Renewables: India’s transition towards a greener economy

Renewable energy is one of the most sought after projects undertaken by India in recent years. With critical policy decisions expected from Budget 2023-24, India is projected to further grow its stature in renewable energy over the next few years.

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With a population of 1.3 billion, India has a massive demand for energy to fuel its rapidly growing economy. Keeping in mind its sustainable development goals, India’s power generation mix is rapidly shifting towards a more significant share of renewable energy.

Today India is the world’s third largest producer of renewable energy, with 40% of its installed electricity capacity emanating from non-fossil fuel sources. The country has set an ambitious target to achieve renewable capacity of 500 GW by 2030, which is the world’s largest expansion plan in this space.

In the past 8.5 years, India’s installed renewable energy capacity has increased 396% and stands at more than 159.95 Giga Watts. The country achieved 166 GW of renewable energy capacity till October 2022 and has achieved its NDC target with total non-fossil based installed energy capacity of 159.95 GW, which is 41.4% of the total installed electricity capacity.

India’s installed renewable energy capacity*

Source: Ministry of Power; *as of September 30, 2022

India aims to reduce total projected carbon emission by 1 billion tonnes by 2030. To reduce the carbon intensity of the nation’s economy by less than 45% by the end of the decade and expand India’s renewable energy installed capacity to 500 GW by 2030, the Indian government has been working on various schemes, some of which are listed below:

• The National Green Hydrogen Mission: Approved in January 2023, the mission aims to develop green hydrogen production capacity of at least 5 MMT (Million Metric Tonne) per annum with an associated renewable capacity addition of about 125 GW in the country. It also targets creating over 6 lakh jobs and cumulative reduction in fossil fuel imports over ₹ 1 lakh crore. The initial outlay for the mission will be ₹ 19,744 crore, including an outlay of ₹ 17,490 crore for the SIGHT programme, ₹ 1,466 crore for pilot projects, ₹ 400 crore for R&D and ₹ 388 crore towards Mission components.
• Production Linked Incentive Scheme: The government launched the PLI scheme on National Programme on High Efficiency Solar PV Modules with an outlay of ₹ 19,500 crore.
• Central Public Sector Undertaking (CPSU) Scheme Phase 2: The scheme focuses on setting up 12,000 MW grid-connected Solar Photovoltaic (PV) power projects by government producers with Viability Gap Funding (VGF) support, for self-use or use by Government/Government entities, either directly or through Distribution Companies (DISCOMS).
• Solar Parks Scheme: To facilitate large scale grid-connected solar power projects, a scheme for “Development of Solar Parks and Ultra Mega Solar Power Projects” is under implementation with a target capacity of 40 GW capacity by March 2024.
• Green Energy Corridor: To facilitate renewable power evacuation and reshaping the grid for future requirements, the government has initiated Green Energy Corridor (GEC) projects. The first component of the scheme, Inter-state GEC with target capacity of 3200 Ckm transmission lines and 17,000 MVA capacity sub-stations got completed in March 2020. The second component with a target capacity of 9,700 Ckm transmission lines and 22,600 MVA capacity substations is expected to complete by March 2023.

India’s vision is to achieve Net Zero Emissions by 2070, and attaining short term targets including:

• Increasing renewables capacity to 500 GW by 2030
• Meeting 50% of energy requirements from renewables
• Reducing cumulative emissions by 1 billion tonnes by 2030
• Reducing emissions intensity of India’s gross domestic product (GDP) by 45% by 2030.

Even though India is the second largest population in the world, its per capita CO2 emissions are much lower than the global average. The US emits 14.7 tonnes per capita, China emits 7.6 tonnes per capita, while India’s CO2 emissions amount to 1.8 tonnes per capita.

Expectations from the Union Budget 2023-24

With Budget 2023-24 just around the corner, the industry is expected to get a massive boost in both production and usage in almost every renewable source of energy in India.

In the 2022-23 budget, the Indian government allocated an additional ₹ 19,500 crore for the solar PLI scheme and introduced Sovereign Green Bonds in public sector projects. Additionally, it has planned to co-fire 5-7% biomass pellets in thermal power plants, thereby saving 38 MMT of carbon dioxide annually.

In the 2023-24 budget, the renewable industry expects a number of initiatives, taking into account the importance of renewables in India’s energy security. Some of these are listed below:

• Production Linked Incentive (PLI) scheme for wind turbine generators and device manufacturers: The Ministry of New and Renewable Energy (MNRE) and NITI Aayog are under talks to introduce a PLI scheme to promote the manufacturing of offshore wind turbines.
• Funding and reforms that will pave the way for India’s switch to renewable energy: The industry expects more government investments in renewable energy. India had set a target of 175GW of renewable energy for 2022. It includes 100GW of Solar energy, 60GW from wind, 10GW from Bio-power and 5GW from small hydropower. Of this, 159.95 GW was achieved as of September 2022. As discussed, India plans to further ramp up the capacity to 500 GW by 2030.
• National Emission Trading Scheme (ETS): The upcoming Union Budget is expected to announce favorable measures to facilitate the development of a National Emission Trading Scheme (ETS) to strengthen India’s position in the global climate action scenario and supporting the transition to an energy efficient economy.
• Decentralized Renewable Energy (DRE): Budget 2023-24 is expected to allocate decentralized renewable energy and access to make it mainstream to country’s green growth. The sector is also expecting increased policy support to enhance access to clean, sustainable and reliable energy.
• Development of battery storage system: One of the major challenges faced today is the development of a battery storage system. The industry expects the government to introduce solutions like intelligent battery software that uses algorithms to coordinate energy production and computerised control systems which are used to decide when to keep the energy to provide reserves or release it to the grid.
• Granting of favorable tax on income derived from the sale of Renewable Energy Certificates (RECs): Currently, the law includes beneficial provisions like Section 115 BBG – in relation to income from transfer of carbon credits. However, there are no similar provisions with respect to RECs. Hence, one of the key expectations from Budget 2023 is to provide a consolidated taxation regime to address inefficiencies and administrative challenges.
• Market Stabilization Fund: The allocation for “Market Stabilization Fund” is crucial to bolster the carbon trading market and enhance the valuation of environmental attributes of Indian Carbon Market (ICM). It will ensure that prices of credits remain attractive for investors and emission reduction is achieved.