OPINION: Achieving the 2030 target of 450 GW of renewable energy - A prescription for India

While India’s renewable energy targets are ambitious, and getting to these targets would require significant deployment on a yearly basis, these targets can be reached.

  • Published On Nov 29, 2020 at 09:27 PM IST
Read by: 100 Industry Professionals
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By Gireesh Shrimali

In order to meet its climate commitments, and to achieve energy security, India has ambitious renewable energy targets by 2030 [1]. India’s nationally determined contributions (NDC) at the Paris UNFCCC conference of parties (COP) in 2015, imply 350 GW of renewable energy capacity. Recently, in the Climate Week in New York in 2019, the aspirations have increased to 450 GW of renewable energy capacity [2].

India has made significant progress towards these targets. As of September 30, 2020, the renewable capacity stood at approximately 90 GW [3]. This includes 38 GW of wind energy and 36 GW of solar energy. While wind energy has been growing steadily since the early 2000s, the growth in solar energy has been achieved in the last decade.

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However, India still has a long way to go! To get to the stated targets, it needs to install more than 250 GW of renewable energy capacity in 10 years, or 25-35GW of renewable energy capacity per year. This is more than twice of what India has been achieving in recent times [4], and is by no means going to be easy.

In particular, this would require concerted policy effort, including on the following: (1) demand creation for renewable energy; (2) revenue certainty for renewable energy power projects; (3) risk reduction for development, construction, and operation of these projects; and (4) system integration of variable and intermittent renewable energy supply.

First, on demand creation, the ambitious targets need to be converted to legally binding renewable portfolio standards, at the level of not only states but also large central generators [5]. These standards, when designed appropriately, are very effective in driving large-scale renewable deployment in an effective manner [6].

Second, on revenue certainty, India needs to continue auctioning renewable capacity at fixed (on inflation adjusted) price long-term power purchase agreements (PPAs). This revenue certainty, ideally over the lifetime of renewable energy power plants, allows low-cost financing of capital intensive assets [7] where the auctions, in turn, enable provision of lowest cost renewable power to consumers [8].

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Third, on risk reduction, there is continued need to keep operational and project development risks low, to ensure there is adequate supply of low-cost capital available for renewable energy projects [9].

While these projects are in operation, India needs to ensure that these PPAs are paid on a regular basis. One of the key risks in investing in renewable energy projects in India is the tenuous financial situation of the primary off-takers, the distribution companies (DISCOMs) [10], which raises questions around their ability to pay on time [11]. This is known as the off-taker risk.

While fixing the DISCOMs is a priority in the long-term, and multiple schemes have been tried sequentially, including UDAY [12] and ADITYA [13] in recent times, which have had variable levels of success; 14 publicly funded payment security mechanisms [15], which guarantee coverage of payment shortfalls, would need to be used in the short-term to provide comfort to investors [16].

To further reduce risks in project development, India needs to continue development of large renewable energy parks, which address the two key risks of land availability and transmission interconnection. These parks have been already shown to be effective in driving solar energy deployment in India [17].

Finally, on system integration, based on multiple recent and ongoing investigations [18], India needs to make sure that the renewable energy is appropriately supported by increased transmission capacity, agriculture load shift, and battery storage deployment. At the same time, India does not need to develop any significant new coal plant capacity beyond 2022. According to these investigations, not only a largely fossil-free path is technically and operationally possible, it is also likely to be cost-effective.

The increased transmission capacity of more than 100 GW would be needed to connected RE-rich locations – such as Rajasthan for solar energy and Tamil Nadu for wind energy – with demand centers, and is likely to be an extension of the Green Corridors initiative, implemented in order to reach India’s 2022 target of 175 GW renewable energy capacity.

The agriculture load shift [19], which is a form of demand side solution, of more than 50 GW would be needed to ensure that the agriculture consumption is during the renewable (especially solar) energy hours. This would require extension of the agriculture feeder separation [20], similar to the rural feeder separation already implemented in many India states.

Finally, increased battery storage deployment would require a battery storage mission, similar to the solar mission where a 50 GW/200 GWh (or higher) national target would be accompanied by corresponding state-level targets [21]. One way to procure this battery storage capacity would be to execute renewable energy plus storage auctions, similar to Hawaii [22], which has been experimenting with many innovative PPA structures, such as the renewable dispatchable generation PPA. In this context, it would be key to allow the DISCOMs and/or the system operators control of the batteries, so as to enable their efficient usage for supporting required system flexibility services, such as primary reserves as well as ancillary service.

While India’s renewable energy targets are ambitious, and getting to these targets would require significant deployment on a yearly basis, these targets can be reached, provided the multi-pronged approach outlined above, including on demand creation, revenue certainty, risk reduction, and system integration.

[Shrimali is Precourt Scholar, Sustainable Finance Initiative, Stanford University]

References:
1. These typically refer to non-large-hydro renewable energy.
2. See https://www.nrdc.org/experts/anjali-jaiswal/transitioning-indias-economy-clean-energy
3. See https://en.wikipedia.org/wiki/Renewable_energy_in_India
4. See https://www.ibef.org/industry/renewable-energy.aspx
5. See https://www.nrel.gov/state-local-tribal/basics-portfolio-standards.html
6. See https://iopscience.iop.org/article/10.1088/1748-9326/aa87bd
7. See http://files.brattle.com/files/7487_the_importance_of_long-term_contracting_for_facilitating_renewable_energy_project_development_weiss_sarro_may_7_2013.pdf
8. See https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/Jun/IRENA_Auctions_beyond_price_2019_findings.pdf
9. See https://www.irena.org/publications/2016/Jun/Unlocking-Renewable-Energy-Investment-The-role-of-risk-mitigation-and-structured-finance
10. See https://mercomindia.com/privatizing-discoms-financial-mess/
11. See https://economictimes.indiatimes.com/small-biz/productline/power-generation/centre-asks-states-not-to-stop-payment-of-renewable-energy-generators/articleshow/74950550.cms
12. See https://powermin.nic.in/en/content/uday
13. See https://www.livemint.com/industry/energy/aditya-to-help-recharge-discoms-reeling-under-losses-1583428596460.html
14. See https://www.financialexpress.com/industry/power-shock-uday-scheme-fared-even-worse/1965396/
15. See https://cef.ceew.in/masterclass/explains/how-payment-security-mechanism-works
16. See https://jsf.pm-research.com/content/25/2/87/tab-article-info
17. See https://www.sciencedirect.com/science/article/abs/pii/S1364032120304287
18. See https://www.teriin.org/sites/default/files/2020-07/Renewable-Power-Pathways-Report.pdf for one such study by TERI, in collaboration with NREL. Similar work is also ongoing at LBNL as well as IEA
19. See https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/CPI-India-flexibility-25-August-2020-
full-report-1.pdf
20. See https://www.thehindubusinessline.com/specials/clean-tech/solarisation-of-agriculture-through-feeder-separation/article32554487.ece
21. For example, each 1GW of renewable capacity could be auctioned with 0.15GW/0.6GWh of battery storage capacity. This way, 350GW of additional renewable capacity would result in 52.50GW/210GWh of battery storage capacity.
22. See https://energy.stanford.edu/sustainable-finance-initiative/publications/role-policy-development-business-models-battery-0

[Disclaimer: The views expressed are solely of the author and ETEnergyworld.com does not necessarily subscribe to it. ETEnergyworld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.


  • Published On Nov 29, 2020 at 09:27 PM IST
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