India generates 13,878.58 MW grid-interactive power from renewable sources like from wind, small hydro, solar, biogas co-generation and biomass. It amounts to 9% of the total installed generation capacity. It has been enabled by the provision of government incentives like capital and interest subsidy, accelerated depreciation and concessional excise and customs duties. Some states also offer preferential tariff for grid interactive renewable power.
Last year, the sector attracted investment of $3.7 billion, growing 12% over 2007. The biggest chunk went to the wind industry, which grew 17% to $2.6 billion. The investment in solar industry went up to $347 million. Small hydro investment quadrupled to $543 million. Biofuels recorded a fall of 80% to $49 million. Mergers and acquisitions amounted to $585 million in 2008, according to UNEP?s Global Trends in Sustainable Energy Investment 2009.
Renewable energy could have done even better, but for policy, financial and technical bottlenecks. A recent study by London-based Commonwealth Business Council and the Indian Institute of Management (IIM) in Ahmedabad blames issues like grid interface issues in the wind industry, lack of sufficient land for solar power installation, unstructured nature of the biomass market, and lack of data about the waste sector. Besides, low R&D spends and lack of baseline data are also deterring investors.
India is already seized of the issue. For example, the 11th Five Year Plan, ending 2012, has set a target of 14,000 MW of grid interactive and distributed/ decentralised renewable power generation installed capacity, including 10,500 MW of wind energy. Similarly, the National Action Plan on Climate Change underlines that the central and the state electricity regulatory commissions must encourage the renewable industry by purchasing a stipulated percentage of grid-based power from it. The plan also aims to promote solar energy and make it competitive with energy sourced from fossil fuels. The plan has set goals of increasing production of PV to 1,000 MW/year; and commissioning more than 1,000 MW of solar thermal power generation.
But India needs to do more because of the big potential of renewables. The country needs to address not only issues like high capital investment, low capacity utilization and grid synchronization bottlenecks, but also institutional financing, private investment and technology transfer. It?s important because India can meet 35% of the electricity needs from renewables, according to Energy [R]evolution: A Sustainable India Energy Outlook by Greenpeace. It?s not only important for India?s energy security, but also for lowering emissions. Though India?s per capita emission is only 1.8 tonnes against 20 tonnes of the US, India is the third biggest emitter in absolute terms and is facing international pressure to commit to emission targets. Renewables could help diffuse the pressure.
Lastly, promoting renewables is a business imperative because it?s big business worldwide. The global renewable energy market is doubling every three years. It?s time for India to connect with it. The Union Budget could be an apt opportunity to do so.