While rapid infrastructure build-up is essential to sustain India?s high economic growth, economic development has traditionally been carbon intensive. The challenge is to build infrastructure with a smaller carbon footprint, without compromising poverty alleviation and energy security. As India is in the early stages of infrastructure development, the choices now would determine the future.
Renewable energy has long been recognised for its enormous potential in meeting the energy needs of India in a carbon-smart way. Renewable energy solutions can be most useful for rural electrification and sustainable development, apart from creating employment opportunities at all stages of the value chain. Though the central government through the new and renewable energy ministry, finance ministry and the state governments has used a number of policy instruments to promote renewable energy, there is no single comprehensive policy statement for renewable energy in the country. Policies have been formulated as and when necessary to facilitate the growth of specific renewable energy technologies. The lack of coordination and cooperation between the Centre, state governments and state nodal agencies restricts the progress of renewable energy development.
The India Infrastructure Report 2010 by Infrastructure Development Finance Company and 3i Network questions the effectiveness of single window approval and clearance for renewable energy projects that several states have adopted. Delays in obtaining clearances for projects awarded through competitive bidding result in the levy of a penalty on the developer.
Renewable energy developers face difficulty in financing projects as the technology involves large upfront investment cost in generation equipment. Bariers also include the enormous paper work and costs associated with identifying and obtaining access to finance for small and medium-scale renewable energy projects.
Moreover, many renewable energy project developers are often small, independent and newly established, lacking the institutional track record and financial strength needed to secure non-recourse project financing. A sound cross-cutting legal, regulatory policy on finance issues is needed to facilitate the development and deployment of low carbon technologies.