Indian Renewable Energy Development: A case study for developing nations

The continuous use of fossil fuels for the past decades has made their availability much lesser now and the increasing human population makes them even scarcer. This results in increasing their price manifold. So power deficiencies resulting from it pose as a global issue. Renewable energy projects developed by various nations therefore try to combat this global threat. Assisted by the government India became the very first country in the world to establish a ministry of non-conventional energy resources back in the 1980s, called the Ministry of New and Renewable Energy.

Also, the issue of renewable energy production becomes a matter of utmost importance especially in developing countries namely- India, China and various others. Such nations have a raging population and thus have exorbitant hunger for highly polluting non-renewable fossil fuels like oil, coal and gas which makes it an even more important to produce renewable resources by them.  Adopting and enforcing policies to work towards establishing renewable energy resources as primary energy sources, these nations can grow up to be the leading nations in renewable energy production. Especially tropical countries get enough sun to harness its energy for power production. Also, wind in universally available and hence wind power becomes an easy option for developing countries to replace the polluting energy resources such as the fossil fuels. And considering the constant availability of cheap labour owing to high population in these countries makes it easier to incentivise technology and product innovation in this sector. Just that, developing nations should keep the production and storage cost of the renewable energy sources in check. Because they do not have overflowing national coffers, cost – effectiveness becomes an important issue to look into. So whatever be the means, these countries should aim at supporting sustainable development by minimising pollution in a cost effective way. 

Welspun Renewables is a pioneer of renewable energy projects in India. Backed by many eminent international investors, Welspun Renewables has been effectively contributed to the production of solar and wind power in India and stands as one of the leading solar and wind IPPs in the country. The company has created a total energy having a capacity of 680 MW. The Asian Development Bank is instrumental to the development of Welspun Renewables and in their work for setting up sustainable development in the country.

About Author: 

Nikhil Mehra is a specialist on Indian Renewable Energy Development projects in India and is a professional who is well acquainted with industry news and similar development stories.

Can India set an example when it comes to renewable energy development?

The renewable energy sector in India has been witnessing a rapid growth in recent times, and consequently, it presents an opportunity for strong financial returns.There are quite a few factors behind this. India is short of power, and thus, new renewable capacity generates electricity for a market which is undersupplied. Secondly, renewable energy can be more swiftly taken to market in place of other alternatives like coal fired power. Besides, renewable electricity prices are similar to those of electricity from other sources. India benefits from truly market-led renewable energy demand, without any major subsidies. There has been consistent and vital support from the Indian Government and this has not only reinforced the market fundamentals but also created a dynamic market which seems firmly on the growth path. The country already possesses 35 GW in terms of overall renewable energy capacity and plans to grow this 500% over a period of six years from now. Indian renewable energy development has presently got a shot in the arm and is progressing at a rapid pace.

India presently has a golden chance to properly shape its entire policy. Social and economic growth are one of the priorities of the government’s agenda, and new energy sources to cater to this demand are increasingly being derived from renewable energy. A number of factors have contributed to this. Besides the government policy which has been supportive, a wider set of actions, which include incentives, infrastructure and investment promotions, were taken up. Technology development, larger-scale projects and the learning effect has facilitated the use of efficient designs and have brought down costs. This makes renewable energy alluring to power utilities that are contracting new long-term capacity, and in addition, this helps avoid burdens relating to the fuel risk and also take or pay contracts. Multiple renewable energy projects have also come into being.

Renewable energy companies are minimally dependent on fiscal support from the government in India. It signifies an investor with a given capital can fund more projects across regions or even various asset classes for diversification into risks which are resource based. Additionally, a lower cost structure also means that an investor gets early or better prepared gains from better returns. Public opinion is positive with the recognition of environmental, economic and social benefits. According to recent studies, wind potential of 40-65 times higher is possible with new technologies and more scale. Additionally, new initiatives have come up for exploration of offshore wind, provision of solar parks or construction of transmission corridors for green energy and these can support overall development of the market. The considerations to meet energy demands, lower costs, sustainability and energy security are fueling renewable energy growth in the country. This also holds true at a global level. The industry estimates that Europe will add 109 GW of renewables by 2020 while India aims at reaching a staggering 175 GW or even adding 140 GW by the year 2022. This makes for a lucrative opportunity for developers and suppliers and is also a significant transformational chance for the power market and electricity policy alike.  

GST- How will the renewable sector deal with it?

India has been increasingly focusing on renewable energy, which has garnered considerable global interest; however, according to latest findings, there is a high probability that the new GST (Goods and Services Tax Bill) regime will raise the cost of setting up renewable energy projects in the country by up to 20%. It has been learnt that the Ministry of New & Renewable Energy (MNRE) will share the findings of the report with the Department of Revenue, requesting an exemption. The study commissioned by the ministry compiles findings that lead to the revelation that the implementation of the GST will increase the cost of setting up of all categories of renewable energy systems, be it solar, wind, or biomass, or even small hydro power projects.

The draft findings, which have been reviewed by Economic Times, serve to show that the cost of Solar PV-Grid could rise by 12-16% and that of Off-Grid systems by 16-20%. Wind energy systems could face an increase of 11-15% in tariff/cost of setting up and operations, and given that it is already going through a dull phase, this drastic increase will not bode well for it at all. Besides, the hybrid and solar combination projects will, in all likelihood, face an increase of 11-17%. The major factors that will lead to an adverse impact on the cost of renewable energy include removal of exemption, increase in tax rates, and removal of statutory norms. The ministry has put forward its argument that a sudden increase in cost would result in policy disruption, scare away new investors, and also make it difficult to retain existing investors.

100% tax holiday on the earnings for 10 years, concessional excise and custom duties, are some of the various fiscal incentives that the renewable energy sector currently enjoys. However, in the new GST regime, all these incentives will come to an end. With over $4 billion lined up for investments in India’s solar industry, its viability depends largely on exemptions continuing on related equipment to power 4.8 GW of electricity generation. Service tax is also likely to increase to 18%, thus leading to a 5% rise in operation and maintenance charges. Developers are keeping their fingers crossed, with the hope that a standard GST rate will not be taken into consideration for projects that have bid at high tariffs. Indian renewable energy development has to be given a big boost in order to meet the targets of the Government by the end of the decade.