Optimism on renewables

Speaking at a side event related to the ongoing G-20 summit hosted under the presidency of Saudi Arabia, Prime Minister Narendra Modi noted that India was not only meeting its Paris Agreement targets, but also exceeding them. In particular, he said that India would meet the goal of 175 gigawatts (Gw) of renewable energy capacity “well before the target of 2022”, and added that the new target was for 450 Gw of renewable energy capacity by the year 2030. The prime minister’s re-commitment to meeting the 2022 targets, and his optimism are doubly welcome. He has set very ambitious goals, which are a significant step-up from those set by the previous administration. The 175-Gw target included sub-targets of 100 Gw for solar energy and 60 Gw for wind energy; the former are dependent upon imported photovoltaic cells and modules, which have come under increased levels of scrutiny from tariff authorities in recent months.

But the confidence does not appear to be shared by many in the industry, with a survey of chief executives of 40 Indian and international businesses in the sector in July this year suggesting that only 50 Gw of solar power and 10 Gw of wind energy capacity would be added in the next five years in India, to add to the 70 Gw or thereabouts of renewable capacity currently installed or in active projects in India. This means that the 175-Gw target did not appear within reach at least during the pandemic; whether the prime minister is more correct about a sharp bounce-back from the pandemic’s effects, or the sectoral leaders are, is the open question. This year has been a definite problem: According to Wood Mackenzie, solar installations in India in 2020 may drop by more than 40 per cent to less than 5 Gw — the lowest level since 2016.

One problem is that the 175-Gw target has been made subordinate to other policy directives and concerns. The increasing tensions with China have caused not just informal go-slows in terms of delivery of previously ordered components, but the aforementioned safeguard duties and even a proposal that the basic Customs duty of 20 per cent be levied. While the desire to ensure that a domestic supply chain is built up for photovoltaic components is a laudable and praiseworthy end, the fact is that this increase in costs will be harmful in the medium term and significantly hurt the race to the 100-Gw target for solar in particular.

Meanwhile, the pandemic has significantly affected distribution companies’ purchasing behaviour. Previous directives from the Union government that all discoms buy at over 20 per cent of their overall power requirements from renewable energy suppliers by 2021-22 will likely be missed, as discoms fail to transform tenders into contracts and in some cases simply fail to follow through with promised purchases or payments. Power-supply agreements have been long delayed, with 6,500 Mw of solar capacity awarded but not signed by discoms — and thus at threat of cancellation. ICRA, a credit-rating agency, has said that the revenue gap this fiscal year for discoms might be as much as Rs 45,000 crore, meaning that it will be difficult to pressure them to follow up on the mandate. This will need engagement at the highest level. With increased effort, the targets could still be met — which would be greatly to the government’s credit.

 



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