India was the world’s sixth largest clean energy investment market in 2016 as it ramped up activity to meet its goal of installing 175GW of clean energy by 2022, which includes 100GW of solar and 60GW of wind. The total installed power generation capacity of the country was 314GW at the end of 2016, which was surpassed only by China (1.6TW) and the U.S. (1.1TW). Renewable energy capacity topped the 50GW mark last year and now accounts for 16% of the total installed capacity. A record breaking 4.3GW of solar power, including one of the world’s largest PV projects with 648MW capacity, 3.6GW of wind and 310MW of small hydro was added in 2016. Nevertheless, the number is lower than the 16GW of coal added in the country during the year.
The power sector in India is unbundled and is managed by the Ministry of Power. The ministry is assisted by the Central Electricity Authority (CEA), a statutory body under the government, responsible for technical coordination and supervision of programmes, as well as for drafting the National Electricity Plan every five years. Generation of power is handled by federal government owned companies, state level corporations and private sector companies. The transmission of power is mainly handled by Power Grid Corporation of India. The responsibility for distribution and supply of power to rural and urban areas lies with individual state distribution companies (DISCOMs) though private licensees can be found distributing power in a few big cities like Delhi and Mumbai. The peak power demand has been growing at an average of 4.5% over the last five years and is expected to accelerate in the future. According to the CEA, India became a net exporter of electricity for the first time during the year 2016-17 – something the CEA expects to see more of in the future thanks to new interconnections, and the fact that the country is producing more power than the DISCOMS are capable of delivering. Since 2014, exports to Nepal and Bangladesh increased 2.5 and 2.8 times respectively.
The country is using auctions to award contracts for solar projects since 2010, and the tariffs continue to fall rapidly. In an auction held on May 12, 2017, solar tariffs fell to a record low of INR 2.44/kWh ($ 3.8 cents/kWh) in Rajasthan, down by almost 7% from just two days earlier. The difference between the winning bid and second lowest winning bid in the same auction was just $ 1 cent/kWh making the bids extremely competitive. In the wind sector, India moved from using feed-in tariffs to auctions in 2017. The first wind auctions in February 2017 cleared at INR 3.46/kWh ($ 5 cents/kWh), below the feed-in tariff levels of INR 3.82/kWh ($ 6 cents/kWh) in force before that. The Indian government is in the process of reviewing its tax code in a way that could adversely impact the renewables industry according to draft policies discussed in the media. As of May 2017, the final version of the new tax code was yet to be published. India’s power distribution companies – the major off-takers of power in the country – are heavily indebted. Revenues are not able to cover the cost of generation and supply, partly due to subsidization of agricultural and domestic power users, high commercial losses due to power theft as well as delayed payments of dues by some consumers, high technical losses due to outdated equipment and erratic subsidy payment schedule of state governments. To deal with these problems, the government of India launched the UDAY (Ujjwal DISCOM Assurance Yojna) scheme in November 2015. Under this scheme, state governments take over 75% of the outstanding debt in a phased manner (50% in FY2016 and 25% in FY2017). The remaining 25% debt will be converted into bonds and will be offered in the market. As of April 2017, 26 out of India’s 29 states had joined UDAY. Additionally, bonds worth $ 26.9 billion have been issued as of January 27, 2017. India’s largest state insurer – Life Insurance Corporation – and Employees Provident Fund Organization have invested in these bonds.
India ratified the Paris agreement on October 2, 2016. The Intended Nationally Determined Contributions (INDC) states that India aims to lower emissions intensity per unit of GDP by 33-35% below 2005 levels by 2030. Additionally, the country also pledged to create a carbon sink of 2.5-3 billion tons of CO2 through expanded forest and tree cover by 2030.
A tax of INR 400 ($ 6.24) is levied on each metric ton of coal imported or produced in India and is placed in the National Clean Energy Fund (NCEF). The tax makes coal more expensive and helps mobilise funds that can be used for promotion of renewable energy and the environment, however it remains unclear to whom and how they will be distributed. This tax is expected to create an additional income of $3.9 billion for the federal government in 2016-17. Between 2010-11 and 2016-17, $1.8 billion was allocated to MNRE from the NCEF.
The National Mission for Enhanced Energy Efficiency (NMEEE), one of the eight missions under the National Action Plan on Climate Change (NAPCC), has created policies to incentivise energy efficiency initiatives. It targets total avoided capacity addition of almost 20GW and fuel savings of approximately 23 million metric tons per year. The ministry of Power along with the India Smart Grid Force also started 14 smart grid projects and one Smart City R&D platform. In the transport sector, the government intends to have an electric vehicle policy in place by December 2017 with the aim to achieve an extremely ambitious goal of an all-electric vehicle fleet by 2030.
Performance over time
- Overall Rank
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