The next big power push
Balawant Joshi says the private sector will help India achieve renewable energy targets
Illustration: Tim Tim Rose
DURING THE first oil shock in the 1970s, soaring crude oil prices compelled the world to look at alternative energy sources to meet the demand and paved the way for commercial development of non-conventional energy technologies. During the past four decades, some of these technologies have matured and begun making significant contribution to the total energy consumption in some countries, such as Germany, Spain, etc. A steep rise in fossil fuel prices since 2008 has once again reminded the world that crude oil and gas reserves are limited. There are indications that the global oil production will peak in the near future and slide sharply thereafter. Besides, new fields are likely to be in offshore deep waters and with the Deepwater Horizon disaster, it is not going to be easy to drill deep wells for production of oil. The situation on coal is no different. Its international prices have been increasing too.
It is well accepted that the current global energy consumption and supply trends are economically, socially, environmentally and ecologically unsustainable. In this context, securing supply of reliable and affordable energy and developing technologies to transform this efficiently into electrical energy has become an urgent need.
No wonder then that the policy support for renewable energy has increased considerably worldwide over the past decade. As one would envisage, two drivers are cited for this push for support: first, there was a need to contain growth in greenhouse gas emissions and, second, concerns related to the supply mix of fuels and need for its diversification were felt. On the global scale, 19 per cent of electricity came from renewable sources in 2008, a share that has changed little since 2000, while the shares of coal and gas have increased by two per cent and 3.6 per cent respectively. Though the resource base of the renewable sources is very high and, in theory, these sources can meet a large proportion of energy demand, in practice these technologies are dependent on incentives and other forms of government support. Consequently, governments around the world are continuously developing programmes for promotion of renewable energy sources
From India’s perspective, securing conventional energy fuels like coal and oil is extremely crucial for sustaining high rate of economic growth, and there is no reason to believe that this will change in a foreseeable future. However, from a wider perspective of preventing the catastrophic and irreversible consequences of global warming, India will have to inevitably take efforts to decarbonise its economy. These perspectives – energy security and climate change – are driving the energy policy.
Though India started its renewable energy programme way back in 1981, the government established the full-fledged ministry, the Ministry of Non-Conventional Energy Sources, now called the Ministry of New and Renewable Energy (MNRE), in 1992. The fact that India is the first country to establish such a ministry signals the importance given to renewable energy sources by the government in its future plans to meet energy needs.
Broadly speaking, the renewable energy could be divided into two types depending on the mode of harnessing it. These two types are grid-connected renewable energy and off-grid applications. As the names suggest, electricity generation from renewable sources where the generators are connected to the electricity grid, while the latter deals with renewable energy generation in standalone mode, such as solar lantern, biogas plants, etc. A significant push is being given by the government of India to promote both forms of renewable energy through pronouncement of several policy measures.
Today, the MNRE has one of the world’s largest programmes for promotion of renewable energy, as a result of which India has established nearly 20,000 MW of grid connected renewable energy capacity and more than 500 MW of off-grid capacity. In the former category, wind power tops the charts at a total capacity of 14,157 MW.The renewable energy through solar power comes at the end, with an installed capacity of 37 MW.
While The government has been setting targets for renewable energy development as part of the five-year plans, the National Action Plan on Climate Change (NAPCC) launched by the government in June 2008 has set aggressive targets for installation of renewable energy technologies in the country. The NAPCC prescribed a target of five per cent for the share of renewable energy in total electricity generation in 2010. Further, it prescribes that this target would increase by one per cent each year to reach 15 per cent by 2020.
This is huge challenge given that electricity generation is expected to increase manifold during next decade. In 12th Five Year Plan for the period 2012-2017, India is expected to add 83,000 MW of conventional generation capacity. If the government wants to increase the share of renewable energy in this mix, very aggressive capacity addition targets will have to be established. By conservative estimates, this would mean a year on year increase in capacity by 6,000 to 8,000 MW. One can appreciate the enormity of challenge if we take note of the fact that India has never added more than 3,000 MW of renewable energy capacity in a single year in the past.
The most dominant renewable energy technology has been wind. With more than 70 per cent share in the total renewable energy capacity, it has a lion’s share. The dominance of wind is expected to continue during at least the 12th plan, in which the government is planning to install 11,200 MW out of 18,700 MW total renewable energy capacity. Interestingly, the government wants to take power generation through solar means to 16,000 MW during the 13th plan target, which may be an uphill task.
Traditionally, renewable power generation capacity has been set up largely through private sector investment. According to estimates, more than 70 per cent investment in the this sector has come from private players. In future also, the private sector is expected to lead investments in this sector. This is going to open huge opportunities for it. At normative costs, investment requirements in the 12th and the 13th plans for capacity addition are expected to be `1,46,000 crore and `2,65,000 crore respectively. Of course, the government will have to put in place strong, clear and investor-friendly legal, policy and regulatory framework, and that is where the real challenge lies
Balawant Joshi is the director of ABPS Infrastructure Advisory