the State government and the private sector for the setting up of small/mini hydro projects.
- Subsidy to upgrade watermills and thereby improve their efficiency.
- A subsidy of USD 1.15 million/ MW for special categories and North-Eastern states and USD 0.53 million/ MW for other states limited to USD 3.07 million per project for State government projects.
- A subsidy of USD 230769.2/ MW for special categories and North-Eastern states and USD 153846.2/ MW for other states for the projects developed by private developers.
- From barely 20 MW in 2011, India’s installed solar capacity has increased to 8.062 GW as on 31.07.2016.
- India has vast untapped renewable energy resources — wind energy has installed capacity of 27.44 GW and an estimated potential of 302 GW at 100 meter height.
- Small hydro has installed capacity of 4.3 GW and an estimated potential of 19.7 GW.
- Bio-power (including biomass and bagasse co-generation) has an installed capacity of 4.88 GW as opposed to an estimated potential of 22.5 GW.
- Solar power has installed capacity of 8.062 GW with the potential of 7.48 GW.
- The Solar Policy of Rajasthan notified in 2014 envisages the setting up of solar manufacturing facilities at proposed solar parks.
- 34 solar parks of total capacity 20 GW have been sanctioned.
- Land for the solar parks are identified in Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Nagaland, Odisha, Rajasthan, Telangana, Uttar Pradesh, Uttarakhand, West Bengal and Tamil Nadu.