Last week, speaking at a UNEP and FICCI conference on ‘Designing a sustainable financial system for India’, the Minister for Coal, Power and Renewable Energy, Shri. Piyush Goyal reiterated the government’s plan to achieve 100 GW of solar by 2022. This is a very ambitious goal – to say the least. Is it feasible? The short answer is: it depends on political will. And it will require a huge amount of political will. Initial demand creation through an enhanced obligations mechanism, an increased role for distributed generation, an escalation based tariff structure and non-subsidized growth of the sector are some of the highlights of how the government is thinking of going about it.
- The government is planning to give a new impetus to the solar sector
- The ministry clearly understands that the solar sector at this scale cannot be driven by subsidies and steps need to be taken for it to become commercially viable and sustainable
- BRIDGE TO INDIA believes that achieving the distributed generation target will be most challenging but perhaps also most rewarding for a sustainable market growth
Image source: blog.comparemysolar.co.uk
To drive the initial demand, the government is working on amending the Electricity Act 2003 to increase the Renewable Purchase Obligation (RPO) targets, introduce Renewable Generation Obligation (RGO) targets and bring in an enforceable penalty structure for non-compliance. Since a significant part of the power generation capacity in the country is owned by central government and private power generators, implementing RGOs might be easier. For RPO-driven renewables demand to work, India’s many states will need to come on board to accept the amendments. The government will also need to ensure that buying solar power is viable for state distribution companies. Unless larger power sector reforms improve their profitability, this is a tough proposition.
Larger scale, streamlined development through solar parks, lower interest rates and staggered payments through an escalated tariff are some of the ideas the new government is already working on to ensure that buying solar power is an attractive option for power distribution companies. Based on unconfirmed information, the government plans to achieve 60-70 GW through large-scale projects and the remaining through distributed generation (up from a current total of only 300 MW distributed solar).
BRIDGE TO INDIA believes that achieving the distributed generation target will be most challenging but perhaps also most rewarding for a sustainable market growth. How the government defines distributed generation will also be crucial. China currently classifies anything below 20 MW (!) as distributed generation. (It was just a last-minute reclassification to help achieve previously defined targets, read more).
At the conference, the Minister also discussed the idea of leasing small parcels of not-so-fertile land from farmers for setting up small-scale projects that can freely feed the power back into the grid. Whether this will become a more substantiated plan and whether such projects would be considered as distributed generation is yet to be seen.
It is clear that the ministry understands that the solar sector at this scale cannot be driven by subsidies and steps need to be taken for it to become commercially viable and sustainable. This is an encouraging sign and the expectations are only building up. We hope that a suitable action plan is announced soon. This 100 GW plan will be India’s showcase at the climate conference in Lima starting today and will determine how India is seen as a global investment destination.