Solar, wind and other renewable energy sources hold the key to India’s energy problems as well as energy security. For the economy to grow uninterrupted power supply is a necessity. Rising prices of imported coal and gas, environmental roadblocks to hydro-power projects and shortage of coal and gas at home provide an exciting opportunity for renewable energy companies and consumers. We will advise you on how to power your and nation’s growth.
Economic growth has led to soaring demand for energy. According to some estimates, India’s power demand is expected to increase by more than 75 percent to 1,640 billion units by 2020. The energy bill has strained the exchequer as local supply of inputs has failed to keep with demand resulting in higher imports. About 80 percent of oil needs are met through imports. Gas and coal imports have also been rising. The depreciating rupee has added to the woes.
The drive for energy self-sufficiency has always fuelled the growth of the renewable energy sector. Foreign direct investment of 100 percent is allowed in the sector. India has immense potential for power generation from renewable sources such as wind, biomass, solar energy and small hydroelectricity projects.
According to some experts India is capable of generating 6 lakh gigawatt (GW) of renewable energy. Wind energy accounts for more than two-third of India’s renewable energy capacity today. India became the world’s fifth-largest wind energy market with 16 GW installed capacity in 2011, with plans to increase it to 31 GW by 2017. India currently has 15,691.4 MW grid-connected and 367.9 MW off-grid renewable solar energy capacities. It is among the top three global spots for development of solar energy according to the Ernst & Young’s index for the sector. The Jawaharlal Nehru National Solar Mission envisages installation of install 1-2 GW by 2013, 4-10 GW between 2013 and 2017, and 20 GW by 2022. Though, some experts expect the installed capacity to touch 75 GW by 2022.
There are a number of reasons which make the Indian renewable energy market an attractive investment destination. It is the most developed renewable energy market in South Asia with annual revenue of around $185 billion. The sector has already been attracting annual investments of around $3 billion. States such as Gujarat, Rajasthan and Karnataka have attracted investments and attention by putting in place renewable energy policies and schemes.
The second phase of solar power would require more investments and technology transfer from abroad, especially for off-grid installations. These projects are provided capital subsidies, which range from 30 percent for non-priority regions to 90 percent for priority regions and accelerated depreciation. Incentives depend on whether the scheme is sponsored by state or central government, and vary between $0.27 and $0.40 per kWh for grid-connected power, based on the plant’s size.
The declining availability of debt and high interest rate are set to spell trouble for renewable energy projects. The shallow bond market adds to the problem. The sector is also hampered by regulatory and structural issues. As the policies are decided by the state governments, project risks increase. The central government’s effort to persuade states to reform their electricity boards and tariffs is an encouraging sign for the investors.
The demand-supply gap in the power sector is increasing as the economy grows and citizens aspire for higher standard of living. This gap currently stands at 10.3 percent. The use of renewable energy sources is still comparatively low in India and immense investment opportunities exist in the sector.
(Disclaimer: The information has been aggregated through secondary research. IFIE is not responsible for errors if any)