The renewable energy sector of India has been ranked as the third most attractive renewable energy market in the world by the 57th Renewable Energy Country Attractiveness Index released by Ernst and Young. With the second largest population in the world, India will have an energy demand of approximately 15,820 Terawatt-Hour (“TwH”) by 2040 and unsurprisingly, renewable energy shall be catering to a significant portion of this requirement.
The Indian Electricity Act, 2003 (“Act”) does not provide a definition of ‘renewable energy’ but myriads of regulations under the Act including the Central Electricity Regulatory Commission (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations 2017 define ‘renewable energy’ as grid quality electricity generated from renewable energy sources. At the federal level, the Tariff Policy and National Electricity Policy 2005 broadly encourage the generation of electricity from renewable energy. The Tariff Policy exempts payments of inter-state transmission charges and losses for solar and wind energy generators for 25 years of commissioning of the project set up through competitive bidding.
The National Offshore Wind Policy 2015 empowers the Government to bundle power generated from offshore wind power projects with conventional power to reduce the cost of power generation. In May 2018, the Government floated the National Wind Solar Hybrid Policy, with the objective of encouraging the setting up of hybrid solar and wind plants. In order to settle challenges posed by dispute resolutions in the renewable energy sector, the Government proposed the setting up of a dispute resolution committee to alleviate issues relating to time extensions of executed contracts and appeals from the sector regulators in June 2019.
Investments and Incentives
Foreign Direct Investment (“FDI”) in the Indian non-conventional energy sector stood at US$ 42 billion from the period of 2014- December 2020. In March 2021, The United States International Development Finance Corporation (“USIDFC”) reported a loan guarantee program worth US$41 million to support Indian investments in the renewable energy sector. At the same time, the Japan International Cooperation Agency (“JICA”) entered into a loan agreement with Tata Cleantech Capital Limited (“TCCL”) for US$ 90.31 million with the aim of providing loans to companies in India for clean energy production.
To further boost the renewable energy sector of India, the Government has proposed various schemes and initiatives. In the Financial Budget of 2021-22, the Ministry for New and Renewable Energy has been allotted US$ 788.45 million, the Indian Renewable Energy Development Agency has been allotted US$ 205.57 million and the Solar Energy Corporation of India has been allotted US$ 137.04 million.
In November 2020, the Government proposed the production-linked incentive scheme worth US$ 610.23 million for the manufacturing of high-efficiency solar photo-voltaic modules over a five-year period. An investment of US$ 41.12 million has also been stipulated for the ‘Green Energy Corridor’ scheme. To foster research and development, the Government has created an inter-ministerial committee under the National Institution for Transforming India (“NITI”) Aayog (Government Policy think-tank) to study and research energy modeling.
The renewable energy sector of India has taken huge strides in establishing itself as a hot investment opportunity for international financiers. With the like-minded objective of both the Government and the global community, the use of clean energy and the creation of large-scale sustainable power projects is paving the road ahead. The draft Electricity (Amendment) Bill, 2020 – which is pending in the Indian parliament – envisages to empower the Government to issue a Renewable Energy Policy for promoting the generation of electricity from renewable sources.
The renewable energy market of India is set to receive another US$ 80 billion worth of investment in the next four years. Indian clean energy conglomerate, Adani Group intends to become the world’s largest solar power company by 2025 and world’s biggest renewable energy firm by 2030. As per the Government, the share of renewable energy is set to increase from 18% to 44% by 2029-30. Furthermore, the country might witness a ‘green city’ in every state which would be run solely on renewable and clean energy. With ambitious objectives such as these, the Indian renewable energy sector is set to grow at a tremendous pace in the future.