The growth of RE has changed the energy business in India. It has democratised energy production and consumption in the country. RE has created an alternate energy market in which thousands of small companies, NGOs and social businesses are involved in selling RE products and generating and distributing renewables-based energy. This trend is likely to accelerate because of two key policies of the government.

 

 

The Electricity Act, 2003 opened up the rural electrification market to decentralised distributed generation systems. Private developers are free to set up RE based generators and sell electricity to rural consumers. The second impetus came 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.

 

 

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 realize the potential of the renewables to open up the energy market and democratise energy generation and consumption.

 

 

But all is not well with the RE development in the country. In the past two years, the development has taken a backseat. Installation has gone down significantly in 2012-13 and 2013-14, compared to 2011-12. The status of off-grid RE 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. Under Remote Village Electrification Programme (RVEP), solar home lighting solutions were distributed in about 10,000 villages and hamlets. The programme suffered from poor service delivery and corruption and was stopped in 2012.

 

 

The past two years were a complete wash out for the renewable energy sector in India. Investment in renewables went down from US $13.0 billion in 2011 to US $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 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 central government. These UMSPPs alone can meet most of JNNSM's targets. If the central government 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. Till the end of 11th Five Year Plan (FYP), the industry could avail of both incentives - accelerated depreciation (AD) and generation-based incentives (GBI). Then all of a sudden at the beginning of the 12th FYP, both subsidies were removed. 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 that proposes to bring back both GBI and AD incentives.

 

It is quite clear that long-term policy perspective and certainty is the key for the sustained growth of the RE sector. The experience of the past few years show that major changes in policy and practice are required to make RE a real solution for meeting the energy needs of the country.

 

 

Develop an integrated policy and plan for the renewables for 2050: Policies and plans to develop RE have been haphazard. Two key levels of integration are missing: one, integration of the renewable energy sector with conventional energy sources and the other, integration of different sources of renewable energy themselves.

 

 

Currently India has five separate ministries for the energy sector: Ministry of Coal, Ministry of Petroleum and Natural Gas, Department of Atomic Energy, Ministry of Power and the MNRE. These ministries are only concerned about their own turf. Similarly in the MNRE itself, each wing is concerned with its own territory. The ministry has a sub-sector approach and vision. The fact is ministry does not have a vision for a holistic development of the renewable energy sector.

 

 

All this is leading to inconsistent policies. For reasons of economic efficiency, better utilisation of infrastructure and environmental protection, India needs a long-term policy to integrate the different sectors of energy with specific role of RE addressing the needs of energy access and energy security.

 

 

Be ambitious: Installation of renewable energy in India, especially grid-connected solar and wind, has always exceeded government targets and expectations in the past. In fact, one can argue that government has been quite pessimistic about the role of renewable energy in meeting the energy needs of the country.

 

 

The Integrated Energy Policy, 2006 had projected that in the most optimistic scenario, by 2031-32, India will have 30,000 MW of wind and 10,000 MW of solar power. The 12th Five Year Plan (FYP) document has projected a fourfold increase in the installation of renewable power by 2021-22. But despite renewable power reaching 100,000 MW by 2022, the share of renewables in total commercial energy use will remain under 2 per cent in 2021–22.

 

 

Both the Integrated Energy Policy and the 12th FYP are not ambitious enough. The fact is the price of renewable energy (especially solar) is coming down and the price of fossil fuels is going up. India is highly dependent on imported fossil fuels and this dependency is growing every year. The fact also is that climate change is palpable and is now hurting India’s poor. All these require that we must be more ambitious about RE. The benefits of moving to renewables are immense – energy security, climate protection, reduced pollution and health benefits for people.

 

 

Renewables for energy access: India has done well on grid-connected RE, but has lagged behind on decentralised solutions. The biggest social and economic impacts of RE will be in providing clean energy to the energy poor. Decentralised RE can provide basic energy access to all. This can be done by adopting a cluster-based approach. The government needs to incentivise setting-up of small RE plants with the same model it employs for grid-connected large solar or wind plants. These mini-grid projects should be provided with a feed-in-tariff (FiT) or Viability Gap Funding (VGF), like grid-connected projects. The difference between what consumers in the villages are willing to pay (say equivalent to the replacement cost of kerosene) and tariff discovered through the bidding mechanism can be financed through VGF or FiT.

 

 

If operationalised, this model will revolutionise the way power is produced and consumed in India. Thousands of renewable energy based mini-grids can promote millions of small businesses and social entrepreneurs to create local jobs and build local economies.

 

From subsidy to grid-parity: RE has grown in the country on the back of government subsidies, incentives and tax exemptions. There must be a long-term plan to progressively reduce subsidies and allow renewable energy to reach grid-parity. Reverse bidding has done very well in the solar sector and subsidies have reduced over time and this can be emulated in other renewable energy sources like wind. Subsidies should incentivise performance and not physical achievements.

 

 

Rationalise and enforce RPOs: RPO was the policy measures used to mandate renewable procurement by state electricity boards, open access and captive consumers. Most states introduced their own targets in 2010, but none of them have enforced this mandate. The enforcement will give big impetus to the growth of the sector and also lead to development of RE in all parts of the country, not just in a few regions.

 

 

Green norms for renewable energy: RE projects can have major ecological impacts if they are installed without proper environmental assessment and management. For instance, the impact of wind power on forest ecology can be very high. Many of these wind power projects are coming up in the eco-sensitive Western Ghats without going through any environmental impact assessment (EIA). Similarly, small hydro projects (SHP) are exempted from EIA. Multiple SHP on a single river can completely destroy a river's ecology. Large solar projects too have environmental impacts—they are land and water intensive. These issues should be addressed before setting-up large solar plants.

 

 

The environmental community believes in the necessity of proper environmental regulations for the RE sector: it should be subjected to the EIA process. Today, RE is small. If we don’t have environmental safeguards now, the ecological impacts of this ‘clean’ energy source might become unmanageable.

 

 

Lastly, RE must benefit the local community. Communities must have the first right over the electricity from renewables and they must benefit from the installation on their land.

 

 

These we think are the ways ahead for the sustainable growth of RE in India.