India’s Renewable Energy Target

The Indian government has set an extremely stretch target of 175 GW of renewable energy capacity by 2022 up form around 40 GW now. This means a quadrupling of the installed cumulative green energy capacity in the country over the next 6 years. A lot of the analysts have been sceptical of the target given the huge numbers involved and the numerous challenges in the form of financing, grid capacity, energy demand growth and ability of the human resources. However, the government has made a strong start by overachieving its RE target in the last year and even over the next 3 years as they have set up an aggressive capacity addition target.

This will make India not only the fastest growing renewable energy market in the world but also one of the largest in terms of absolute numbers. It is not surprising that every global renewable energy company is making a beeline to enter India. Solar power finds the pride of the place, with 43 GW of capacity additional targeted over FY 17 to FY19. This will make up more than 70% of the overall RE addition. Next comes wind energy with 15 GW making up another 25% of the capacity addition. Small hydro and biomass makes up the rest 5% of the RE addition.

While I am also sceptical whether India has the grid capacity and demand to support capacity, the government has done extremely well in power over the last couple of years. It will not be an exaggeration to say that Piyush Goel has been by far the best energy minster that Indian has ever had. His achievements in all sectors such as coal, renewable energy, energy efficiency etc. has been incredible considering the institutional constraints and systematic problems facing the overall Indian economy.

I think while the financing, grid etc. are overall in place, energy demand which is dependent on the industrial growth remains a big challenge. Indian industry has grown at a muted pace over the last couple of years hobbled by excess capacity and debt. Energy efficiency improvements has also decreased the overall power demand in the country. A number of states which used to be chronically deficient in power have also become power surplus in recent years. This makes it tough for new power plants to find buyers of power. Wind power plants have recently been stranded due to a lack of PPAs from the distribution utilities. Solar power is also facing some isolated incidents of curtailment. Thermal power capacity is currently operating at a very low PLF of 62%

The Target set for the various Renewable Energy Sources for the Next Three Years:

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