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Renewable energy has arrived

Renewable energy has arrived
In the past 10 years, installation of renewable energy for electricity has grown at an annual rate of 25 per cent. It has reached 30,000 MW as of January 2014. During this period, wind power installation has grown 10 times and solar energy has grown from nothing to 2,500 MW. Currently, renewable energy accounts for about 12 per cent of the total electricity generation capacity and contributes about six per cent of the electricity produced in the country. Renewables, therefore, produce more than twice the amount of electricity produced by all nuclear power plants in the country. In 2012-2013, the electricity produced by renewables was equivalent to meeting the per capita annual electricity requirement of about 60 million people. More than a million households in the country, today, depend solely on solar energy for their basic electricity needs.

The growth of renewable energy has changed the energy business in India. It has, in many ways, democratised energy production and consumption in the country. Before the renewable sector became a significant player, the energy business was all about fossil fuel-based big companies and grid-connected power – they dominate even today. But today there is an alternate energy market in which thousands of small companies, NGOs and social businesses are involved in selling renewable energy products and generating and distributing renewables-based energy. This trend is likely to accelerate because of two key policies of the government.

The first is the Electricity Act 2003. The Act has opened up the rural electrification market to decentralised distributed generation systems. It promotes decentralised generation and distribution of electricity involving institutions like the panchayats, users’ associations, cooperative societies and NGOs in rural India not under the purview of distribution companies. In addition, private developers are free to set up renewable energy based generators and sell electricity to rural consumers. The second impetus to decentralised renewables comes from rooftop solar policies of state governments.

States like Gujarat, Andhra Pradesh, Uttarakhand, Karnataka, and Tamil Nadu have policies to promote solar energy generation from rooftops of residential, commercial and industrial buildings. The response to these policies has been highly encouraging. Although the results of this policy are likely to be realised slowly, the stage for re-inventing electricity generation with power from rooftop installations has been set.

In the coming years we could see thousands of energy producers feeding the grid or supplying electricity to consumers through local mini-grids. We could also see millions of consumers generating their own electricity and feeding the surplus to the grid. The fact is we are just beginning to realise the potential of the renewables to open up the energy market and democratise energy generation and consumption.

But all is not well with the renewable energy development in the country. In the past two years, renewable energy development has taken a backseat. Installation of renewable energy has gone down significantly in 2012-2013 and 2013-2014, compared to 2011-2012. The status of off-grid renewable energy is even poorer. There has been little effort by the Ministry of New and Renewable Energy (MNRE) in the past few years to take off-grid solutions to the country’s unelectrified villages and hamlets. The decade-long Remote Village Electrification Programme (RVEP) was stopped in 2012. Under RVEP, solar home lighting solutions were distributed in about 10,000 villages and hamlets. The programme suffered from poor service delivery and corruption. It is anybody’s guess how many of the villages electrified by RVEP still have electricity or how many households are still using the solar home lighting systems they have received through the programme. MNRE had to come out with an energy access programme to replace RVEP. The programme envisaged installing mini-grids for rural electrification. But this programme has not taken off so far.

The past two years were a complete wash out for the renewable energy sector in India. Investment in renewables went down from $13.0 billion in 2011 to $6.5 billion in 2012. This was largely because of policy uncertainty – some say paralysis – within MNRE. Let’s take the case of the solar energy. After successfully implementing the Phase 1 of the Jawaharlal Nehru National Solar Mission (JNNSM), nothing significant happened on Phase 2 till the beginning of 2014. The delay of more than a year brought about stagnancy in the solar industry.

In addition, MNRE announced that states will have to deploy, as part of their renewable purchase obligations (RPOs), about 60 per cent of JNNSM Phase 2’s target of 10,000 MW of solar energy by 2017; the central government will support only 40 per cent of the installation. But in January 2014, MNRE announced its plans to install four Ultra Mega Solar Power Plants (UMSPP) of 4,000 MW each – all these four plants will be put up by the Centre. If these UMSPP are installed, they alone will meet most of JNNSM’s targets. Bearing in mind that government programmes are about targets, if Centre is going to meet the bulk of the target, why should states be interested in doing more!

MNRE also did major flip-flop on wind power. Government incentives have played a major role in the wind industry’s growth. Till the end of 11th Five Year Plan (FYP), the industry could avail of both accelerated depreciation (AD) and generation-based incentives (GBI). Then all of a sudden at the beginning of the 12th FYP, both subsidies were removed. This led to major reduction in investments in the sector. The removal of subsidies, though, was not the only reason for the fall in investments: lack of proper grid infrastructure to evacuate power and delays in payments by state utilities have compounded the wind industry’s problems.

MNRE has now announced a Wind Mission to ramp up installation of wind power in the country. It now proposes to bring back both GBI and AD incentives (GBI was reintroduced in 2013-14). But the question   is how long will this industry survive on AD and GBI? Is there a long-term sustainability plan for the wind sector?

The biomass sector is in big trouble as well. Under the 12th FYP, a National Bioenergy Mission was announced to provide 20,000 MW biomass power by 2022. The mission will promote plantations to achieve its targets. But the fact is about 60 per cent of the country’s grid-connected power plants that run on biomass have either shut down or are on the verge of shutting down. Out of about 118 projects in the major states – Andhra Pradesh, Chhattisgarh, Maharashtra, Tamil Nadu and Rajasthan – nearly 72 have shut down.

The reason: rising cost of biomass due to competition within the biomass power industry and from other industries like cement and brick kilns. Now biomass industry wants an increase in tariffs. But should we pay more for power just because we want biomass power or should biomass power remain in the fray, only when it is economically efficient. If cement and brick kilns can utilise surplus biomass more efficiently and outcompete biomass power in the market, then they should be utilising this feedstock, not biomass power plants. Affordability of energy is as important as promotion of renewable energy. It is quite clear that long-term policy perspective and policy certainty is the key for the sustained growth of the renewable energy sector. The experience of the past few years show that major changes in policy and practice are required to make renewable energy a real solution for meeting the energy needs of the country.

Today, renewable energy is small. But it will grow. If we don’t have environmental safeguards now, the ecological impacts of this ‘clean’ energy source might become unmanageable.

Lastly, renewable energy must benefit the local community. Communities must have the first right over the electricity from renewables and they must benefit from the installation of renewable energy on their land. These we think are the ways ahead for the sustainable growth of renewable energy in India.

By arrangement with Down to Earth magazine
Chandra Bhushan

Chandra Bhushan

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