Making the most of the renewable opportunity

In India, a decentralised model where abundantly available renewable energy sources could be used more efficiently is expected to benefit economic and social growth in a much better way

Electricity and associated infrastructure is the backbone of any economy and availability of reliable and affordable electricity is a key catalyst that puts the economy on higher growth trajectory. India is predominantly a thermal grid nation as more than 70% of electricity generated comes through that source. But with issues surrounding conventional energy for incremental capacity addition, and potential for cost increases due to escalation in variable charges in operative years, renewable energy offers a much better alternative to build the nation’s energy infrastructure. Globally, renewables are being viewed as a means to provide people with a better quality of life and are increasing their share in the global energy pie. The recent IEA report predicts that renewable electricity generation would grow worldwide and, by 2020, it will make up for 26% of global electricity generation.

The current model of power generation, transmission and distribution in India is a centralised one wherein large utilities pool electricity and then distribute it. In a country like India, where nearly 30% population has little or no access to electricity, a decentralised model where abundantly available renewable energy sources could be used more efficiently is expected to benefit economic and social growth in a much better way.

As a banker, I have seen the lifecycle of many renewable power projects. I feel that wind and solar energy carry more potential for growth than other renewable technologies primarily because of lower gestation periods, comparatively remunerative tariffs, minimal fuel risk and operating expenses. The gestation period of solar is far less and returns are consistent, thus making it attractive for long-term investors such as pension and insurance funds.

However, there is one critical area that needs to be addressed. The land requirements in case of wind and solar projects are multiples of the land required in a thermal project or other renewable technologies. Being a populated country with priorities spread across sectors like agricultural, residential, commercial, and industrial, availability of land for large-scale renewable programmes may become a constraint. This is where we need to do out-of-the-box thinking.

Wind industry worked out an alternate model during the course of its lifecycle whereby point-to-point land use concept was brought in and so it saved on gross land requirement. The same may be difficult in case of solar projects as they need to be spread out in an array but the solution lies is making rooftop projects a priority. Not all rooftops may be used for solar generation as there might be competing uses for other services and requirements or adequate roof space may not be available. But solutions emerge only when we face the challenges. As per WWF-TERI report, 60% of India’s land area receives an annual global insolation above 5 kWh/sqm/day. With nearly 330 clear sunny days, solar power alone can supplement most of India’s electricity needs. A beginning can be made from Delhi where all existing big buildings, new buildings and houses are asked to come up with rooftop solar modules. A report on rooftop solar panels in Delhi put the potential at around 2,550 MW by 2020 (with around 31 sq km of solar suitable rooftop area used from the total qualified rooftop area of around 119 sq km).

Innovation will also need to be brought in areas of project implementation. Can we think of putting up small solar projects on the sturdy transmission towers of PowerGrid? Let’s find out if we can really use the towers connecting over 1,00,000 km of PowerGrid lines for putting up small capacity solar projects? A similar exercise can be carried out on telecom towers that currently number 6,00,000. Solar panels on highways and along railway tracks could be one more option.

Noting the challenges that private capital has faced in execution and running of thermal assets, can we have a model whereby private capital is encouraged more for investing in renewable assets? By this change, India can build more than 1,50,000 MW of solar assets and more than 1,00,000 MW of wind assets (onshore and offshore) by 2025.

A 1,50,000 MW solar generation capacity may generate energy equivalent to only 35,000-40,000 MW of thermal asset, but even if 15,000 MW of generation is taken off diesel because of this initiative, India would save an annual foreign currency outgo of $35 billion. The government’s plan of putting up to 1,000 MW solar power units along border areas may save us additional $500 million of foreign currency outflows on diesel, besides saving on logistical arrangements and related costs.

Another area to look at is the ambitious project of 100 Smart Cities. Such cities may have renewable sources as their energy backbone and the learning earned during implementation may be replicated to other segments in India.

Japan will invest $35 billion in India’s multiple infrastructure projects. If only $5 billion of this moves towards equity of projects in the solar domain, a whopping 16,000 MW of these renewable assets can get commissioned.

The government also successfully resolved the issue of anti-dumping duties by ensuring enough business for domestic players while enabling cost-effective imports for power producers. By constant innovation, I believe the cost of projects in the solar sphere will continue to go down and the efficiency will go up. The day is not far when solar energy will become cheaper when compared to conventional energy and without worrying about availability of resources and resultant pollution. If India urgently designs and implements mechanisms and innovative policies that promote increased use of renewable resources, I am confident that we will achieve the energy security sooner than expected.

By RM Malla
The author is MD & CEO, PTC India Financial Services Ltd

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