2013-IX-2 Varadurga Bhat and V Sharada
2013-IX-2 Varadurga Bhat and V Sharada
2013-IX-2 Varadurga Bhat and V Sharada
Development of renewable energy is of great importance in India in the backdrop of ever increasing
demand for energy excessive dependence on oil imports and mounting deficits in Balance of Payments,
volatility in oil prices, depleting fossil fuel reserves, threatening energy security and climate change
resulting from increasing emissions of Green House Gases (GHG). The growth rate of energy consumption
has exceeded the growth rate of production of energy. Development of renewable energy can be a
solution to these problems. Renewable energy was in use in India since the age old times although not
commercially. Now efforts are being made to utilize it to the fullest extent. This paper deals with the
nature and level of development of renewable energy in India. It examines the nature of India’s energy
problem, development of renewable energy, potentials, investment in renewable energy, and the factors
responsible for slow diffusion of renewable energy across the country, measures taken by the government
to promote renewable energy and the major challenges ahead.
INTRODUCTION
Energy is one of the important inputs of economic growth. The availability of energy and its
quality determines the nature and speed of growth of an economy. Energy is the prime mover of
economic growth, and is vital to sustaining a modern economy and society for any country across
the world1. But India is facing huge bottlenecks in energy supply. Although the utilization of energy
resources is becoming more efficient and new reserves are being explored the supply of energy lags
behind the mounting requirements stemming from rising population, industrial development and
improvement in standard of living. Exhaustible nature of fossil fuels is threatening energy security
and sustainable development. Optimal utilization of fossil fuels and development of renewable
energy are the only options to achieve inter generational equity in energy use and sustained growth
of the economy. Efforts are being made at the global level in order to promote renewable energy
technologies. India, being rich in natural resources has a huge potential of renewable energy
and is playing a significant role in development of renewable energy. India’s efforts to achieve
strides in diffusion of renewable energy assumes much importance since it is one of the largest
emerging economies in the world and its efforts and achievements can influence the activities of the
developing as well as developed countries and may also help in reducing the growth rate of global
GHG emissions. This paper deals with the nature and level of development of renewable energy in
India. It examines the nature of India’s energy problem, development scenario of renewable energy,
potentials, the factors responsible for slow diffusion of renewable energy across the country and the
major challenges ahead.
The paper is based on secondary data taken from various national and international reports,
CDM pipeline database and the website of the Ministry of New and Renewable Energy. It is divided
into 4 sections. Section 1 deals with India’s Energy problem and projections. Section 2 deals
with the development of renewable energy in India. Here focus is made on the current status and
potentialities. Section 3 examines the investment prospects and the steps taken by the government
in renewable energy sector. Section 4 points out the major challenges in the path of development of
renewable energy in India.
Table 1
Total Primary Energy Requirement (Mtoe) and Electricity Projections
As against this India had estimated coal reserves of 286 billion tones, lignite reserves of 41
billion tones, crude oil reserves of 757 million tones and natural gas reserves of 1241 billion cubic
meters as on 31st March, 2011. The Compounded annual growth rates of fossil fuel based energy is
given in table 2.
Journal of Economic & Social Development 121
Table 2
Compounded Annual Growth Rates (CAGR) of Conventional Energy In India
(1970-71 to 2010-11)
Source Production (%) Consumption (%)
Coal* 4.97 5.3
Lignite* 6.05 6.05
Crude Oil* 4.26 6.07
Natural Gas** 9.14 11.25
* million tones, ** Billion Cubic Meters
Source: Energy Statistics, 2012.
It is clear that growth rate of consumption has exceeded the growth rate of production of energy
between 1970-71 and 2010-11. The share of India in global energy consumption is also expected to
increase rapidly (Figure 1).
Note: Data for 2010 are actual, for 2030 are projected.
Source: BP Statistical Review of World Energy 2012
India’s Per Capita Energy consumption has registered a CAGR of 3.44% during 1970-71.
India’s CO2 emissions have increased about ten times during the period 1965-2011. During the
same period fossil fuel consumption also increased about ten and half times. Data pertaining to
fossil fuel consumption and CO2 emissions during 1965-2011 show a strong positive correlation of
0.99. Environmental problems associated with energy use have become severe in many urban areas.
Concentration of pollutants is above safe limit in most of the cities. In this context development and
122 Varadurga Bhat and V Sharada
diffusion of renewable energy is highly relevant in India. Renewable energy sources offer viable
option to address the energy security concerns of the country.
Under the New Policies Scenario of the World Energy Outlook (2011), total power capacity in
India would reach 779 GW in 2035. To reach 779 GW in 2035, capacity must grow at a CAGR of 5.9
percent, or over 20 GW per year from 2009 through 2035. The largest addition per year up to now
was nearly 18 GW during fiscal year 2011-2012; this scale of expansion could pose a challenge for
the government (IEA, 2012) without a significant role for renewables3.
Installed generating capacity of electricity from new and renewable sources was 18.45GW
i.e. about 11% of total Installed Generating Capacity of Electricity (Utilities). The total installed
capacity of grid interactive renewable power has gone up to 19971 MW and thus witnessed a growth
of 18.75% over 2010. Out of the total installed generation capacity of renewable power as on 31-03-
2011, wind power accounted for about 71%, followed by small hydro power (15.2%) and Biomass
power (13.3%). Among the states Tamil Nadu had the highest installed capacity of grid connected
renewable power (6500 MW) followed by Maharashtra (3005 MW) and Karnataka (2882 MW). Out
of total Biogas plants installed (41.98 lakh) maximum number of such plants were in Maharashtra
(8 lakh) followed by Andhra Pradesh, Uttar Pradesh, Karnataka and Gujarat each with about 4 lakh
biogas plants. Out of about 6.6 lakh Solar Cookers installed 1.7 lakh were in Gujarat and 1.4 lakh
were in Madhya Pradesh. There were 1,352 water pumping Wind mills systems installed and 6,975
remote villages and 1,871 hamlets were electrified by March 2011.
Wind power dominates India’s renewable energy industry accounting for around 70 percent of
the installed generation capacity from renewable sources. With an installed capacity of 18420 MW,
India is the world’s fifth largest producer of wind power after China, USA, Germany and Spain. It has
an estimated potential of 45000 MW. During the fiscal year 2011-2012 wind energy alone delivered
over 3GW to India’s new installed capacity, accounting for over 16.5 percent of total new installed
Journal of Economic & Social Development 123
capacity. More than 95 percent of the nation’s wind energy development is concentrated in just five
states in southern and western India – Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra and
Gujarat. These five states accounted for over 85% of the total installed capacity at the end of the last
plan period. Rajasthan is another emerging State with rising wind turbine installations.
Solar energy has the highest potential in India of about 50,000 MW of which most remain
unutilized. Only 10% of biomass is exploited. The total installed capacity of small hydro power
projects as on March 31, 2012, was 3200 MW. Figure 2 shows the potential and installed capacity
of renewable energy sources.
Source: www.mnre.gov.in
India aims to increase the capacity to generate renewable energy by 40GW to 55GW by the end
of the 13th Five-Year Plan (2022). The National Action Plan on Climate Change (NAPCC) has set
the ambitious goal of a 1 percent annual increase in renewable energy generation. Meeting this goal
may require 40–80GW of additional capacity in renewable energy capacity by 2017.
Solar Energy
Due to its geographical location India receives a high intensity of solar radiation. Most parts
of India have 300 – 330 sunny days in a year, which is equivalent to over 5000 trillion kWh per
124 Varadurga Bhat and V Sharada
year. This is more than India’s total energy consumption per year. The potential of the solar thermal
sector in India also remains untapped. The Jawaharlal Nehru National Solar Mission launched
in January, 2010 has set the ambitious target of deploying 20,000 MW of grid connected solar
power by 2022. It aims to achieve grid tariff parity by 2022 through large scale utilization, rapid
diffusion and deployment at a scale which leads to cost reduction, R&D, domestic production of
critical raw materials, components and products, Pilot Projects and Technology Demonstration,
local manufacturing and support infrastructure. Renewable energy is seen as the next big technology
industry in India. The ministry of New and Renewable Energy has proposed an additional 500 MW
generation during the Phase-I of the Jawaharlal Nehru National Solar Mission (JNNSM). Mission’s
road map is shown in table 3.
Table 3
Road Map of JNNSM
Wind Energy
Historically, wind energy has met and often exceeded the targets set for it under both the 10th
Plan (2002-2007) and 11th Plan (2007-2012) periods4. India is implementing the world’s largest
wind resource assessment programme (WRA), an ongoing activity, which is being implemented
by the Centre for Wind Energy Technology (C-WET), Chennai in association with State Nodal
Agencies. WRA has so far covered 31 States and Union Territories involving establishment of about
696 automated wind monitoring stations. 92 wind monitoring stations were under operation as on
31.12.2012. 35 new wind monitoring stations have been commissioned in various States under
Ministry’s Wind resource Assessment programme during the year 2012-13. Wind energy is the
fastest growing renewable energy technology for generating grid connected power amongst various
renewable energy sources. Wind power is a mature and scalable clean energy technology where
India holds a domestic advantage. India has an annual manufacturing capacity for over 9.5 GW
of wind turbines today. Government’s wind power programme covers survey and assessment of
wind resources, facilitation of implementation of demonstration and private sector projects through
various fiscal and promotional policies. A package of incentives which includes fiscal concessions
such as 80% accelerated depreciation, concessional customs duty for specific critical components,
excise duty exemption, income tax exemption on profits for power generation are available for wind
power projects.
Biomass
India is in the fourth position in generating power through biomass. With a huge potential,
India is poised to become a world leader in the utilization of biomass. Biomass resource potential is
assessed at 500 MT/year and about 30% of the same or about 150 MT/annum is estimated surplus
Journal of Economic & Social Development 125
biomass availability creating a potential of about 18,000 MW electricity generation. Biogas is mainly
used in rural India based on cattle manure, vegetable wastes and agricultural residues. Biomass
power generation in India is an industry that attracts investments of over Rs. 600 crores every year,
generating more than 5000 million units of electricity and yearly employment of more than 10
million man-days in the rural areas. Biomass gasifier programme promotes electricity generation
using locally available biomass resource in rural areas where surplus biomass such as wood chips, rice
husk, arhar stalks, cotton stalks and other agro residues are available. National Biogas and Manure
Management Programme was launched to set up family type biogas plants for meeting cooking
energy needs in rural areas and to make available enriched biofertiliser. Government has also started
a scheme ‘Biogas based Distributed/Grid Power Generation Programme’ from 2005-06 to promote
biogas power generation, especially in the small capacity range based on the availability of large
quantity of animal waste and wastes from forestry/rural based industries (agro/food processing),
kitchen wastes etc. Biomass Gasifiers are now being exported not only to developing countries of
Asia and Latin America, but also to Europe and USA. During 2012-13, Punjab, Maharashtra, Uttara
Pradesh and Gujarat took a lead in biomass energy generation.
Apart from these, India has reasonably good potential for geothermal. The potential geothermal
provinces can produce 10,600 MW of power. A programme on tidal energy has been implemented to
harness about 8,000 to 9,000 MW of estimated tidal energy potential for power generation.
For promotion and popularization of Renewable Energy and Energy Conservation in the states
of India, state nodal agencies have been set up in different states to promote renewable energy
and energy efficiency. These are working under the Ministry of New and Renewable Energy.
126 Varadurga Bhat and V Sharada
Indian Renewable Energy Development Agency Ltd. (IREDA) was established in 1987 as Non-
Banking Financial Company under the administrative control of the Ministry of Non-Conventional
Energy Sources (MNES) to provide term loans for renewable energy projects. Subsequently energy
efficiency and energy conservation projects were added to its portfolio. The government has issued
guidelines to all state governments for creation of an attractive environment for evacuation and
purchase, wheeling and banking of electrical power from renewable energy sources. It provides
financial incentives such as incentives and capital subsidies for renewable energy programmes.
Concessions like capital subsidies, exemption from taxes and duties are being given to industrial
units. Infrastructural facilities are being provided. A five year tax holiday is allowed for renewable
energy power generation projects. Foreign investors can enter into a joint venture with an Indian
partner for financial and/or technical collaboration and also for setting up of renewable energy based
Power Generation Projects.
The Challenges
A study conducted by World Bank in 2010 points out some specific barriers for solar energy.
They include policy and regulatory barriers relating to long term planning, clarity in policy
guidelines, bankability of power purchase agreements etc, infrastructural barriers relating to
the approval process and single window clearance to developers, land constraint, solar radiation
and data related barriers, technology and financing barriers. The study also revealed the ways of
addressing these barriers like making the power purchase agreements bankable, ascertaining the
minimum and maximum capacity to be developed on the prior installation experience, removing the
domestic content criterion, enabling single window clearances, greater involvement of state nodal
agencies etc. It also suggested that a single government or semi-government financing agency to
act as the focal point for all applications to be processed. Indian solar energy sector is also facing
the problem of cheap imports from foreign solar manufacturers, primarily from China. Indian solar
Industry is relatively modern and hence of relatively small scale and fragmented, leading to higher
production costs. Renewable-energy resources are not evenly spread across the country and the high
cost of renewable energy generation discourages local distribution companies from purchasing more
than their obligatory amount of renewable generation. To address the imbalances and encourage
renewable energy capacity addition in states with untapped renewable energy potential, the Central
Electricity Regulatory Commission (CERC) promulgated a regulation creating renewable-energy
certificates in January 2010 according to which renewable energy generators who register with
CERC will have the option either to sell power at a preferential tariff set by their State Electricity
Regulatory Commission or to sell the power and its associated environmental benefits in the form of
renewable-energy certificates. The certificates can be sold in Central and State electricity regulatory
commissions-approved exchanges to entities needing them to meet their Renewable Power Purchase
Obligations, thus creating a national market for such generators to recover their costs. The trading
started in January 2011.
According to Global Wind Energy Council inadequate grid infrastructure is one of the barriers
for wind energy. Across most of the states with significant wind potential, the grid does not have
sufficient spare capacity to be able to evacuate ever-increasing amounts of wind power. Hence the
state distribution utilities are reluctant to accept more wind power generation. There is an urgent
need to augment general grid capacity. Better forecasting of power demand and modernization of the
grid is needed. In most of the states, availability of land for wind farms is a contentious issue. There
are problems associated with conversion of land use status from agricultural to nonagricultural,
Journal of Economic & Social Development 127
obtaining clearance for the land close to a protected area or forestlands. Another barrier to the growth
of the wind sector is inordinately high borrowing costs.
Small hydro projects encounter the same problems of deforestation and resettlement as big
projects.Some of the common barriers relate to the pricing rules, high capital costs, uncompetitive
technologies, lack of capital, hidden subsidies to fossil fuels, insufficient infrastructure, lack of
supporting institutional structure, lack of initiative and low level of awareness etc. Government
should give tax rebates, tax relief and incentives, lower interest rates and provide easy access to
credit, fix emission targets and encourage public private partnership, strengthen infrastructural
facilities and encourage research and development in this field.
CONCLUSION
Renewable Energy Sector has a bright future and tremendous job creation potential in India.
Targets have been fixed for the states for uptake of electricity from renewable energy sources.
Appropriate policy framework is necessary to address various constraints and thereby create
opportunities for business to fulfill the objectives of power generation from renewable sources.
Policies should address promotion of innovative delivery models, structured training programmes to
create skilled personnel, innovative designs and loan schemes, effective monitoring and evaluation
frameworks, creating fiscal and policy incentives to enhance public and private sector participation,
and their mainstreaming with the global markets, creating decentralized manufacturing and service.
Focus should be given on mechanisms to attract private and international finance. Supporting
domestic project developers and manufacturers through innovative finance options and international
cooperation is beneficial.
References / Notes
1 Renewable Energy and Energy Efficiency Status in India, ICLEI, 2007
2 http://www.indiacore.com/overview-energy.html
3 Global Wind Energy Council, 2012
4 Global Wind Energy Council, 2012
Banerjee R. (September 2006) Overview of Renewable Energy Scenario in India Lecture delivered at RENET
Workshop, IIT Bombay.
Can S., McNeil M. & Sathaye J. (January 2009). India Energy Outlook: End Use Demand In India To 2020.
Ernest Orlando Lawrence Berkeley National Laboratory Environmental Energy Technologies
Division. Retrieved From http://Ies.Lbl.Gov/Iespubs/India_Energy_Outlook.Pdf
Central Statistics Office, Ministry Of Statistics And Programme Implementation. Government Of India. (2012).
Energy Statistics 2012. New Delhi. Retrieved from http://mospi.nic.in/mospi_new/upload/Energy_
Statistics_2012_28mar.pdf
Exxon Mobil. (2013) The Outlook for Energy : A View to 2040. Retrieved from http://www.exxonmobil.com/
Corporate/files/news_pub_eo.pdf
Global Wind Energy Council (GWEC). (Nov 2012 ). India Wind Energy Outlook 2012. Brussels,
Belgium. Retrieved from http://www.gwec.net/wp-content/uploads/2012/11/India-Wind-Energy-
Outlook-2012.pdf
GOI, Ministry of New and Renewable Energy (2012) Annual Report 2011-12. Retrieved from www.mnre.gov.
128 Varadurga Bhat and V Sharada
in
GOI, Ministry of New and Renewable Energy (2013) Annual Report 2012-13. Retrieved from www.mnre.gov.
in
Gyan Research and Analytics Pvt. Ltd. (2012) The Potential for Renewable Energy in India – 2012. Retrieved
from http://www.gurmitsingh.net/Renewable-India.pdf
ICLEI, Local Governments for Sustainability. (May 2007). Renewable Energy and Energy Efficiency Status
in India. South Asia. Retrieved from http://local-renewables.iclei.org/fileadmin/template/projects/
localrenewables/files/Local_Renewables/Publications/RE_EE_report_India_final_sm.pdf
Kapoor T. (2012). Grid Connected Solar Power inIndia. Available at http://cseindia.org/userfiles/tarun_kapoor.
pdf
Lalwani M. & Singh M. (October 2010). Conventional and Renewable Energy Scenario of India: Present and
Future. Canadian Journal on Electrical and Electronics Engineering. 1(6), p 122-140.
Planning Commission, Government of India (August 2006). Integrated Energy Policy : Report of the Expert
Committee. New Delhi
Prakash R. (n.d.) Making India a Solar Energy Economy – Prospects & Challenges. Hidayatullah National Law
University, Raipur available at http://indiagovernance.gov.in/files/solar_energy_economy.pdf
Sargsyan G., Bhatia M., Banerjee S. G., Raghunathan K. & Soni R. (2010). Unleashing the Potential of
Renewable Energy in India. South Asia Energy Unit, Sustainable Development Department. The
World Bank ESMAP Energy Sector management Assistance Program. Retrieved from http://
siteresources.worldbank.org/EXTENERGY2/Resources/ Unleashing_potential_of_renewables_in_
India.pdf
Schwieger S. G. (Ed.). (2011). 2011 India Energy handbook. PSI Media Inc, Las Vegas. Retrieved from http://
www.psimedia.info/handbook/India_Energy_Handbook.pdf
Shukla P. R.(n.d.). Biomass Energy In India: Transition From Traditional To Modern. The Social Engineer,
6(2). Available At http://Www.E2analytics.Com
Shukla P. R.(n.d.). Biomass Energy in India: Policies and Prospects. Paper presented at the workshop on
Biomass Energy: Key Issues and Priority Needs .Organized by International Energy Agency (IEA)
Paris Available At http://Www.E2analytics.Com
UNEP/GRID. (n.d). Climate change Mitigation In India . Arendal. available at http://www.devalt.org/
knowledgebase/pdf/CDM_Report.pdf
World Bank. (2010) Report On Barriers For Solar Power Development In India. South Asia Energy Unit
Sustainable Development Department , ESMAP Energy Sector management Assistance Program
available at https://www.esmap.org/sites/esmap.org/files/The%20World%20Bank_Barriers%20
for%20Solar%20Power%20Development%20in%20India%20Report_FINAL.pdf
World Energy Council. (2012). India Energy Book 2012. Retrieved from http://indiaenergycongress.in/
iec2012/ieb2012/ieb2012.pdf