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: 25% in developed countries, driven by this encouraging mechanism, even as R&D constantly endeavours to reduce cost. Justification for an attractive FIT is also relevant considering the under-pricing of conventional coal-based power, which levies no penalty on environment pollution nor takes into account irreplaceable loss of deposits.
In India, compensation for land, rehabilitation or destruction of flora and fauna is too little or even missing altogether. The cost of thermal power is more than three times the current level when all such factors are taken into consideration. SPV prices are coming down by 50% each decade and, hopefully, in another ten years, energy cost from SPVs will become competitive, more so on account of the continuous rise in the price of conventional power.
So, nurturing the renewable sector through a favourable FIT is of utmost social necessity in this intervening period. Renewable energy, as the case elsewhere, will boost the economy both by stepping up the manufacture of new products, and also from the marketing and servicing efforts. Technological innovation and financial engineering are now drawing over $50 billion in annual investment at global levels and the prospects in India are estimated at about Rs10,000 crore, or $2 billion, annually.
Current tariff rates for renewable energy are too conservative and do not in many cases even guarantee a 10% return on investment. The benefits of the accelerated depreciation option are in the exclusive domain of big companies earning huge profits. Existing FIT on solar and wind power should ensure a reasonable positive return within ten years of loan repayment in a regime where interest rates are over 12%.
Regulatory authorities and statutorily empowered institutions should review the FIT polices in force and the government may undertake an exercise to ensure greater linkages between tax benefits and production so that the incentives promote renewable energy by attracting large investments. This also conforms to the urgency embodied in the terms of the National Action Plan on Climate Change initiated by the PMO.
If 10%, or 20,000 mw, of installed capacity is to come from renewable resources out of 2,00,000 mw planned and deliver about 35-40 billion units of the total of 1,100 billion even at double the price, it will still only have a negligible impact on the overall tariff structure to be borne by the supplier and consumers. In resolving future power problems, a coordinated approach to a different energy mix is unavoidable, as also...
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