Inter-ministerial coordination needed for higher RE investments: Experts

India's plan to expand its non-fossil energy capacity five-fold to 500 Gw by 2030 and meet half its energy needs from RE could add over $300 bn of investments in the sector

Subhomoy Bhattacharjee New Delhi

5 min read Last Updated : Nov 03 2021 | 9:36 PM IST

The pace of investment in the Indian renewable energy (RE) sector could grow substantially in the current decade, reckon experts in their reaction to Prime Minister Narendra Modi’s five pronged goals or Panchamrit at the COP26. To make the best use of the targets, more ministerial coherence is necessary, argued some of them.

“There is a lot of scope to scale up investments in the RE sector, through innovative business models and market transformations like the power exchanges,” said Chirag Gajjar, Head-Subnational Climate Action at World Resources Institute, India, one of the premier global research and advocacy groups on environment issues.

The first and second elements of the Prime Minister’s promise at COP26 is that India will expand its non-fossil energy capacity to 500 Gw by 2030. Also India shall meet 50 per cent of its energy requirements from renewable energy by the same date.

The increase in the RE power capacity target could add more than $300 billion of investments in the sector. “This is a five-fold increase from the current capacity of 101 Gw…apart from additional investments in augmenting the evacuation infrastructure and building storage capabilities,” said Sabyasachi Majumdar, Senior Vice President & Group Head-Corporate Ratings, Icra.

Modi’s target scales up from the latest energy projections done by the Central Electricity Authority under the Ministry of Power. Those projections, made in 2020, had shown non-fossil fuels will contribute 44.7 per cent of the gross electricity generation in FY30. To make that level of generation possible, the total installed capacity of solar and wind is projected to be 420 Gw by FY30. This would imply that of the total 817 Gw power generation capacity of the economy 51 per cent will be RE.

The gap between installed capacity and generation is because unlike coal or gas, RE power has intermittency. Actual generation depends on the sun and wind as storage capacity is limited. The CEA projection assumes that in a 24-hour cycle, the demand for FY30 shall be similar to the trend for the current decade.

Both these numbers, for expected generation and that of installed capacity, shall now be expected to rise. Gajjar said after the direction set by the COP26 promise, one can expect more states will ramp up their targets for RE projects. “Four states, Gujarat, Maharashtra, Karnataka and Chhattisgarh have already got a policy of only adding RE to their grid. One expects more states to adopt this position’.

As the demand for electricity rises, the states will have to tender more capacity for RE based generation projects, from what they have projected. Even this could be an underestimate. The electricity demand for FY30 has been assessed with a CAGR of 4.4 per cent assuming an expected real rate of growth of GDP at 7 per cent. If the economy does consistently better the space for RE will have to expand to keep up with the percentage growth of GDP.

Speaking at an Icrier session on COP26, former deputy chairman of Planning Commission last week, Montek Singh Ahluwalia said the capacity ramp up will be helped by the hydrogen mission. “Our ability to green our energy is already there and will be increasingly there once hydrogen comes in. Correspondingly no new thermal power plants except those under construction is warranted”.

Industry chamber CII also said these targets can be “achieved”. “Our sustainability initiatives help companies to assess their carbon footprint, design environmental strategies and build ESG capacities,” Chandrajit Banerjee, director general of CII noted.

CEA data shows old coal based units with total capacity of over 25 Gw are to be retired between 2022-30. New coal fired thermal plants under construction are only 8.6 Gw. The latter numbers could even come down as new global pressures on methane emissions take shape. At the ongoing COP26 negotiations, 90 countries have joined a US- and EU-led effort to slash emissions of methane by 30 per cent by 2030 from the levels of 2020. India and China are not signatories to the pact but would be expected to show enthusiasm for it. Ahluwalia said the changes associated with the electricity transition shall need a big structural change in the economy. “To make those changes we are talking about requires a lot of investment”.

Gajjar said one of those structural changes to make the investments count will demand targets set by multiple ministries to be coordinated. “The targets need to match up like those for freight transportation where there is a need to emphasise more of rail transit than road”.

Beyond power capacity, the RE market could also tap into some new areas. According to Tamal Sarkar, director at the Foundation for MSME Clusters, this sector has been largely left untouched from the benefits of the new energy. They could gain through wider adoption of market mechanisms through aggregation of demand. Help could come from the UN supported SME Climate Hub, a partnership of multinational companies, financial institutions and governments, to create clear incentives and opportunities for SMEs to halve each unit’s emission in this decade.

Table: Current and projected power capacity in India