COMMENT – Renewable energy has an edge in post-COVID India

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Photo courtesy: ADB

India’s Finance Minister Nirmala Sitharaman recently announced a slew of reforms and financial initiatives to kickstart the economy ravaged by the Covid -19 pandemic and subsequent lockdown of the country.

As part of the government’s stimulus package, a one-time liquidity injection of Rs 900 billion has been earmarked for power distribution companies (discoms), which have seen a drastic revenue drop due to sharp a fall in demand.

The financial infusion will be done through the Power Finance Corporation and REC Limited in two equal installments.  

Sitaraman also noted that loans would be given against state guarantees solely for clearing liabilities to power generating companies. This, in turn, will improve the viability of utility power purchase agreements for renewable power generators since discoms would now be able to pay their dues.

Economies and businesses are being gravely challenged under the prevailing extraordinary circumstances. The renewable energy industry is no exception.

Industry stakeholders do agree that the Government has been taking steps to safeguard the interest of the renewable energy sector during the lockdown, like the Ministry of New and Renewable Energy (MNRE), notifying state utilities to ensure must-run status for renewable energy projects. Also, projects in Covid-19-free zones have been allowed to resume construction and deadlines have been extended by invoking the force majeure clause.

Banked energy deadlines have also been extended for rooftop, captive and open access projects.

However, that it may not be enough to help the sector. India may not achieve its target of 175 gigawatts (GW) of renewable energy capacity by 2022, and 450 GW of non-fossil sources by 2030.

“Though at the start of this year, it actually looked possible,” said Kanika Chawla, senior program lead at the Council on Energy, Environment and Water (CEEW), a Delhi-based think-tank.

In the case of solar energy alone, India is unlikely to meet its target energy capacity of 100 GW by 2022.  The lockdown has halted construction works of projects totalling about 5 GW.

India has currently, 31.5 GW commissioned capacity of utility-scale solar and 5.6 GW of rooftop solar. Almost 29 GW of utility-scale solar is in the planning stage.

With most construction workers away, even if the government ends the lockdown by June 2020, it will take a while to remobilise the labourers and for recovery to begin.

The suspension of trade with China is also a big impediment. It has severely impacted the delivery timelines of key equipment and has increased the cost of photo voltaic modules, which may increase solar tariffs. About 90 percent of solar modules and cells used in Indian projects are sourced from China and Malaysia.

Recently, ReNew Solar Power Pvt Limited emerged as the lowest bidder at a tariff of Rs 2.90 per unit for 400 MW renewable energy capacity put on auction by Solar Energy Corporation of India (SECI). 

The developers can develop solar, wind, and hybrid projects under this tender. Besides, these are round the clock power supply projects which means they can be augmented by energy storage systems.

Also at such a competitive price point, it can prove to be more attractive and sustainable than traditional fuel in the long run.

(Mumbai-based columnist Shampa Bahadur has been following the renewable energy sector for a long time)

Ritwik Sinha is a Delhi-based business journalist with 23 years experience across three mediums - television, print and digital. He has covered key economic ministries and parliament for a long time while working for noted television platforms like BITV, Doordarshan and Sahara. He also brings to the table substantial B2B media experience spearheading publications like Travel Trends Today (T3) (as managing editor) and Logistics Times (as founding editor). For past over four years, he has also been associated with India's leading business fortnightly Business India as a consulting editor.

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