When the prime minister inaugurates the fourth Clean Energy Ministerial meeting in New Delhi on Wednesday, he will no doubt have good things to say about India's thriving renewables sector, and that the National Action Plan on Climate Change envisages that renewable energy will meet 15 per cent of the country's power needs by 2020. However, the story is not as rosy as it should be. In particular, it is worryingly clear that investors' interest in the sector is sagging. Bloomberg New Energy Finance (BNEF) estimates that investment in renewable energy in India dipped sharply by around 53 per cent to $6.3 billion (approximately Rs 34,417 crore at the current exchange rate) in 2012. The previous year, there had been a similarly sharp rise in inflows; but momentum was lost, thanks to hurdles put in the way of both solar and wind energy by the government. The solar industry (power production as well as equipment manufacturing) registered the sharpest decline in funding from $5.2 billion in 2011 to just $1.7 billion in 2012 due largely to poor policy enforcement. Nor is there any indication of a rebound in such investment in 2013, though the Budget has suggested some feeble new initiatives to that effect. Indeed, the sums provided in the Budget to promote renewable energy fall considerably short of Parliament's Estimates Committee's recommendation that one per cent of the Union Budget be earmarked for renewable energy. The Jawaharlal Nehru National Solar Mission's target of 10,000 Mw additional solar power capacity by 2017 seems unlikely to be achieved, now. Equally unlikely is the production of 30,000 Mw of power through non-conventional means by that year, as the Climate Action Plan promises.
Land availability is a major constraint for the solar energy sector, though. Like other non-conventional means of power, it also faces problems concerning bank finance, grid connectivity, power transmission, pricing and equipment procurement. Some innovative approaches have indeed been tried - in Gujarat, canals have been covered with solar panels. But the bigger trouble is financing: Banks are over-conservative, unable to understand that irregular power production is natural to renewable energy projects, and should not lead to them being seen as too risky or economically unviable to finance. Nor have grids understood this fact; and those that have claim they lack the transmission infrastructure needed to absorb power from renewable sources. This makes it difficult to feed this power to the grids or sell it to other states.
Meanwhile, equipment procurement has also become problematic, especially for solar power producers. The US has taken India to the World Trade Organization (WTO), challenging the domestic procurement clause in the solar mission's guidelines. Investors, clearly, want more clarity. The Clean Energy Ministerial has important work to do in ensuring that frontline research in renewable energy becomes easily operationalised. It should prioritise those innovations that allow capital to see a steady - if not high - return, in order to ensure that the investment deficit ends soon.