Renewable Energy Sector under the Current Indian Government

In May 2014, Mr. Narendra Modi was elected the Prime Minister of the Country. This appointment led to a lot of optimism in the Renewable Energy Sector as under his leadership the Indian state of Gujarat had made big strides in Solar Energy. 

Our Takeaway from the Current Government’s Run

 The Indian Government looks committed to increase the share of Renewable Energy in the energy mix exponentially. Their commitment is evident from the revision of Renewable Energy targets to 175000 MW till 2022, comprising 100000 MW Solar, 60000 MW Wind, 10000 MW Biomass and 5000 MW Small Hydro.  However, the Government does not want to make this sector dependent on  Subsidies and Waivers. For instance, W.E.F 1st April 2017, Accelerated Depreciation in Wind Energy has been capped at 40% from an earlier figure of 80%. The current government wants this sector to become financially viable by 2022. The government hopes that the RE Sector will open employment opportunities for many. Case in Point is the Suryamitra Scheme launched in 2015 to train 50,000 Solar Professionals. 

 

How has the Budget Outlay for the Renewable Energy Sector changed over the Years? Here’s the low-down starting from the Union Budget 2013-14. 

 

Budget 2013-14 – The budget in 2013 was a letdown for the Renewable Energy Sector.  According to the numbers mentioned on indiabudget.nic.in the government rolled back the revised budget outlay from Rs 4232 crore for  2012-13 to Rs. 3,915 crore in the budget for 2013-14. The budget for Renewable Energy saw a disappointing 7.49 % drop. 

In an article for http://www.downtoearth.org.in, Mr. Chandra Bhushan who is the Deputy Director at CSE noted that “In the budget 2013-14, finance minister P Chidambaram reiterated India’s dependence on coal imports, which is likely to go up to 185 million tonnes in 2016-17 from the existing 100 million tonnes, but did not deliberate on the need to increase energy generation from renewable sources. In fact, the outlay of the Ministry of New and Renewable Energy (MNRE) has been reduced and so has been the plan for installing renewable energy projects”

Now we move to Budget 2014-15, here the budget outlay for MNRE increased from Rs 3393 cr to Rs 3941 cr. This is an impressive 16.1 % increase and a firmer show of commitment towards Renewable Energy.

We will again quote Mr. Chandra Bhushan from his article published in http://www.downtoearth.org.in “Highlighting new and renewable energy as the high priority sector, Finance Minister Arun Jaitley focused more on the big solar power projects in his budget speech, neglecting decentralized mini and micro grid solar projects for rural areas of the country. However, solar power agricultural pumps have been given a big boost in the budget.The BJP-led NDA government has taken up the Ultra Mega Solar Power Projects (UMSPPs) announced by the previous UPA government in Rajasthan, Gujarat,and Ladakh in Jammu and Kashmir. Jaitley has allocated Rs 500 crore for these projects. The projects received flak from some renewable energy experts advocating the need of mini-grids over big solar projects. Jaitley has added Tamil Nadu in the list of states where UMPPs will be set up”

Budget 2015 was the year of Ambitious targets for Renewable Energy. Ahead of COP 21 in Paris, on 2nd October India Pledged to source 40% of its energy requirements from Renewable Energy Sources. Earlier to the pledge, the Govt had increased its RE Capacity targets dynamically to 175000 MW till 2022, comprising 100000 MW Solar, 60000 MW Wind, 10000 MW Biomass and 5000 MW Small Hydro. However, the budget outlay told a different story. The budget estimate was slashed from Rs 3941 cr (2014-15) to Rs 3661 cr which is a good 7% drop. Now here’s the glitch in the plan – The Ambitious targets call for Ambitious Investments. Along the year, Revised Budget Estimates showed that Rs 5677 cr  was finally allocated to MNRE in 2015-16. At this point readers would be sighing with relief but the revised estimates are a far cry from the investment needed to install 175 GW by 2022. We will discuss the Investment that the RE Sector needs in future posts. 

Source : http://www.business-standard.com/article/economy-policy/india-s-energy-mix-to-have-40-renewable-sources-by-2030-115092200057_1.html 

Budget 2016-17 The Budget estimates for 2016-17 were a gigantic 14193 cr.  Gokul Chaudhri, partner at BMR and Associates, observed in an article for Livemint –

This outlay includes Rs.5,000 crore from the National Clean Energy Fund (NCEF) with the balance coming from Internal & Extra Budgetary Resource (IEBR). A significant part of viability gap funding for solar power projects is intended to be financed out of such cash outlay.

The budget appears to be focusing more on administrative issues within the limits of fiscal prudence, like providing a legal framework for dispute resolution in PPP projects and measures to curb litigation in order to promote a non-adversarial tax regime.

Source : http://www.livemint.com/Opinion/lkjrlBIKEfChAi4Hh4mp5L/Budgets-impact-on-renewable-energy.html 

This budget also saw the reduction of Accelerated Depreciation from 80% to 40% w.e.f April 1st, 2017. 

Budget 2017 -18 The 2017 Budget was a disbelieving low Rs 5396.30 cr. This was a 62 % drop from 2016-17.  

Anjali Viswamohanan and Neeraj Kuldeep, researchers at CEEW, wrote in an article for FirstPost –

A number of areas that required government support, which the Budget could have addressed, remain unaddressed. Allocation of funds to specifically mitigate financial risks plaguing the renewables sector by way of developing and institutionalising innovative government-backed financial instruments could have been a potential game changer. Stakeholders also relied on the 2017-18 Budget to put to rest some of the crucial uncertainties plaguing the sector such as the impact of the implementation of the Goods and Services Tax regime. The Budget failed to provide any clarity or certainty on this front as well.

Could this perhaps be indicative of the Government’s view that it has provided enough fiscal and policy support to put the sector on auto-drive to achieving the set targets, with the occasional requirement of minor incentives to ensure a smooth ride? When there are a number of gaping flaws in the sector which reappear periodically, it may be a bit too soon for the Government to take a back seat.

Source : –

 

Highlights of MNRE’s Performance since 2014

 

Renewable Energy in 2014-15 –Key Schemes/ Programmes Launched/Policy Initiatives of the Year 2014-15 :-

  • Restoration of Accelerated Depreciation Benefits for Wind Power Projects: After significant harm was done to the wind sector due to withdrawal of AD with effect from 1.4.2012, it has been restored on 18.7.2014. This decision of the Government has helped in creating a robust manufacturing base for wind turbines in the country.
  • The Government has also approved a Scheme, in December 2014, for setting up of 25 Solar Parks, each with the capacity of 500 MW and above and Ultra Mega Solar Power Projects to be developed in next 5 years in various States and will require Central Government financial support of Rs.4050 crore. These parks will be able to accommodate over 20,000 MW of solar power projects. 
  • The Ministry took up an ambitious programme for installation of 1,00,000 solar water pumping systems for irrigation and drinking water in different States of the country during 2014-15. Under the programme 63436 Solar pumps will be installed through the State Govt. Agencies and 15330 pumps has been earmarked for community drinking water supply in collaboration with Ministry of Drinking Water and Sanitation. In addition 30,000 solar pumps will be installed through bank loan for irrigation purpose to individual farmers. NABARD is the Nodal Agency for this scheme. Under the scheme Banks (Regional Rural Banks, Commercial Banks etc.) extended the loans at normal interest rates and subsidy component to the beneficiaries.
  • Ordinance Factory Board (OFB) and other Defence Establishments agreed to set up solar power projects on the large tracts of land and vacant rooftops which they own.The Establishments in the border area and remote locations use diesel as the primary source of energy. In some areas they pay very high tariff. Solar power is clean source of energy and can replace diesel power generation to a large extent. Potential of Solar Energy in cantonment and Military Stations are approximately 5000 MW and in Ordnance Factory Boards (OFB) are 950 MW.The Cabinet has approved the Scheme in its meeting held on 10th December, 2014. The Ministry has issued Administrative Approval on 07th January, 2015.

Key Highlights of the Year 2015-16 in the Renewable Energy Sector :-

  • 2015-16 — Target of renewable energy capacity revised to 175000 MW till 2022, comprising 100000 MW Solar, 60000 MW Wind, 10000 MW Biomass and 5000 MW Small Hydro.
  • The budget estimate was shockingly reduced to Rs 3661 cr from 3941. This is nearly a 7.01 ‘% decrement.
  • Electrification of the remaining 20,000 villages including off-grid Solar Power- by 2020.
  • Clean energy cess increased from `100 to `200 per metric tonne of coal, etc. to finance clean environment

Policy Initiatives of the Year 2015-16

  • Surya Mitra Scheme Launched

Surya Mitra Scheme launched for creating 50,000 trained personnel within a period of 3 years (2015-16 to 2017-18). 

  • Wind Atlas, 2015 Launched

A wind Atlas having information at 100 m height has been launched. It’s a GIS based software tool which will help not only the developers but also policy planners.

  • National Offshore Wind Energy Policy, 2015  

Under this Policy, the Ministry of New & Renewable Energy (MNRE) has been authorized as the Nodal Ministry for use of offshore areas within the Exclusive Economic Zone (EEZ) of the country and the National Institute of Wind Energy (NIWE) has been authorized as the Nodal Agency for development of offshore wind energy in the country and to carry out allocation of offshore wind energy blocks, coordination and allied functions with related ministries and agencies. It would pave the way for offshore wind energy development including, setting up of offshore wind power projects and research and development activities, in waters, in or adjacent to the country, up to the seaward distance of 200 Nautical Miles (EEZ of the country) from the base line. The policy will provide a level playing field to all investors/beneficiaries, domestic and international. It is planned to set up the first offshore wind power project off the Gujarat coast soon.

  • MoU to establish PACE Setter Funds

Establishment of Partnership to Advance Clean Energy (PACE) Setter Fund:S. and India have signed an MoU to establish PACE Setter Funds with a contribution of US$ 4 million (INR 25 crores) from each side for providing grants for seed capital for innovative clean energy projects. The PACE Setter Funds has been formally launched on 19th August, 2015 in New Delhi

  • Inclusion of Renewable Energy Projects in Priority Sector Lending Norms of Commercial Banks
     

In pursuance to the initiatives taken by MNRE, Reserve Bank of India vide its circular dated 23rd April, 2015 on ‘Priority Sector Lending: Targets and Classification’ has issued revised guidelines for all scheduled commercial banks to include renewable energy in categories of priority sector, in addition to existing categories. Bank loans up to a limit of Rs 15 crore to borrowers for purposes like solar based power generators, biomass based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities viz. street lighting systems, and remote village electrification. For individual households, the loan limit will be Rs 10 lakh per borrower.

  • The following activities have been initiated at NISE during 2015-16 :-

(i) Up-gradation of SPV module test facility; (ii) Up-gradation of solar cell test facility; (iii) Expand of battery test facility; (iv) Enlarge SPV water pumping test facility and other labs; (v) Up-gradation of Solar Thermal Labs; (vi) Establishment of IT cell; (vii) Renovation of work shop facility; (viii) Establishment of R&D monitoring cell; (ix) Setting up of 500 kW SPV power plant and (x) House the Secretariat of the International Solar Alliance, whose foundation stone was laid jointly by the Indian Prime Minister Narendra Modi and French President François Hollande on 25th January 2016.

Renewable Energy in 2016-17 – Important Policy Initiatives/Schemes/programmes of 2016-17

  • Amended Tariff Policy

The Amended Tariff Policy notified on 28 January 2016 provides for notification of longterm Renewable Purchase Obligations (RPO) trajectory by Ministry of Power (MoP). The MoP has issued RPO trajectory up to 2019 notifying uniform RPO across the country as under :

Year Solar Non-Solar Total
2016 17 2.75% 8.75% 8.75%
2017 18 4.75% 9.50% 14.25%
2018-19 6.75% 10.25% 17.00%
  • Waiving Interstate Transmission Charges

Wind power potential is concentrated in 7-8 windy states and to facilitate the interstate transmission of wind power suitable provisions have been made in the Tariff Policy, waiving the interstate transmission charges and losses for interstate sale of wind and solar power. MoP has already issued order in this regard

  • Repowering Policy

The Ministry in August 2016 released Policy for Repowering of Wind Power Projects with the objective of promoting optimum utilization of wind energy resources by creating facilitative framework for repowering. Higher wind capacities and power generation is now possible from wind potential sites occupied by old, de-rated and small capacity wind turbines by using more efficient new technology wind turbines of much higher capacities. Under this policy initially old projects which have installed wind turbine generators of capacity 1 MW and below would be eligible for repowering. Indian Renewable Energy Development Agency will provide an additional interest rate rebate of 0.25% for repowering projects apart from all fiscal and financial benefits available to the new wind projects.The State governments will support repowering by augmenting transmission infrastructure, facilitating acquiring additional footprint required for higher capacity turbines, purchase of additional wind power at prevailing rate and relaxing micro-siting criteria. The project developers will also be exempted from any penalties on non-production of electricity during the repowering period.

  • Package to Electrify Border Villages of Arunachal Pradesh 

The Hon’ble Prime Minister had announced a package of Rs.550.00 crore to electrify/ illuminate border villages of Arunachal Pradesh. Accordingly, a plan was made to electrify / illuminate 1053 un-electrified villages of all border districts of Arunachal Pradesh. The project is now in the final stages of implementation. Out of 1053 villages, 976 villages have been illuminated / electrified. These include, 523 villages, where all households have been provided with solar home lighting systems.

  • Development/ Reconstruction package for Jammu and Kashmir

The Hon’ble Prime Minister had announced a package named as “Development/ Reconstruction package for Jammu and Kashmir” of Rs.2350.00 crore for Renewable Energy which includes Rs.2000.00 crore for Small Hydro. This may cover Preparation of DPRs and implementations/ installations of SHP projects. Duration of project is 2014-15 to 2020.

  • Target to Setup 5 GW by the year 2022

During the year 2016-17, the Ministry had interaction with the State Governments, SHP developers and manufacturers of SHP equipment. A meeting under the chairmanship of Hon’ble Minister was held on 06.04.2016. Ministry has to achieve a target up to 5 GW by the year 2022 through SHP in the total target of 175.00 GW from Renewable Energy Sources. To achieve the target in full during the remaining period of 12th Plan, the Ministry interacted with SHP developers (State Nodal Departments/Agencies). A consultative meeting held on 31st August, 2015, wherein the State Governments opted to achieve the following targets voluntarily. State wise details are given below:-

Target setup during the meeting:-

S.No Name of State Target Allocated (MW)
1 Arunachal Pradesh 500
2 Himachal Pradesh 750
3 Jammu & Kashmir 500
4 Karnataka 250
5 Maharashtra 200
6 Odisha 100
7 Punjab 100
8 Uttarakhand 500
Total 2900

Department of Financial Services has advised all Public Sector Banks to provide loans for grid connected rooftop solar systems as home loan/ home improvement loan. So far, ten PSBs namely Bank of India, Syndicate Bank, State Bank of India, Dena Bank, Central Bank of India, Punjab National Bank, Allahabad Bank, Indian Bank, Indian Overseas Bank and State Bank of Bikaner & Jaipur have given instructions to their branches.

  • Grant by ADB

4.82 Multilateral grant of USD5 million by ADB, USD1.8 million from USAID and USD28.8 million from World Bank has been approved for solar rooftop programme

Subsidy Policies Announced/Revised for Off Grid Solar Photovoltaics in 2016-17

  • Under the Off-grid and Decentralized Solar Applications for the year 2016-17, the Ministry provides 30% subsidy on the cost of the system ranging from Rs. 21/- per watt peak to Rs.120 /- depending upon the capacity of the modules and configuration of the solar photovoltaic systems /plants in General Category States in the country.
  • The Ministry is also providing subsidy of 40% of the capital cost limited to Rs. 160/Wp (LED based) upto 40 Watt peak & Rs. 100/Wp for system above 40 Wp limited to 300 Wp by individuals through NABARD, Regional Rural Banks and other Commercial Banks. For balance of the cost, the banks extend credit facility to the beneficiary at usual commercial rates. 300 Wp to 1 KWp systems are also covered under the scheme but the subsidy is limited to 300 Wp only. The RRBs and other Commercial Banks extended the loan for balance cost of the systems at normal interest rates. Regional Rural Banks and Commercial Banks are extending loans to the consumers and directly disbursing subsidy for solar home lighting systems and small Capacity PV systems under the financing of Off-grid Solar Applications Programme. Banks have extended loans for 1,12,445 solar lighting systems during the last year and the current year as on 30 Nov, 2016.
  • For installation of stand-alone SPV power plants by Central and State Government Bodies and their establishments in Special Category States and North East States and Islands the Ministry provides 90% subsidy ranging from Rs.72/- to Rs.396/- for off-grid solar PV applications.
  • To meet unmet community demand for electricity or in un-electrified rural areas, standalone SPV power plants with battery storage in a micro grid mode/ local distribution network, would be provided in the range of Rs.85 /Wp to Rs.115/Wp of capital subsidy.
  • For Solar Water Pumping system, the capital subsidy ranges from Rs.27,630 per Hp to Rs.57,600 per Hp depending upon category and capacity. 4.99 DST has initiated a concept on Micro Solar Dome (MSD) which is based on the Principle of passive as well as active solar device and gives day and night lighting solution. The PV Integrated Micro Solar Dome has been included as a product for off grid solar lighting applications by Ministry of New and Renewable Energy and is eligible for subsidy at par with other solar lighting products. Attempts are being made to integrate Surya Jyoti for subsidy in rural and urban housing schemes, MP Local Area Development Schemes and corporate social responsibility activities of public sector enterprises

Prime Highlights of Renewable Energy Sector in 2017-18 

  • India attains global 4th and 6th position in global Wind and Solar Power installed capacity
  • By November 2017, a total of 62 GW Renewable Power installed, of which 27 GW installed since May 2014 and 11.79 GW since January 2017
  • Historic Low Tariffs for Solar (Rs. 2.44/ unit) and Wind (Rs. 2.64/ unit) achieved through transparent bidding and facilitation 

Source : MNRE             

Sector-wise highlights of Achievements  in 2017-18

  • Largest ever Wind Power capacity additionof 5502.39 MW in 2016-17 exceeding target by 38%. During 2017-18, a total 467.11 MW capacity has been added till 30.11.2017, making cumulative achievement 32746.87 MW. Now, in terms of wind power installed capacity India is globally placed at 4thposition after China, USA and Germany.
  • Biggest ever Solar Power capacity additionof 5525.98 MW in 2017-18. During 2017-18, a total 4323.1 MW (including 207.92 MW Solar Roof Top) capacity has been added till 30.11.2017, making cumulative achievement 16611.73 MW (including 863.92 MW Solar Roof Top).
  • So far,1.42 lakh Solar Pump have been installed in the Country as on 30.11.2017 including 1.31 lakh during last three and half year.
  •  Solar projectsof capacity 23656 MW have been tendered and LoI for 19,340 MW issued.
  • A capacity addition of0.59 GW has been added under Grid Connected Renewable Power since last three and half years from Small Hydro Power plants.
  • Biomass powerincludes installations from biomass combustion, biomass gasification and bagasse co-generation making a cumulative achievement to 8181.70 MW.
  • Family Type Biogas Plants mainly for rural and semi-urban households are set up under theNational Biogas and Manure Management Programme (NBMMP). During 2017-18, against a target of 1.1 lakh biogas plants, 0.15 lakh biogas plants installations has been achieved making a cumulative achievement to 49.8 lakh biogas plants as on 30.11.2017.

Source : MNRE

Renewable Energy Capacity Installed since 2014 under the Current Government 

Screen Shot 2018-01-15 at 11.07.28 PM

*Biomass Power & Gasification & Bagasse Cogeneration

**Biomass Power and Bagasse cogeneration were added to reach this figure

 

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