Renewable Energy India
India has sharply increased its target for Renewable Energy in the next 5 years to 30 GW from the earlier 17 GW. Greenworldinvestor had predicted that the 17 GW was too low a target in order to meet India’s 15% target of energy generation from green power sources ( see below). Though the Government has increased the green power target there are huge hurdles to achieving the target. India plans to meet 50% of the renewable energy increase from wind energy. However 3 GW from wind power looks tough considering that all the subsidies and incentives have been removed and major wind energy companies are predicting only a 1 GW capacity increase in the current year. Solar Power is also facing some teething problems though some states like Gujarat have made impressive gains in solar energy generation. The other major problems plaguing the green power industry are:
a) Inadequate and low quality transmission and distribution electricity infrastructure
b) High interest rates and capital funding problems
c) Financial viability of customers.
Renewable Energy in India has seen decent growth in the past, mainly driven by Wind Energy which accounts for almost 65% of the estimated 20 GW of Green Energy capacity installed in the country. However to meet India’s 2020 Green Energy Target of 15% of power to be generated from renewable sources set by CERC, at least 40 GW more would need to be installed (that is a conservative estimate as load factors for green energy are lower). This is assuming that India meets its target of raising the power capacity to 400 GW by 2020 from around 175 GW at present. Solar Energy in India has not got off to a good start despite immense potential as the federal subsidy program JNNSM has seen irrational bidding by bit players and debt financing is difficult. Wind Power in India has seen the most growth amongst the green sources of power but it too faces hurdles as good quality wind sites have all been taken.
Why 17000 MW is too Low
Biomass, Small Hydro and other sources of green power face problems of scale making the 40-80 GW of the required green energy capacity quite difficult unless the government changes its policies even more. Note 17 Gw of renewable energy between 2012 and 2017 equates to around 3 GW of alternative energy capacity per year which is much lower than the 4-8 GW of green energy needed per year. While out of the 100 Gw of power capacity expected 17 G may seem higher, note that renewable energy load capacity is around 25-33% of a normal thermal/gas power plant which means that the power generated from the green sources will be only 7% from the newly installed 100 GW capacity much lower than the 10% target by 2015. That would leave around 23 GW to be installed in just 3 years which seems quite impossible.
India already faces a massive energy deficit and that will only increase as the prices of fossil fuels like coal and oil are increasing at a parabolic rate driven by the growing demands of China and India. With the fossil fuel a depleting source of fuel, renewable energy is the only alternative left. While the government has put in decent efforts, it has been bogged down by a lack of clear thinking. Using the auction mechanism did not help with JNNSM while Wind Power too faces problems of getting proper payments from bankrupt state distribution companies. It needs to structurally reform the whole electricity market in order to meet the growing energy demand of the country. Otherwise the 8% GDP growth rate will look like a pie in the sky.
Wind Power Plants in India are finding the going tough in 2012 as we had written earlier with a number of factors affecting the growth of the industry in India. Not only have the central subsidy schemes like accelerated depreciation and GBI have been removed, but the wind power players are also facing tactical problems like collecting of dues from the state distribution utilities. Most of the state power distribution companies are saddled with massive debt and payment to suppliers is always a perennial problem. In the case of the wind energy developers, the problem of working capital has become acute with payment delays of more than a year.
Wind Companies are also facing capital escalation of costs with the prices of materials like steel and cement showing a sharp appreciation leading to a 30-40% increase in the cost of wind farms. The rise in costs with a fall in electricity tariffs are squeezing the wind energy developers. Wind energy installations in Tamil Nadu which accounts for almost 40% of the wind capacity in India, has already dropped by a startling 70% in the first quarter of fiscal 2012. With the industrial conditions getting worse it is expected that the trend will continue and wind capacity could drop to just 1000 MW from 3000 MW last year.
“At the end of 12th Five Year Plan (2012-17), the country is expected to have total renewable energy generation capacity of 55,000 MW,” Joint Secretary at the Ministry of New and Renewable Energy Tarun Kapoor said here today.
Of the projected 30,000 MW capacity addition, around 15,000 MW would be from wind power.
According to him, there are also certain issues such as financial health of power distribution companies (discoms) and availability of transmission lines for renewable energy projects.