Inside of Renewable Energy Industry of India – Is achieving a target of adding 100 GW capacity of Solar in India by 2022 bankable? : Series I

Renewable energy is one of the purest form of energy with almost negligible or no carbon emissions. Thus, renewable energy is the need of today’s society which not only has the potential to considerably reduce dependency on fossil fuel generated electricity (i.e., electricity generated by the combustion of coal, oil, natural gas etc.,) but also increases energy security by increasing access of sustainable and environmental friendly source of energy (i.e., access of affordable form of energy which not only increases energy independency, accelerate economic growth and create new jobs but also addresses the problem of pollution by reducing global warming and thus improving air quality).

Series I discusses - Why renewable energy is vital for India’s growing needs of sustainable economic

growth, Power Scenario of India - Demand and Supply gap since Independence (1947 – 2014),

Potential of Renewable Energy Sources in India and India’s Renewable Energy Portfolio as of

December 2014.

Series II will showcase following - Techno-commercial cum socio-economic comparison

between different energy sources i.e., both conventional and non-conventional energy sources

(Solar, wind, hydro, biomass, coal and natural gas), Grid parity of Solar Energy and

Government’s ambitious target of achieving 100 GW of solar energy by 2022, different

financing options available for solar projects in India and at last we discuss about Challenges

associated with the bankability of target of solar capacity addition of 100 GW by 2022.

Why renewable energy is vital for India’s growing needs of sustainable economic

growth

Today, India’s natural resource deposits are at huge pressure due to country’s need of enormous and sustained economic growth. According to Asian Development Outlook (2015), India’s GDP is expected to grow by 7.8 % and 8.2 % in 2015 and 2016 respectively (Refer: Table: 1 ). According to CEA data (2015), about 70% of India’s installed electricity generation capacity comes from fossil fuel which constitutes 60% from coal, 9% from natural gas and 1% from diesel. And, thus it is estimated that India’s dependency on energy imports will increase to 53% of the total country’s energy consumption by 2030 (Yep, 2011). Therefore, to meet this increasing energy consumption demand, India imported total 38% of fossil fuel (i.e., together coal, natural gas, and petroleum products) in 2012 (EIA, 2014) (Refer: Figure :1). In addition to this, India imported approximately 80% of total domestic oil consumption as of May, 2014 (http://makeinindia.com/).

Table: 1 – India’s Economic indicators (%)

Selected economic indicators (%) - India

2015 2016

GDP Growth 7.8 8.2Inflation 5.0 5.5Current Account Balance (Share of GDP) -1.1 --1.5

Source: Asian Development Outlook 2015: Financing Asia’s Future Growth

Figure: 1 – India’s increasing dependency on fossil fuel imports

Source: U.S. Energy Information Administration, International Energy Statistics (2014)

India’s substantial and sustained growth has placed enormous demand on the country’s natural resources. Today, India imports substantial quantities of gas, oil and coal in order to meet its growing energy demand. The increasing dependence on imported fuels may create a serious threat to the future fuel security of the country. In addition, the country’s 254 GW2 of power generation capacity based mainly on conventional sources has further strained the natural resources.

Around 60% of India’s current power generation capacity is based on coal which is expected to remain the dominant power source in the future. However, the coal sector is facing many challenges and India is increasingly relying on coal & oil imports to meet its requirements of energy, thereby exhibiting a lot of pressure on Indian economy from these high import factors.

Power Scenario of India - Demand and Supply gap since Independence (1947 – 2014)

Though Calcutta was the first city in India to get electrified in the nineteenth century after New York and London i.e., in 1899. But to deal with the huge power demand and supply gap, the real evolution of Indian power sector took place post-reform/ liberalization phase i.e., since 1991 when the actual development took place and several policies & regulatory changes were made (such as the formation of central sector utilities i.e., NTPC and NHPC, privatization and unbundling of power sector and thus opening the sector for private players i.e., Independent Power Producers (IPPS) including 100% foreign direct investments (FDIs) for generation,

transmission & distribution, increasing technical efficiency, reducing T&D losses, several policies & measures were introduced under the provisions of the Electricity Act 2003 like National Tariff Policy, National Electricity Plan, Competitive Bidding Guidelines, and Ultra Mega Power Projects etc.,) thus which transformed the shape and the performance of the power industry.

Today, India has the 5th largest power generation portfolio in the world and third largest in Asia. The generating capacity has increased significantly from 1,362 MW in 1947 (Bhattacharjee, 2005) to 254 GW of power as of December 2014 (Investors Guide Re-invent, 2015). But despite this significant growth of power sector since 1991, India still faces acute power shortage as the demand outgrows power supply.

Table: 2 – All India Power Supply Position Energy-wise and Peak-wise (Utilities) (1984-85 to 2012 –13)

Source: CEA (2013), Growth of Electricity sector in India from 1947 to 2013

Figure: 2 - Power Supply Position in India (as of March 2014)

Source: CEA (2014), Power Scenario at a Glance, March 2014

From the above Table: 2 and Figure: 2, it is clear that Historically, India has experienced shortages in energy and peak power requirements. The maximum energy deficit of 11.51% was recorded in 1996 – 97 and the average energy deficit was 8.38 percent and the average peak power deficit was 13.74 percent between 1984 – 85 and 2012 - 13. However, the gap between demand and supply of power has reduced significantly in FY14, due to enormous addition of thermal (i.e., coal, gas, and diesel), hydro and renewable energy (i.e., solar, wind, biomass and small hydro) power plants. And below Table: 3 gives region-wise summary of electrical energy requirement (EER) and annual peak electric load (APEL) by the end of 12th & 13th plan as per electric power supply (EPS).

Table: 3 - Region-wise Summary of EER & APEL by End of 12th & 13th Plan

Region/ YearEER (MU) APEL (MW)

2016 - 17 2021 - 22 2016 - 17 2021 - 22Northern 422,498 594,000 60,934 86,461Western 394,188 539,310 62,015 86,054Southern 357,826 510,786 57,221 82,199Eastern 163,790 236,952 24,303 35,928

North-East 16,154 23,244 2,966 4,056A&N Island 366 505 67 89

Lakshadweep 52 65 11 18All India Total 1,354,874 1,904,862 207,517 294,805

Note: EER –Electrical Energy Requirement, APEL – Annual Peak Electric Load and EPS – Electric Power Supply

Source: CEA (2013), Growth of Electricity sector in India from 1947 to 2013

Below Table: 4 gives the sneak peak about the progress report of village electrification, according to which approximately 20,000 villages are still un-electrified as on 28-02-2015 as per 2011 census (CEA, 2013) means nearly 400 million people in India still lacks the access of reliable supply of power (Times of India, 2014)

Table: 4 - Progress report of village electrification as on 28-002-2015 as per 2011 census

Total inhabited villages as per 2011 Census

Villages electrified as on 31-03-2014 (Provisional)

(Nos.)

Cumulative achievement as on 28-02-2015

%age of villages electrified as on

28-02-2015

Un - electrified villages as on 28-

02-2015597464 576554 96.5 577629 96.7 19,835

Source: http://www.cea.nic.in/reports/monthly/dpd_div_rep/village_electrification.pdf

Potential of Renewable Energy Sources in India

India is blessed with vast potential of different renewable energy sources like wind, hydro, solar, biomass etc. As per Ministry of New & Renewable Energy (MNRE) (2015), India has an estimated renewable energy potential of about 895 GW from commercially exploitable renewable energy sources. Below is the Table: 6 showing potential (in MW) of different renewable energy sources in India and Table: 6 showing calculation of solar energy potential in India.

Table: 5 - Renewable Energy Potential (MW) in India

Technology Potential (MW)Wind 102,800 (80m hub height)Small Hydro (up to 25 MW) 19,700Biomass including bagasse cogeneration (including waste to energy) 22,500Solar 50MWp/km2Source: Ministry of New & Renewable Energy (MNRE)

Table: 6 - Calculation of Solar Energy Potential in India

Total Land Area (sq km) 3,287,590No of sunny days 200Unit potential from 1 sq.m 4kwh/dayConversion efficiency 15%1 sq. km (Mn units per year) 1200.5% of land used (in sq km) 16,438Potential units (in billions) 1,972Source: http://tejas.iimb.ac.in/articles/75.php

From the above Tables: 5 and 6, it is clear that as geographically India is situated near the Equator therefore India has the maximum potential of 50 MWp/Km2 of solar energy which is equivalent of 750 GW assuming that only 3% of waste land is available in India. Thus, India receives immense amount of sunshine for approximately 3000 hours per year which can generate nearly about 1,900 billion units of solar energy (Refer Table: 6). And this is equal to 5000 trillion kWh of energy which can serve the nation’s energy demand till 2030.

India’s Renewable Energy Portfolio as of December 2014

In India, out of total power generating capacity of 254 GW, 33.79 GW of power comes from the total installed capacity of renewable energy in India (as of December 2014). And, in fact India is the 5th largest wind energy producer in the world with installed capacity of 22,465.03 MW which constitutes about 66% of the total India’s renewable energy basket as of December 2014. In addition to this, the installed capacity of other renewable energy sources like solar, biomass, hydro etc., are also increasing rapidly. Below is the figure: 3 showing total installed renewable energy capacity in India (as of December 2014).

Figure: 3 - Installed Renewable Energy capacity in India (as of December 2014)

Wind 66%

Small Hydro 12%

Biomass 13%

Solar 9%

Total Installed Renewable energy capacity in India (as of december 2014)

Source: Ministry of New & Renewable Energy (MNRE)

Now, please read the upcoming second part of the article – “Inside of Renewable Energy Industry of India – Is achieving a target of adding 100 GW capacity of Solar in India by 2022 bankable?” Series II for our insight on following - Techno-commercial cum socio-economic comparison between different energy sources i.e., both conventional and non-conventional energy sources (Solar, wind, hydro, biomass, coal and natural gas), Grid parity of Solar Energy and Government’s ambitious target of achieving 100 GW of solar energy by 2022, different financing options available for solar projects in India and at last we will discuss about Challenges associated with the bankability of target of solar capacity addition of 100 GW by 2022.

Energy Source Wind Small Hydro Biomass Solar TotalInstalled Capacity (MW) 22,465.03 3990.83 4273.13 3062.82 33,791.81

Image Credit: China & solar panel via shutterstock

Bibliography:

1. Asian Development Outlook 2015: Financing Asia’s Future Growth - http://www.adb.org/countries/india/economy

2. CEA (2013), Growth of Electricity sector in India from 1947 to 20133. CEA (2014), Power Scenario at a Glance, March 20144. CEA Monthly all India Installed Generation Capacity (January, 2015)

http://www.cea.nic.in/reports/monthly/inst_capacity/jan15.pdf5. http://www.cea.nic.in/reports/monthly/dpd_div_rep/village_electrification.pdf6. http://www.re-invest.in/Document/orginal/15.RE-Invest_2015_Investors_Guide.pdf 7. http://cea.nic.in 8. http://www.globalelectricity.org/Projects/RuralElectrification/Presentations/

6.2%20%28EDF%29%20-%20Somnath%20Bhattacharjee.pdf9. http://makeinindia.com/10. http://mnre.nic.in11. http://tejas.iimb.ac.in/articles/75.php12. U.S. Energy Information Administration, International Energy Statistics (2014)13. India’s widening Energy Deficit - http://blogs.wsj.com/indiarealtime/2011/03/09/indias-

widening-energy-deficit/14. India is increasingly dependent on imported fossil fuels as demand continues to rise -

http://www.eia.gov/todayinenergy/detail.cfm?id=17551#

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