India is home to one of the largest clean-energy expansion programs. Support from the government and foreign investors is driving this growth. There is still more the state can do to support this transition, however India is the new hotspot for renewable energy investors.
Despite of strict policies, steady influx of capital, falling prices and rise in new technologies, there has been an exponential growth in the renewable energy(RE) sector in the past 5 years. In 2015, the government took an initiative to transform to a lower-emission electricity system with an aim of 1175GW from renewables by 2022. The motive was simple; access to wider and cheaper energy at minimal costs to the environment. The renewables industry responded to the government’s call for climate-compatible growth by aggressively ramping up capacity, at an annual growth rate of 17.5% between 2014 and 2019 and increasing the share of renewables in India’s total energy mix from 6% to 10%.
Progress in Indian renewable energy sector.
India is among the top-five-clean-energy producers globally and is in progress to achieve its set aim with an installed renewables capacity of 83GW, plus 31 GW development and further 35GW out for tender. It has now eyeing 225GW from renewables by 2022 with an aim of 40% clean energy by 2030.
Consequently, India has steadily improved its position and allows 100% FDI for RE projects to facilitate easy transfer of capital and technology. The new government, in its first post-election budget, has also announced several welcome measures such as tax breaks for setting up mega-manufacturing plants for solar cells, lithium storage batteries, electric vehicles and charging infrastructure. It is also focusing on strengthening the grid to enable seamless and increased integration of renewables. The fact that India’s renewable market is huge and well-diversified in terms of the location of its projects has also helped lower investors’ risk perception.
Apart from this, the government can still better by improving transmission infrastructure, ensuring no confusion once contracts are concluded and It must also work to turn around India’s distribution companies (discoms) so that they can honor their renewable purchase obligations. The government must also introduce a payment security mechanism to counter the risk that discoms do not fulfil their contractual obligations. A foreign-exchange facility will also calm down investor worries around currency volatility. If these issues can be adequately and immediately addressed by policy-makers, it will further lower risks and boost investments.
The battle against climate change cannot be won without a healthy and vibrant renewables sector in India. This needs a steady flow of funds in the years ahead and the current sector profile is perfectly aligned to investor interests which has raised hopes that India’s renewables success story will continue with a good progress.