CRISIL Yearbook Indian debt market 2021

Overall supply of corporate bonds could double to Rs 65-70 lakh crore

Over the next five fiscals, corporate bond issuances outstanding could more than double from ~Rs 33 lakh crore or 16% of gross domestic prod- uct (GDP) at the end of fiscal 2020 to Rs 65-70 lakh crore – tantamount to 22-24% of GDP – by the end of fiscal 2025. This growth will have three drivers: investments, primarily for infrastruc- ture; non-banking financial companies (NBFCs) and housing finance companies (HFCs); and innovation to facilitate enhanced bond market funding for the NIP.

Infrastructure sector to supply Rs 5.5-7.5 lakh crore of bonds

The NIP has set an ambitious target of achieving Rs 111 lakh crore of investments in the infrastructure sector over fiscals 2020 through 2025. That is more than twice the infrastructure investments of ~ Rs 51 lakh crore seen between fiscals 2014 and 2019. As much as 71% of the investments envisaged in the NIP is in four sectors – energy (predominantly power, renewables), roads, railways, and urban infrastructure.

Bulk of the investments in infrastructure are expected to be borne by the central and state governments directly through budget allocations, followed by NBFCs – mostly government owned ones such as Power Finance Corporation, Rural Electrification Corporation and Indian Railway Finance Corporation – with the corporate bond market expected to play a relatively muted role.

Our growth projection, based on the existing policy framework and optimistic assumption, suggests demand for corporate bonds will likely touch Rs 54-58 lakh crore by fiscal 2025. Given India’s requirement of capital through the bond market over the next few years, key policy mea- sures are needed for boost demand further. We believe focused policy measures can benefit the following investor segments, and thereby push aggregate demand to Rs 60-65 lakh crore.

  • Mutual funds (MFs): Aligning capital gains taxation for debt MFs on a par with equity; extending tax sops similar to equity linked savings scheme (ELSS) to debt funds; targeted tax exemptions; and mea- sures such as setting up of an institution for supporting liquidity of investment grade corporate bonds can increase flow to debt funds
  • Retail investors: Incentivising retail investment through tax sops, similar to the one for infrastructure bonds introduced over fiscals 2010-12, can help garner a large pool of capital
  • Employees’ Provident Fund Organisation (EPFO): Measures such as credit default swaps and credit guarantees can encourage invest- ment in private sector bonds
  • Foreign portfolio investors (FPIs): To ensure full utilisation of limits for FPIs, taxation changes such as easing of withholding tax, offering tax incentives, setting up institutions to support liquidity and hedge credit risk, and inclusion in global indices can help significantly

NIP financing hinges a lot on innovation

While the NIP envisages infrastructure investments of Rs 111 lakh crore over fiscals 2020 to 2025, it acknowledges the likelihood of a 8-10% shortfall. Moreover, the weaker fiscal position of the Centre and states after the pandemic does not augur well for infrastructure spending. That’s why it’s imperative to leverage alternate and innovative financing avenues for the great Indian build-out.

The essentiality of innovation

India’s corporate bond market can play a significant role in facilitating takeout financing for operational infrastructure projects, and help release a material portion of the over Rs 20 lakh crore lent by banks and NBFCs to finance under-construction projects (for more perspectives on this, see the chapter titled ‘Operational HAM roads bond well’).There is also substantial asset-monetisation potential in the infrastructure sector, which would, in turn, offer opportunities for the corporate bond market to facilitate debt financing for monetised assets.

For e.g., public sector undertakings in infrastructure currently hold assets worth over Rs 20 lakh crore. New projects worth Rs 10-12 lakh crore are also expected to be implemented by the public and private sectors over the next two fiscals in relatively stable asset classes such as roads, power generation and transmission, renewables, oil and gas pipelines, and telecom, which would become operational and stabilise within the next five fiscals. This reflects huge asset-monetisationpotential over the medium term.However, for bond market investments to reach these operational infrastructure assets, issuances by these assets need to be aligned with the requirements of bond investors who typically invest only in highly rated instruments. That means innovations such as pooling of assets, a well-capitalised Credit Guarantee Enhancement Corporation, and CRISIL INFRA EL rating scale are essential.

Pooling of assets can attract takeout financing from the corporate bond market, based on the structural credit enhancement provided by diver- sification across different counterparties and geographies that reduces idiosyncratic risks.The scale and diversification of pooled assets can also help attract for- eign capital into infrastructure. Additionally, pooling of assets brings in professional managements with asset-class-specific expertise that can improve operational performance and optimise capital structure, and provide comfort to investors.

InvITs are gaining currency in India following the footsteps of the developed world. The combined AUM of InvITs and real estate investment trusts (REITs) have reached ~Rs 2 lakh crore, marking a whopping 42% CAGR since the launch of the first InvIT in fiscal 2018.Such growth has been enabled by supporting regulations such as cap on leverage, and restriction on investments in under-construction assets. The AAA rating threshold is also stipulated for listed InvITs if their debt- to-AUM ratio exceeds 49%. Further, mandatory distribution of surplus cash enhances investor confidence. These attributes can attract bond market investments into InvITs.

InvITs can help create an ecosystem for infrastructure creation by

allowing developers to offload operational assets and release capital for new projects, and by allowing project financiers to offload debt to a new set of investors and unlock funds.InvITs have the potential to generate ~Rs 6.5 lakh crore over the medium term, which can be part-funded by bond market issuances of Rs 3-4 lakh crore in sectors such as roads, transmission, gas pipelines, telecom infra and renewable assets.

Macroeconomic troubles Even before the pandemic hit, real GDP growth had slumped to a decadal low of 4% in fiscal 2020 compared with 6.5% the previous year. This was driven by slowing private consumption as well as investment growth. Business and consumer confidence were at their lowest in 10 years, and the financial sector, burdened with bad assets, was unable to adequately lubricate the economy.The pandemic sharply slowed the Indian economy to -23.9% in the first quarter this fiscal. The huge economic cost it extracted forced the country to open up and get back on its feet in the following quarter, slowing the decline to -7.5%. What also helped was a sharp cutback in operating costs for corporates due to jobs and salaries being pared, employees exercising work-from-home options, and low input costs due to benign interest rates and prices of crude oil and commodities. Two other factors have been supportive: the agriculture sector, which recorded 3.4% growth on-year, and exports, which only posted a contraction of 1.5% versus -19.8% in the first quarter. Since imports fell much sharper than exports, net trade was less of a drag on the economy compared with the past. For the first half of this fiscal overall, GDP declined 15.7%, with the services sector suffering more than manufacturing. In the second half, GDP growth is estimated to be almost stagnant. Thus, for the fiscal overall, GDP is expected to decline 7.7%, according to first advance estimates by the National Statistics Office. Consumer price index-linked (CPI) inflation remained within the RBI’s target of 4-6% for much of fiscal 2020, averaging 4.8% for the year. However, in the first half of this fiscal, it consistently remained above the upper target limit, averaging 6.7%. Sporadic lockdowns and supply disruptions, coupled with high bullion prices, have kept prices elevated despite slack demand. The weak domestic demand, coupled with low crude prices, led the current account deficit to narrow to 0.9% of GDP in fiscal 2020 compared with 2.1% the previous year. The imposition of lockdowns led the current account to turn surplus in the first half of this fiscal, as imports fell much sharper than exports. The first quarter saw a record-high surplus of $19.8 billion, or 3.9% of GDP. With the economy unlocking, this moderated to $15.5 billion or 2.4% of GDP in the second quarter. Uncertainty post the pandemic in March 2020 led to a record outflow by FPIs and a sharp depreciation of the rupee against the US dollar at fiscal 2020-end. The rupee averaged 74.4 to the dollar in March 2020, compared with 69.5 in March 2019. However, the sharp easing of monetary policies by central banks globally led to a return of FPI inflows. This, coupled with the current account surplus, eased depreciation pressure on the rupee. By the end the first half of this fiscal (September average), the rupee settled at 74.7 per US dollar. The central government’s fiscal deficit had breached the Fiscal Responsibility and Budget Management (FRBM) target in fiscal 2020, with fiscal deficit printing at 4.6% of GDP. Gross market borrowing had risen to Rs 7.1 lakh crore in fiscal 2020 compared with Rs 5.7 lakh crore the previous year. The hit to economic activity due to the pandemic further affected tax revenues and led to a sharp rise in borrowing. In the first half of this fiscal, the Centre’s gross market borrowing had surged to Rs 7.4 lakh crore.

Corporate bond issuances stick to ‘private’ road

Primary issuance via private placements continued to dominate the total issuance – at ~98% in fiscal 2020 and 99.77% in the first half of fiscal 2021. Public issuance (largely driven by retail investors) lagged behind because of reduced interest rates, positive equity markets, and alternative cheaper fund-raising options for NBFCs, which typically borrow through public placements. A multitude of schemes launched by the Reserve Bank of India (RBI) and the Ministry of Finance, such as long-term repo operations (LTRO), targeted long-term repo operations (TLTRO), special liquidity scheme (SLS), and partial credit guarantee scheme (PCGS), brought low interest rates and high liquidity to the market. Hence, despite the Covid-19 pandemic, primary issuance was ample.

The number of NBFC and HFC issuers who approached the bond market has fallen post fiscal 2018 due to lower appetite for such papers, reduced capital requirement (owing to consolidation of business at top NBFCs and HFCs), and alternative funding sources (such as securitisation and bank loans). The total issuance fell a marginal ~3% on-year in fiscal 2019, following the IL&FS and NBFC liquidity crisis. Meanwhile, the number of issuers decreased a significant ~18% on-year, reflecting the strain on lower-rated issuers in raising capital from the market. In fiscal 2020, the total issuance amount increased a marginal ~6% on-year, the number of issuances fell ~12% on-year, and the number of issuers changed a minimal ~3% on-year. As interest rates fell, the average issuance size increased in fiscal 2020 and also the first half of this fiscal.

Global

Indian Indices topped the chart in both govern- ment and corporate bond fund categories, out- performing all of its Asian peers in local return terms (domestic investor perspective). CRISIL Composite Bond Fund Index has seen rapid growth in the past 10 years, surpassing S&P Philippines Index in July 2016 and S&P Indonesia Index in September 2018. CRISIL Dynamic Gilt Index outperformed the S&P Indonesia Government Bond Index in May 2018, and has been leading its peers since then.

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Egat plans world’s largest floating solar farm in June

Egat's floating solar power farm, with a capacity of 45 megawatts, is on a reservoir at Sirindhorn Dam in Ubon Ratchathani province.

State-run Electricity Generating Authority of Thailand (Egat) expects to operate a 45-megawatt floating solar farm it claims to be the largest in the world in Ubon Ratchathani in June after a delay caused by the pandemic. Egat signed a contract with B.Grimm Power Plc, which will serve as an engineering, procurement and construction firm to develop photovoltaic panels worth 842 million baht on Sirindhorn Dam, where an Egat hydropower plant is operating. Power generation on a water surface requires 450 rai of land, equivalent to an on-ground solar farm. The facility was originally scheduled for operation in December last year, but the launch was postponed due to the pandemic.

Chatchai Mawong, Egat’s director for hydro and renewable energy power plant development, said construction is now 82% complete. Workers began installing the first lot of floating solar panels in December and are speeding up installation. The floating solar farm is designed to be a hybrid system, working in tandem with 36MW of hydropower generation to increase optimisation capacity. Under the 2018 National Power Development Plan, Egat is committed to building more floating solar farms on all nine of its dams nationwide over the next 20 years, with combined capacity of 2,725MW. It is also planning to adopt a modern energy management and energy storage systems, crucial to store electricity produced by solar panels. Egat is building 415-metre natural walkways at all its reservoirs to be further developed into new tourist attractions.

Source: Bangkok Post

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[Vietnam] Solar power capacity to be cut due to oversupply

A building in Đà Nẵng City uses solar rooftop to generate power. — Photo nld.vn

Ninh told local media at a recent conference of Vietnam Electricity (EVN) that Việt Nam will cut 1.3 billion KWh of renewable energy in 2021. According to EVN’s statistics, national electricity output generated from solar power in 2020 was 10.6 billion kWh, including 1.15 billion kWh from rooftop solar power, accounting for about 4.3 per cent of the total output from the national electricity system. Ninh said in 2020, the regulating agency must reduce 365 million kWh of unexploited solar power due to overloads of local networks, mainly in central provinces like Ninh Thuận and Bình Thuận. By the second half of November 2020, due to the excess power from the growth of solar farms and solar rooftop power, the electricity industry had to make a total reduction of 35 million kWh. In 2017, the Government issued the first feed-in tariff (FIT) mechanism with the purchase price of solar power for all types of 9.35 cents per kWh, until June 30, 2019, leading to many solar power projects being licensed rapidly.

In June 2020, the Government moved to a FIT 2 tariff of 7.09 cents per kWh for solar power on the ground, 7.69 cents for floating solar power, and 8.38 cents per KWh 7.69 cents for rooftop power. On December 31, 2020, the decision expired and investors must await a new tariff.  Phạm Quế Phong, chairman of Inter Solar Joint Stock Company, said: “If the upcoming FIT 3 price is issued to prioritise dispersed solar rooftop and has a price difference between regions according to the rate of radiation, it will promote lots of rooftop solar projects and limit solar farm projects.” “The loose management has led to the fact that the majority of solar rooftop projects are actually now solar farms,” he said. Phong said the country was estimated to have more than 100,000 rooftop solar power projects with a total output of nearly 10,000 MWp but only 20 per cent of them were rooftop solar power constructions and installed on the roofs of offices, restaurants and hotels.

He said the rest were solar farm projects disguised as rooftop solar power to enjoy the price of 8.38 cents per kWh instead of 7.09 cents per kWh for solar farms. Phong predicted the buying price of rooftop solar power would decrease this year following the trend in the world, adding: “The reduction will not be much.” “Households, businesses and administrative agencies with solar roof power should not worry as though the price of electricity is cheaper, the initial investment cost is also cheaper,” he said. Regarding the FIT prices of solar power, some companies believed that the adjustment of the annual price was reasonable because the prices of solar technology and equipment in the world were declining. Professor Bùi Thiện Dụ, a former lecturer of the Electrical Faculty of Hanoi University of Technology, said: “The country needs to build a long-term, transparent solar power development policy roadmap towards protecting the interests of investors, especially local users who have installed solar power at home.” “In addition to the households that install roofs for use, the rest want a stable policy to sell electricity to quickly recover capital. Therefore, for rooftop solar projects, it is necessary to have a separate sustainable mechanism to ease the users and investors’ concern. The Government and the Ministry of Industry and Trade should carefully calculate to not repeat the problems that arose in the past with a seamless policy,” he said. “Cutting the solar power is not reasonable, they must find solutions to solve problems and develop sustainable renewable energy instead,” he said. “It is necessary to solve the problem of transmission infrastructure by attracting resources, allowing the private participation while the State manages the capital recovery mechanism for investors, releasing capacity while ensuring the energy and national security,” Dụ added. He said the sustainable development of renewable electricity should follow strict controls and requires good investment in transmission infrastructure. Ninh, director of National Power Regulation Centre, said they need to adjust the generating time of small hydroelectricity, avoiding frame from 11am to 1pm, which was the best solar radiation time for rooftop solar.

Ninh asked the Government and the MoIT for mechanisms and principles to mobilise renewable energy sources when the system was redundant or overloaded, adding the centre was now confused about mobilising different sources. Professor Dụ told local media: “A lack of vision in the solar development and matters in transmission grid has resulted in the incomplete capacity of solar electricity.” He added the mechanisms and policies on solar development had been unsustainable and brought risks to investors and the people. Dụ again said Việt Nam has to build a long-term and transparent solar power development policy roadmap to improve its power industry. — VNS

Source:Nation Thailand

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MEA increases purchase price for household solar in Bangkok and vicinity

The Metropolitan Electricity Authority (MEA) has increased the price at which it purchases solar power from households, government spokeswoman Ratchada Thanadirek revealed on Tuesday. In a move to encourage households to install solar panels and generate electricity by themselves, the MEA has raised the purchase price from Bt1.68 to Bt2.20 per unit for 10 years in Bangkok, Nonthaburi and Samut Prakan.

Electricity purchase from public solar generators will expand to hospitals and schools soon, Ratchada added.

Solar-powered households can apply to join the project at https://spv.mea.or.th/.

Source: Nation Thailand

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Solar PV Report – IEA – Renewables 2020Analysis and forecast to 2025

Solar panels and wind turbines

Solar PV

Global solar PV capacity additions are expected to reach nearly 107 GW in 2020 in the main case, representing stable growth from 2019 (this forecast has been revised up by 18% from the market report update published in May). IEA monthly deployment data indicate that construction activity for utility-scale projects slowed from March through April, but rapidly regained speed in mid-May. Deployment of distributed PV applications remains sluggish in large markets such as China and the United States, although activity in most European markets, Australia and Brazil has not been hampered significantly. Still, the share of distributed applications in total PV deployment is expected to decline to 37% this year, the lowest since 2017.

In 2020, utility-scale additions will increase nearly 3% owing to record additions in the United States. China is expected to construct over 33% more PV capacity than in 2019, as developers rush to complete projects before the phaseout of subsidies. Additions in India decline for the second straight year as DISCOMs’ financial health challenges persist and Covid‑19 measures inhibit construction activity. Global distributed PV additions are forecast to be 8% lower in 2020 than in 2019 as the current economic uncertainty shifts the financial priorities of both individuals and small/medium-sized enterprises in some countries. Fewer distributed PV additions in key markets such as the United States, the European Union, India and Japan mark the global trend. Conversely, generous policy incentives drive a residential market boom in China and spur commercial market activity in Brazil despite the pandemic. In the accelerated case, global solar PV additions could be more than 120 GW in 2020, 16% higher than in the main case. China and the United States account for the largest portion of extra accelerated-case capacity because developers in both countries usually commission projects in the last quarter of the year, due to policy schedules. China’s historical last-quarter deployment (which ranges from 7 GW to 15 GW) does, however, introduce a major portion of 2020 PV forecast uncertainty. Another record for global solar PV additions is anticipated for 2021, with nearly 117 GW installed – a nearly 10% rise from 2020. The increase results from a strong rebound in utility-scale plants outside of China, where the phaseout of subsidies curbs PV expansion. Utility-scale project development rebounds in India and key EU markets (France and Germany) to meet auction-commissioning deadlines. With Chinese developers shifting investments from distributed to larger utility-scale projects as subsidies end, distributed PV growth does not fully return to the 2019 level. In 2022, global PV additions continue to expand to almost 120 GW. Although there is uncertainty concerning the new post-subsidy support scheme in China, PV deployment will gain speed in Europe and the United States thanks to increasing competitiveness and continuous policy support.


In the accelerated case, annual additions could reach over 142 GW in 2021 and 149 GW in 2022 with:

  • A smooth policy transition to ensure investor confidence in China.
  • Faster distributed PV recovery in the United States and Europe.
  • Rapid implementation of auctions and grid connections in India and Latin America.
  • Timely commissioning of auctioned capacities in the Middle East and Africa.
  • Elimination of policy uncertainties and administrative challenges in ASEAN countries.

Global annual solar PV additions are expected to accelerate during 2023‑25, owing to faster recovery of distributed PV applications as the global economy improves. Outside of government support schemes, market drivers such as corporate PPAs and bilateral contracts are forecast to support PV expansion globally. Potential in the ASEAN region remains largely untapped due to administrative and regulatory challenges, while the lack of policy certainty and infrastructure is hampering regional growth. Global PV expansion after 2022 is expected to accelerate even more quickly, owing to continuous policy support and cost reductions. The distributed PV segment resumes growth during 2023-25 as global economic recovery supports faster adoption of commercial and residential systems. The higher potential for total PV in the accelerated case compared with the main case is significant, with the possibility of annual capacity additions averaging almost 165 GW during 2023‑25.

PV developers rush to meet subsidy deadlines in 2020

Solar PV capacity additions are expected to increase 33% in 2020 from 2019. China’s PV growth slowed in 2018 and 2019 because the government temporarily froze PV subsidy allocations and announced the transition to competitive auctions in 2018. Growth resumed this year, however, with the commissioning of projects awarded in the country’s competitive auctions held in July 2019 and June 2020 – before all PV subsidies are phased out at the end of 2020 (except for residential applications). Overall, the policy transition to auctions has reduced the appetite for commercial PV applications, which accounted for almost half of PV growth in 2018. Conversely, the popularity of residential PV installations is booming thanks to continuous financial support through the end of 2021. 

China’s PV auction in July 2020 showed clear shift to larger utility-scale projects while prices declined 18% on average

In its second auction in July 2020, China awarded almost 26 GW of solar PV projects – more than in the first one – as the average contract price drop of 18% spurred greater contracted capacity even though the subsidy budget had been cut by half.Two key trends that have emerged from the auction will shape China’s future solar PV market. First, commercial solar PV developers showed limited interest in the auction because the investment priorities of small and medium-sized enterprises have shifted with the Covid‑19 crisis. Second, the competitive process has pushed developers to focus on larger projects in order to benefit from economies of scale and achieve lower bids.In the 2019 auction, projects with a capacity of 1-5 MW accounted for a significant majority of awarded capacity, while the average project size was almost three times higher in the 2020 auction. Projects with winning bids are forecast to come online in 2020 and 2021 while residential solar PV additions are expected to range from 9 GW to 10 GW, almost double the 2019 level, as developers rush to benefit from the generous FiT scheme that will end in 2021. 

After subsidies are phased out in 2020/21 and the 13th Five-Year Plan on Renewables expires, capacity additions in 2022 are expected to decline due to uncertainties over the new policy scheme and targets in the upcoming 14th Five-Year Plan. An emerging development schedule shows plans for a pipeline of “grid parity” projects under 20-year contracts at administratively set provincial power prices. Although the government approved 29 GW of these projects in July 2020, many are expected to be cancelled or postponed due to increasing financing challenges caused by the Covid‑19 crisis and a lack of penalties for non-completion.Beyond 2022, growth in annual additions is projected to resume, averaging 40‑50 GW through 2025. In the absence of subsidies, continuous PV cost declines will remain the key driver for expansion. The large difference between the main and accelerated cases reflects uncertainty over the new policy scheme after the phaseout of subsidies.Although implementation of state-level renewable portfolio standards began this year, the current design provides only limited incentives for solar PV projects, especially rooftop distributed PV. The smooth interaction between newly introduced provincial spot electricity and green certificate markets, along with the implementation of the RPS scheme, will be key for faster solar PV project expansion.Unprecedented US solar PV expansion of almost 17 GW is forecast for 2020, the highest annual increase to date. Growth is mostly in utility-scale projects, with 3.9 GW more additions than in 2019, which will more than offset the decline forecast for the distributed segment.Numerous utility-scale projects were already under development at the beginning of 2020, and construction has continued relatively unaffected by shelter-in-place orders because many states deem construction an essential service. While some developers have reported delays or pauses in construction, newly installed capacity increased 30% from the first to the second quarter of 2020. Growth is expected to remain strong in the second half of the year, as remaining social-distancing measures are assumed to have very little effect on the considerable 13.6 GW under construction.

Covid‑19 disruptions cause a significant slowdown in 2020 PV deployment but a strong rebound is expected in 2021 and 2022

India’s solar PV capacity additions are forecast to be one-third lower in 2020 than in 2019. In the first half of 2020, new PV capacity installations were 70% below average first-half growth of the previous three years. This drop resulted from a combination of Covid‑19-related supply chain disruptions and construction slow-downs, as well as increased macroeconomic risks.Consequently, compared with our previous update in May, this forecast anticipates 19% fewer additions in 2020. A rebound in PV deployment is expected for 2021 and 2022, with capacity additions exceeding the 2019 level as delayed and new projects become operational. 

The Covid‑19 crisis has compromised distribution companies’ (DISCOMs’) financial viability. The financial instability of many DISCOMs leads to delayed payments to generators, decreasing the profitability of existing projects and raising the level of risk perceived by potential developers and financial institutions.According to the Ministry of Power’s annual financial performance ratings, one-third of electricity sales in 2018 came from DISCOMs rated below B+ on a six-grade scale ranging from C to A+. New PV installations in networks managed by utilities with low grades will likely face greater obstacles than those overseen by healthier DISCOMs. In addition, distressed DISCOMs view the development of rooftop PV as an additional challenge, as higher self-consumption reduces revenues from their most profitable commercial customers.Policies to improve DISCOMs’ financial health through the UDAY scheme introduced in 2015 have been only partially successful, and overdue payments to generators began increasing again in 2018. In fact, from January to June 2020, total overdue payments owed by DISCOMs rose 28% for all electricity generators and 10% for renewable electricity plants.In May 2020, India’s government announced an extensive loan programme to reduce overdue amounts owed to generators. Although it is expected to provide important relief to renewable energy developers, a structural solution is needed to ensure the sustainability of DISCOMs to achieve faster PV growth.

Japan’s solar PV market is expected to contract slightly (by 9%) in 2020 compared with 2019. Capacity additions are mostly driven by different commissioning deadlines for FiT-approved PV projects in each of the segments, while the impact of the Covid‑19 crisis on solar PV construction activity has been minimal. 

Utility-scale installations are most affected by commissioning deadlines because many FiT-approved projects need to be commissioned in 2020 and 2021 to maintain the previously agreed prices and support periods, resulting in strong growth in these years. Fewer FiT-based projects in 2022, however, is expected to reduce utility-scale PV additions, with only a minimal contribution from auctions. Auction-based capacity is low relative to new FiT approvals, with previous auction rounds undersubscribed. For commercial solar PV, a rush to complete FiT-approved projects by 2022 due to commissioning deadlines, and additional investment subsidies for PV and storage as part of Covid‑19 stimulus are expected to boost growth over 2020-22. Japanese PV additions are expected to contract starting in 2022, mainly due to phaseout of the generous FiT scheme for large-scale projects and undersubscribed capacity in previous auctions. The government has approved introduction of a FIP scheme for large solar PV projects. The new policy aims to reduce financial burden, encouraging PV plants to participate in electricity markets to facilitate their system integration and providing a stable long-term revenue stream for developers. However, details regarding the maximum size of eligible projects, ceiling price and the competitive selection process have not yet been decided and remain a forecast uncertainty beyond 2022. Smaller commercial installations will continue to be eligible for FiT-based remuneration, but they are likely to face stricter rules such as a self-consumption requirement of at least 30%. Solar PV growth during 2023-25 could be one-fourth higher in the accelerated case, with more attractive FIP remuneration and further cost declines, unlocking of the potential of other revenue streams such as PPAs, and continuation of the FiT scheme for medium-sized commercial installations. Solar PV capacity additions in the ASEAN region are forecast to reach 2.8 GW in 2020, 57% lower than last year when developers in Viet Nam rushed to complete projects before the announced FiT phase-out. In other ASEAN countries, PV development remains slow in 2020 due to limited policy support. From 2021 onwards, however, a decrease in new installations in Viet Nam following its FiT phase-out should be mostly offset by faster growth in other ASEAN countries. Utility-scale projects account for the majority of new additions in the region due to limited support for distributed applications. However, the share of commercial and residential installations in total investments is likely to increase over 2023-25 thanks to an improved regulatory environment and rising economic attractiveness. 

In Viet Nam, PV capacity additions are expected to decline 65% to1.9 GW in 2020 due to phase-out of the generous FiT in June 2019. Although a government decision to extend the commissioning deadline for previously approved projects to the end of 2020 will keep annual additions relatively strong, workforce shortages and supply chain disruptions due to the Covid‑19 crisis – combined with grid connection challenges – could delay the completion of many approved projects to 2021. In addition, transition from the FiT to an auction scheme is expected to further slow annual growth in 2022. Distributed PV deployment should accelerate during the forecast period, stimulated by decreasing costs and new business models, including on-site private PPAs and roof-space renting introduced in 2020.PV additions of just over 3.5 GW are expected in 2020 – over 30% less than in 2019. This decline results mostly from 50% lower utility-scale PV additions, as delays in grid connection approvals and new operational requirements have lowered project outputs, making the business case for multiple PV projects less attractive and reducing investor confidence.In addition, Australia has already met its 2020 Renewable Energy Target, resulting in an oversupply of generation certificates, which reduces revenues and undermines the business case for new developments. Consequently, utility-scale additions are expected to shrink further in 2021 and 2022.

Moderate gains in utility-scale and distributed PV installations will begin in 2023 as both the small- and large-scale certificate programmes continue through 2030, and as improving grid conditions from planned new investments help reduce connection and curtailment challenges. However, with the projected generation target of the LRET programme having been met already, PV projects will have to rely on merchant installations, corporate PPAs or state-level incentives, such as the New South Wales Renewable Energy Zones.

Off-grid solar PV capacity has expanded with government-led rural electrification programmes and the help of development agencies and private firms, while the Covid‑19 crisis has called attention to the urgent need for solutions and capital

Utility-scale solar PV project development in EthiopiaKenyaNigeria and Tanzania requires bilateral agreements with the governments and state-owned utilities through tenders, FiTs or PPAs. However, off-taker risks and administrative challenges have delayed financial close for many projects since 2016. In Ethiopia, land rights issues deter development, and some PV projects have been delayed by up to one year. The latest tenders in 2019 sought to alleviate this risk, with the government providing the land for installations as part of the tender (IJ Global, 2019). Even with the improved tender process, however, current projects are forecast to connect slowly, with just over 170 MW of utility-scale PV added from 2021 to 2022 and only 360 MW added during 2023-25. Further growth is dependent upon timely project implementation and additional tenders. Land rights issues also pose a challenge in Kenya. Even after the signature of PPAs under the FiT scheme, local governments need to approve project development, which increases project risk. Despite developers having announced a large number of projects in Kenya, the long timelines from actual tendering to commissioning means that the country is forecast to only add 120 MW of utility-scale PV from 2021 to 2022 and 280 MW from 2023 to 2025. While the Energy Act of 2019 reaffirmed the FiT policy, uncertainty over its implementation persists.In Nigeria, PPA renegotiations have hindered previously awarded PV projects, raising project risks significantly (PV Magazine, 2019). In addition, financing challenges in Nigeria’s electricity sector hamper the necessary grid expansion required to connect large-scale renewable projects. Given its solar PV potential, sub-Saharan Africa’s renewable capacity expansion could be twice as high, as demonstrated in the accelerated case. This would, however, require countries to implement policies addressing off-taker and land acquisition risks. Timely implementation of announced auctions and faster grid expansion are also needed. Half of the people living in sub-Saharan Africa do not have access to electricity, so off-grid solar PV is expected to improve electricity access throughout the region. The forecast expects over 1 GW of new off-grid PV capacity to come online in the next five years, representing 20% of all PV additions in the region. Capacity expansion is in the form of mini-grids and solar home systems. Prior to the pandemic, government funding and development agency grants financed numerous state-sponsored RFPs for mini-grid solutions to bring power to under-served populations and create critical infrastructure. In addition, decreasing PV system costs have enabled individual consumers to acquire solar home systems to power their homes.The Covid‑19 crisis has served to heightened interest in developing mini-grids, as relief packages have emphasised investing in renewable energy systems and programmes to power health and sanitation infrastructure and to support off-grid electrification for under-served populations.

Source:renewables-2020/solar-pv

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Corporate Renewable PPAs in India:Market & Policy Update January 2021

More and more companies are procuring renewable power for their operations to help manage their electricity costs while contributing to corporate carbon emissions reduction targets. In India, the main drivers for many companies to do so are rising electricity tariffs for commercial and industrial consumers, falling prices for solar photovoltaic (PV)technology and corporate sustainability goals.A frequently used approach for companies to purchase renewable electricity is a corporate renewable power purchase agreement (PPA). A corporate renewable PPA is a contract between a corporate buyer(s) and a power producer (developer, independent power producer, investor) to purchase renewable electricity at a pre- agreed price for a pre-agreed period. Corporate renewable PPAs have become increasingly varied and innovative and are now a widely used approach worldwide – companies had signed over 70 GW of capacity globally as of the end of November 2020, compared to just 300 MW in 2009.India has also seen impressive growth in corporate renewable sourcing. According to Bloomberg New Energy Finance (BNEF), India was the second largest growth market for corporate renewable PPAs after the US in 2019, with an addition of 1.4 GW of capacity. However, in 2020, India witnessed a significant slowdown in corporate renewable PPA activity, primarily due to regulatory changes and exacerbated by the COVID-19 pandemic.

This third market and policy update for corporate renewable PPAs in India provides readers with a renewed overview of market trends, policies and regulations from 2020, as well as an outlook for 2021. It finds that due to falling technology costs, corporate renewable PPAs in India are economically viable without government waivers on open access charges. Despite this, additional signed corporate renewable PPA capacity in India fell to 800 MW in 2020 (compared to 1.4 GW in 2019). This is due to two factors that posed new challenges for corporate renewable PPAs in 2020:

  • New restrictions at state-level, including limiting banking provisions for power, reversing open access project approvals and imposing additional open access charges.
  • The COVID-19 pandemic, which resulted in paused PPA negotiations, delayed permit approvals due to restricted site access and suspended project construction due to labor and equipment shortages.

Market trends

INTERNATIONAL CONTEXT Corporate renewable PPA uptake is growing around the world at a remarkable rate. According to BNEF, more than 100 companies in 23 different countries signed 19.5 GW of PPAs in 2019.1 This capacity addition is around 6 GW higher than in 2018 and has tripled since 2017. And 2020 is set to be another record-breaking year – for the first 11 months of the year, companies signed 17.9 GW of corporate renewable PPAs globally, outpacing PPA capacity signed in the previous year during the same period (as shown in figure 1).2 Decreasing renewable generation technology costs and growing awareness of corporate renewable PPAs among both corporate buyers and developers are driving this trend.

Annual global signed corporate renewable PPA capacity

Annual India corporate renewable PPA capacity additions

Looking at the breakdown across states, Gujarat is the only state to have increased installation capacity from corporate renewable PPAs in 2020 (January – November), as shown in figure 3. With the addition of December 2020 numbers, Tamil Nadu, Karnataka and Rajasthan may also show a year-on-year capacity increase.

Companies procuring renewable power through corporate renewable PPAs in India (April 2019 – August 2020)

In terms of sectors, construction, infrastructure, automotive and textile companies have been the leading consumer segments, procuring more than 165 MW of renewable power through PPAs in India between April 2019 and August 2020, as shown in figure 5. During this period, corporate buyers Grasim Industries, Ultratech Cement, Cargill and Apollo Tyres procured the most renewable capacity through corporate renewable PPAs in the country. Several evolving market dynamics are impacting the capacity trends outlined in the previous section. From a regulatory perspective, the reversal of DISCOM approvals for open access projects in Haryana and the imposition of additional surcharges on group captive models are developments that are limiting the uptake of corporate renewable PPAs in India.

Policy and regulatory updates

the uptake of corporate renewable PPAs in India is highly dependent on policies and the regulatory environment at both the national and state levels. In december 2019, Re100 companies cited India as the sixth most challenging market for corporate sourcing of renewables.8 Companies reported the main barriers to be a fragmented policy and regulatory framework that differs from state to state, and uncertain charges and taxes on the procurement of renewable power. Over the past year, state-level regulatory hurdles have negatively impacted the corporate renewable PPA market, including backtracking on previously provided waivers and approvals, new restrictions on power banking provisions, the levying of additional surcharges on captive and group captive renewable energy projects and limiting net metering regulations to only residential consumers. At the national level, the government is trying in bring in electricity reforms through its draft National Electricity Amendment
Bill and through the privatization of DISCOMs that are loss-making, as well as by reducing exposure to imports and focusing on domestic manufacturing as part of its Make in India initiative.

Cross-subsidy surcharge trend from FY 2016-17 to FY 2020-21

DISCOM losses in India are significant and have increased from Rs 338.94 billion in financial year 2016-17, to Rs 496.23 billion in financial year 2018-19. The government has taken various measures in the past to address this. However, these have not generated substantial results to date. The privatization of DISCOMs is now under discussion, with C&I consumers poised to be one of the most impacted beneficiaries of this move. In September 2020, the Ministry of Power issued draft Standard Bidding Documents (SBD) for the privatization of DISCOMs across all states and Union Territories (UTs). The first-of-its- kind draft SBD was prepared with the objective of enhancing the operations and finances of India’s loss-making DISCOMs. Along with the government’s target to complete the privatization of DISCOMs in UTs by January 2021, there are also efforts to encourage this process in states such as Uttar Pradesh, Haryana, Gujarat, Karnataka and Assam.

Viability of third-party sale and group captive models by state

Outlook for corporate renewable PPAs

Going forward, there is likely to be a spur in demand for corporate renewable PPAs due to increased corporate sustainability ambitions and action by leading corporate buyers in India. The number of RE100 member companies with electricity loads in India continues to grow: 74 RE100 members report operations in India as of December 2020 and their average renewable electricity share has increased from 32% in 2018 to 39% in 2020. Various developers have entered the open access segment and are planning substantial additional capacity development in the coming years:

  • CleanMax: 200 MW of planned capacity in Karnataka, Gujarat and Haryana.
  • AMP Energy: 400 MW of planned capacity in Uttar Pradesh and Rajasthan.
  • Enrich Energy: 150 MW of open access solar projects in Maharashtra.

Amplus Solar: 75 MW of planned capacity in Haryana, despite regulatory setbacks in the state. Based on this pipeline, JMK Research estimates that in next 12-18 months, companies will likely commission more than 1 GW of new open access offsite renewable electricity projects in India. The country is likely to see another 500-550 MW added under onsite rooftop OPEX models. As a result, capacity additions in 2021 in India are likely to achieve similar or could even surpass volumes observed in 2019.

To meet this growing demand and the diverse needs of corporate buyers considering PPAs, we expect alternative corporate renewable PPA structures to gain interest in India, in addition to increased uptake of rooftop solar PPAs, hybrid PPAs and GTAM. We outline three examples of alternative structures below: virtual PPAs, interstate PPAs, and round-the-clock PPAs. In a virtual PPA (VPPA), the corporate buyer agrees to purchase renewable power through a corporate PPA, without physical delivery of electricity and therefore without sleeving or transmission fees. VPPAs are more flexible in their structure than physical PPAs as the corporate buyer and power producer do not have to be connected to the same electricity network. VPPAs are most common in liberalized power markets.The financial settlement of a VPPA has four steps: (1) the corporate buyer and power producer agree to a PPA price; (2) the power producer delivers the renewable electricity to the grid and receives the variable market price; (3) the power producer and corporate buyer settle the difference between the agreed PPA price and variable market price; and (4) the corporate buyer continues to purchase its electricity at the variable market price, which the VPPA now hedges (see figure 15). To our knowledge, corporate buyers have not yet signed any VPPAs in India to date, due in part to unfamiliarity with the structure and in part to low liquidity in the Indian power market. However, some large-scale corporate buyers are now considering this contract structure, particularly those who have already implemented conventional rooftop solar, group captive or third-party sale structures and who are looking to raise their ambition to reach 100% renewable power. VPPAs may also be attractive for those looking for shorter contract terms in India (e.g., <10 years) to reduce tenor risk.

Structure of a VPPA

Another emerging option that corporate buyers are exploring is the inter-state PPA. Under this structure, a corporate buyer can use the group captive model to build its own renewable power plant in a preferred state to meet its electricity demand in another state. To date all corporate renewable PPAs signed in India have been in-state, i.e., where renewable electricity generation and consumption take place within a single state.The inter-state structure is similar to the growing trend in Europe of cross-border or pan-European PPAs, where a PPA signed with a renewable project in one or more countries covers electricity demand in another country or in several countries. This allows the corporate buyer to simplify renewable electricity purchasing by covering many loads across different countries, as well as choosing the renewable project with the most advantageous conditions (in terms of electricity price and production). For the inter-state model to work in India, the parties to the PPA will need to engage with the respective DISCOMs in both states. Once corporate buyers have signed and proven the first project, we expect this model to gain popularity quickly, particularly in states with high policy incentives. In May 2020, the first utility-scale round-the-clock (RTC) renewable electricity and storage PPA tender was awarded. This tender specified for the first time an average monthly capacity utilization factor (CUF) of 70% and an annual CUF of 80% (previous tenders had been in the range of 18-22% for solar, 20-25% for wind and 30-40% for wind and solar hybrid power plants). This is an important development for India’s renewable power sector, as, if developed at scale, this model can help to stabilize variable generation from renewable power sources to contribute to grid stability. It is too early to say when it may become cost-effective to apply the utility-scale RTC PPA structure to corporate PPAs. In the meantime, we are seeing increased interest from corporate buyers in battery storage projects to enable them to increase the renewable portion of their electricity consumption.

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India Energy Outlook 2021

India has seen extraordinary successes in its recent energy development, but many challenges remain, and the Covid‐19 pandemic has been a major disruption. In recent years, India has brought electricity connections to hundreds of millions of its citizens; promoted the adoption of highly‐efficient LED lighting by most households; and prompted a massive expansion in renewable sources of energy, led by solar power. The gains for Indian citizens and their quality of life have been tangible. However, the Covid‐19 crisis has complicated efforts to resolve other pressing problems. These include a lack of reliable electricity supply for many consumers; a continued reliance on solid biomass, mainly firewood, as a cooking fuel for some 660 million people; financially ailing electricity distribution companies, and air quality that has made Indian cities among the most polluted in the world.India is a major force in the global energy economy. Energy consumption has more than doubled since 2000, propelled upwards by a growing population – soon to be the world’s largest – and a period of rapid economic growth. Near‐universal household access to electricity was achieved in 2019, meaning that over 900 million citizens have gained an electrical connection in less than two decades.The Covid‐19 pandemic has disrupted India’s energy use; our updated assessment shows an estimated fall of about 5% in the country’s energy demand in 2020 due to lockdowns and related restrictions, with coal and oil use suffering the biggest falls. The pandemic has also hit investment in the energy sector, which fell by an estimated 15% in 2020, exacerbating financial strains across the board, in particular among India’s electricity distribution companies. How long the impacts last will depend on how quickly the spread of the virus is brought under control, and on the policy responses and recovery strategies that are put in place.

Over 80% of India’s energy needs are met by three fuels: coal, oil and solid biomass. Coal has underpinned the expansion of electricity generation and industry, and remains the largest single fuel in the energy mix. Oil consumption and imports have grown rapidly on account of rising vehicle ownership and road transport use. Biomass, primarily fuelwood, makes up a declining share of the energy mix, but is still widely used as a cooking fuel. Despite recent success in expanding coverage of LPG in rural areas, 660 million Indians have not fully switched to modern, clean cooking fuels or technologies.The Sustainable Development Scenario (SDS) takes a different approach, working backwards from specific international climate, clean air and energy access goals, including the Paris Agreement, and examining what combination of actions would be necessary to achieve them.

Introducing the India special focus

It has been six years since the International Energy Agency (IEA) last completed a special focus on India in its World Energy Outlook series. This new report updates and expands the analysis of India, and it does so from the exceptional starting point of 2020. Many things have changed in India and in global energy since the last India Energy Outlook was published, but the Covid‐19 pandemic has caused more disruption to the energy sector than any other event in recent history. The impacts will continue to be felt, in India and around the world, for years to come.However, while the pandemic affects the new Outlook in numerous ways, it does not alter the fundamental considerations underpinning this special focus on India. The potential for growth in energy demand and energy infrastructure in India remains enormous. How these needs are met will have a crucial impact on the aspirations of what will soon become the world’s most populous country. It will also have a huge influence on global trends, including the prospects for a successful global response to climate change.Since 2000, India has been responsible for more than 10% of the increase in global energy demand. On a per capita basis, energy demand in India has grown by more than 60% since 2000, although there are widespread differences across different parts of the country as well as across socio‐economic groups. On a range of economic and energy‐related indicators, India has been catching up with the rest of the world in recent years (Figure 1.2). Coal demand per capita increased from 25% of the world average in 1990 to 60% in 2019 and, mainly for this reason, carbon dioxide (CO2) emissions per capita increased from a little over 15% of the world average to a little under 40% over this period.

India is characterised by the co‐existence of shortage and abundance in several parts of its energy system. India possesses the world’s fifth‐largest coal reserves, but nonetheless is one of the world’s major coal importers. India is a major centre for global oil refining, but relies overwhelmingly on imported crude. Many consumers face unreliable electricity supply, and there are significant commercial and technical losses at the distribution level, but in aggregate there is currently a surplus of generation capacity over demand. There is significant potential consumer demand for liquefied natural gas (LNG), but this cannot always be met because of infrastructure bottlenecks and pricing constraints.The choice of per capita or absolute values for India makes a big difference in the way India looks in energy terms. The absolute values are large and growing, while per capita values remain low by international standards. Despite India being one of the world’s largest energy users, Indians on average still consume significantly less than their counterparts elsewhere in the world, and much less than in advanced economies. India’s annual CO2 emissions are now the third‐highest in the world, but barely make the top 100 as measured by emissions per capita, and are lower still if historical emissions per capita are considered.

Mapping India’s energy system

India’s energy needs are largely met by three fuels – coal, oil and biomass. These sources have, in aggregate, consistently met over 80% of India’s total energy demand since 1990. Coal has strengthened its role as the dominant energy source, maintaining its strong position in power generation as well as being the fuel of choice for many industries (especially heavy industries such as iron and steel). Coal demand nearly tripled between 2000 and 2019, accounting for half of primary energy demand growth. Today, coal meets 44% of India’s primary energy demand, up from 33% in 2000. Coal has played a significant role in India’s economic development while also contributing to air pollution and growing GHG emissions.Traditional biomass – primarily fuelwood but also animal waste and charcoal – was the largest energy source in India in 2000 after coal, constituting about one‐fourth of the primary energy mix. Overall energy demand has doubled since then, but the share of traditional biomass in the energy mix has been decreasing: it fell to 12% in 2019, largely as a result of efforts to improve access to modern cooking fuels, in particular LPG.

Electricity consumption has nearly tripled over the past two decades – growing faster than total energy demand – as urbanisation and rising incomes push up the use of household appliances. Industry has also contributed to the increase in electricity demand through its increasing use of electrical motors and other machinery. On the supply side, coal remains the predominant force in the power sector, contributing over 70% of total generation in 2019. Solar PV and wind accounted for 18% of the capacity mix in 2019, but their combined share of generation was less than 10%.

The rapid growth of mobility has been enabled by the expanding road network in India, which increased from 3.3 million km in 2000 to 5.9 million km in 2016 (MoRTH, 2019). India’s total road network is now the second‐largest in the world, behind the United States.Indians are also travelling on rail twice the distance they did in 2000. India’s per capita distance travelled on rail increased from 430 km in 2000 to nearly 860 km in 2019 (Figure 1.11). With over 8 billion trips annually, rail continues to be one of India’s most preferred ways to travel (Ministry of Railways, 2019). Freight activity similarly more than doubled on India’s vast railway network, reaching 740 billion tonne kilometres (tkm) in 2018, although the share of freight that moves on railways has been falling.

While air travel remains out of reach for most Indians, there has been a steady growth in India’s aviation industry over the past decade. The per capita distance flown in India was 110 km in 2019, which is three times as much as 10 years ago. Domestic passenger numbers, too, have nearly tripled in the last decade to over 140 million, up from around 50 million in 2010 (DGCA, 2019). There has been an increase in short‐distance flights in recent years, enabled by policies that have supported the development of small airports and made flying more affordable. India has added 50 domestic airports in the past five years, taking the total to about 150 airports with commercial operations.

Number of clean air days in India, 2019

Notes: Clean air days are defined as days where the 24‐hour average of fine particulate matter (PM2.5) was lower than the CPCB safe limit of 60 microgrammes per cubic metre. This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Source: Blue Sky Analytics (2020).

Economic and population growth

Alongside energy policies, the other principal determinants of energy demand growth in our scenarios are the rates at which economic activity and population are assumed to grow. 1 These indicators are naturally subject to a wide level of uncertainty, which has been exacerbated – particularly for the economy – by the effects of the Covid‐19 pandemic. With this in mind, this India Energy Outlook considers multiple possible trajectories for future growth in India’s GDP.After an unprecedented drop of around 8% in economic output in 2020, uncertainties over employment and strains to balance sheets and household finances are feeding through into constrained investment, despite government attempts to stimulate activity and limit the economic damage (see section 1.3.1). Against this backdrop, the near‐term shape of the economic recovery is closely tied to success in tackling the spread of the virus. However, the longer‐term outlook also depends on building out India’s physical and social infrastructure (a major focus for India’s stimulus spending), as well as on progress in tackling structural challenges affecting investment such as complicated permitting processes, tax arrangements and land acquisition processes.

Our baseline assumption in the STEPS and in the SDS is that the pandemic is gradually brought under control in the course of 2021, allowing for a steady but far from V‐shaped recovery in economic activity. In these scenarios, the supply side effects of the pandemic are significant, but are limited by the relatively short duration of the crisis together with effective policy responses, and the trend rate for growth in Indian GDP post‐2022 moves back towards the level assumed before the crisis. The Indian economy is nonetheless smaller in 2040 than it was in the same scenarios in the WEO 2019.In the IVC, a swift and effective recovery from the effects of Covid‐19 is accompanied by a range of structural reforms that allow India to recover the lost ground in full and raise its long‐term growth potential. In this case, India becomes a $5 trillion economy before the end of the decade, somewhat later than targeted by the Indian government. Conversely, the DRS illustrates the risks arising from a prolonged pandemic. In this scenario, unemployment and fragile finances hit demand and investment across the entire economy, and rising debts limit the scope and effectiveness of government action.

Battery storage systems and DSR also look set to be essential parts of the flexibility portfolio. Battery storage systems are well‐suited to the emerging need to shift solar PV output by several hours, from the middle of the day to evening peak demand, in order to better meet demand. By 2030, the STEPS sees nearly 35 GW of battery capacity. DSR, including the shifting of agricultural pumping and cooling loads, can likewise provide flexibility without compromising energy services to consumers by moving demand to times of the day with plentiful supply. Adapting regulation to permit the aggregation of loads could significantly expand DSR availability by enabling residential, agricultural, and smaller commercial and industrial customers to bring their DSR resources to a wide range of potential markets (IEA, 2018), especially since such smaller loads in buildings and agriculture represent the lion’s share of DSR potential in India. Tariff design could also facilitate DSR uptake among electricity users; switching to time‐of‐use pricing, or perhaps even real‐time pricing, would provide the necessary price signals to consumers to expand DSR from periodic load shedding in times of system stress to more regular load shifting (IEA, 2019).

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Renewable Energy Toolkit

FOREWORD

Shri Rajiv Pratap Rudy Minister of State Skill Devel- opment and Entrepreneurship
(IndependentCharge), Gov- ernment of India and Chair- person Climate Parliament India.

After the ratification of the Paris Climate Agreement, we have observed great global political will and momentum in dealing with challenges of climate change. India is taking global leadership by working to reduce the risk and impact of climate change and moving towards a resilient, low-carbon future. Recently at the COP22 in Marrakech, over 20 countries have become signatories to the framework agreement of the international Solar Alliance (ISA) -an initiative that is the brainchild of the Indian government. Energy access and energy security are two major challenges that our country is dealing with, along with climate change. The need of the hour is to follow up on our commitments, by creating a low carbon impetus solution for addressing all these issues. Decentralized renewable energy systems and solar applications are particularly relevant in the Indian context. Thus, we should make an effort towards scaling up renewable energy applications and en- sure the faster dissemination of other low carbon technologies.

RENEWABLE ENERGY OVERVIEW

The critical nature of climate change has brought 196 countries to form an international agreement in Paris in 2015. The agreement targets to limit the global average temperature rise to 2 °C at least. Renewable energy technologies have been considered to be instrumental in this pursuit. Renewable energy technologies generating energy from naturally abundant sources like solar, wind, hydro and biomass, among others have the capability to replace conventional fossil fuels like coal and petroleum and in turn stop the growth of CO2 emissions – one of the main causes of climate change.

Renewable energy sector has emerged as a major stakeholder in the power generation scenario in India. Government of India has been adopting favourable policies and programmes for sustainable growth of renewable energy sector with a goal to achieve energy security and providing clean energy access to a large part of its population living in remote and difficult terrain. In 2015- 16, India added 7100 MW of renewable energy capacity and in 2016-17 it has added 4925.26 MW (between April to January 2016). Today the total installed capacity stands at 52192.8 MW. The Ministry of New and Renewable Energy (MNRE), Government of India has been successful in positioning India as world’s renewable energy leader through its ambitious and consistent policy sup- port. In 2014, Government of India announced a domestic target of 175 GW of installed renewable energy capacity by 2022. This target would be a crucial stepping-stone for achieving 2030 target. Inter- nationally at the Paris Climate Agreement in 2015, India in its Intended Nationally Deter- mined Contributions (INDC’s) has pledged to reduce carbon intensity of its GDP by 33 to 35 % from 2005 levels by 2030. It has committed to achieve 40 % cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030. With such high targets, REN21 Global Status Report 2016 listed India among the top five countries for investment in renewable power projects after China, the USA, Japan and the UK. InIndia also launched the International Solar Alliance (ISA) in 2015, to promote growth and development of solar power internationally in over 120 countries. Headquartered at India, ISA was conceived as a coalition of solar resource rich countries to address their special energy needs and provide a platform to collabo- rate on addressing the identi- fied gaps through a common agreed approach.

SOLAR LANTERNS

BENEFITS AND POTENTIAL APPLICATION:A Solar lantern is a simple application of SPV technology, found applicable in rural regions with irregular and scarce power supply. In urban areas, it’s prefer alternative during power cuts, because of its simple mechanism. A solar lantern is suitable for indoor as well as outdoor lighting, and it can save 3-5 litres of kerosene per month.

SOLAR PV ROOFTOP SYSTEMS FOR ENERGY SAVINGS/POWER BACKUP

BENEFITS AND POTENTIAL APPLICATION:The main advantages are reduced dependence on diesel generators, and lesser power interruptions. Standalone PV system or Inverter system with solar PV charging could be an attractive option for reliable lighting or a standby power supply system during the load shedding hours in urban areas as well as in rural areas.

SOLAR WATER PUMPING SYSTEMS FOR IRRIGATION & VILLAGE WATER SUPPLY

BENEFITS AND POTENTIAL APPLICATION: Farmers use diesel pump sets as a substitute to grid. This costly and environmental hazard- ous. Solar pumping system is an alternative to irrigational and drinking water requirements in such areas.

PREPARING A MASTER PLAN

Implementation of Renewable Energy (RE) and Energy Efficiency (EE) programs and projects at local level can contribute substantially towards clean energy access, job creation, overall development and welfare of a region, district, urban or rural area (village). District authority, municipality and Panchayat can take a range of initiatives and adopt byelaws for using renewable energy and implement energy efficiency measures. The aim of preparing a master plan is to use different renewable energy technologies that are relevant and techno economically feasible to support developmental activities in the area under consideration. The master plan should provide analysis of availability and intensity of renewable energy resources like solar, wind, hydro, biomass, biogas and waste in the district and subsequently it delineates the viable renewable energy technology interventions for the area. Different technology options should be presented based on economic assessment and financial viability to meet required demand in different sectors.

WASTE TO ENERGY

Municipal solid waste and liquid waste water (untreated sewage) can be used to generate energy. A city may assess the feasibility of us- ing a suitable quality of municipal solid waste for producing fuel or for producing electricity through the bio-methanation process. Assessment of the solid waste to energy potential should particularly consider the moisture content, inert content and calorific value of the waste. Liquid waste water should also be treated as a resource for producing energy through the process of bio-methanation. The quantity of biodegradable volatile solids in the waste water available for bio methanation is the primary limiting factor for the production of methane and subsequent conversion to power.

There are different steps and methods to co- vert solid waste into fuel / energy/ resource/ recycle and there are number of projects successfully being operated in many cities around the world. However, it is essential to segregate the MSW into different categories before converting them into different useful constituents. The flow chart below portrays various steps and processes to convert MSW into different useful elements.

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WHY WE’RE ALL TO BLAME FOR CHINA AND INDIA’S ‘FILTHY’ CO2 EMISSIONS

It feels as though every time there’s a new study about the US or EU needing to reduce carbon emissions, there’s a voice which pops up and asks ‘but what about India and China?!’

From anonymous accounts on social media to global leaders, pointing the finger at these two particular nations has become a common retort when discussing the need for climate action. During the second US presidential debate last year, Donald Trump was challenged over his decision to leave the Paris Agreement. He responded by declaring, “Look at China, how filthy it is! Look at Russia, look at India – it’s filthy! The air is filthy!”Though Trump has long complained about India and China’s carbon emission levels, he’s not the only one peddling this rhetoric. In February 2020, Canadian politician Peter MacKay said “we’re not the problem,” before going on to suggest that if the entirety of Canada stopped using electricity and driving, it wouldn’t make any difference to global emissions.

OUTSOURCING WESTERN EMISSIONS

When a country’s carbon emissions are calculated, only carbon emitted within that country is typically counted. These are known as ‘territorial emissions.’ On the surface that seems like a logical way of tallying things up, but in reality it distorts the truth. Countries in the Global North, the USA, UK, Japan, France and Germany in particular, are increasingly outsourcing key parts of their industrial processes. Consider how many items you own which say ‘Made in China’ or clothes you’ve bought which were manufactured in India; the emissions involved in those products’ creation would have been counted as China and India’s responsibility.

In 2012, China emitted 1.6 billion tonnes of carbon dioxide making products which were exported elsewhere. That’s around 16 per cent of the country’s total, according to the Global Carbon Atlas. Steel production, for example, specifically accounts for around 10 per cent of China’s CO2 emissions. That’s a significant contributor, but perhaps less surprising when you learn that half the world’s supply of steel is manufactured in China. Out of more populous countries, it’s Australia and the US which are out in front, producing 16.88 tonnes and 16.16 tonnes of CO2 per person respectively in 2017. That’s significantly above the global average of 4.8 tonnes per capita. China, on the other hand, generated just 6.86 tonnes per person and India only 1.84 tonnes.

India in particular gets unfairly tarred by the rhetoric around carbon emissions. According to Climate Action Tracker, India is one of just five countries (and the only G20 nation) with policies compatible with the Paris Accord target. “India has reduced its emission intensity by 21 percent over 2005 levels,” said Modi. “Our renewable energy capacity is the fourth largest in the world. It will reach 175 gigawatts before 2022.” It’s also important to note that China and India, of course, have the two biggest populations in the world. In fact more than a third of the entire planet (36 per cent) lives in those two countries combined. Given that the two nations produce 35 per cent of CO2 emissions, it’s clear that by capita, the responsibility is lower – even without adjusting for consumption-based emissions. In fact, when you look at per capita emissions worldwide, China and India are both well down the list.

The worst offenders are, perhaps unsurprisingly, major oil producers like Qatar, Kuwait, and the UAE. Out of more populous countries, it’s Australia and the US which are out in front, producing 16.88 tonnes and 16.16 tonnes of CO2 per person respectively in 2017. That’s significantly above the global average of 4.8 tonnes per capita. China, on the other hand, generated just 6.86 tonnes per person and India only 1.84 tonnes.

India in particular gets unfairly tarred by the rhetoric around carbon emissions. According to Climate Action Tracker, India is one of just five countries (and the only G20 nation) with policies compatible with the Paris Accord target. Wind power has been a major focus for the country, which, as of September last year, had reached 38 gigawatts of wind power capacity. That places India as fourth in the world, behind China, the US, and Germany. Currently nearly 40 per cent of India’s electricity comes from renewable sources, and though 2020 put the country’s transition to clean energy on hold, it’s still moving in the right direction. Indian Prime Minister Narendra Modi said at a UN Climate event last December that he believed his country would likely exceed the Paris Agreement goals. “India has reduced its emission intensity by 21 percent over 2005 levels,” said Modi. “Our renewable energy capacity is the fourth largest in the world. It will reach 175 gigawatts before 2022.”

In both China and India grassroots environmental movements are also gaining impressive traction. But these victories are often omitted from the narratives being expressed about both countries.

Source: Euro News

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Renewable Energy Policies in a Time of Transition

ABOUT IRENA
The International Renewable Energy Agency (IRENA) is an intergovernmental or ganisation that supports countries in their transition to a sustainable energy future, and serves as the principal platform for international co-operation, a centre of excellence, and a repository of policy, technology, resource and financial knowledge on renewable energy. IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy, in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity.

Renewable energy targets, which serve as a principal way for public and private actors to demonstrate a commitment to the energy transition, range from official government announcements to codified plans with fully developed metrics and compliance measures. Targets also vary in focus, from a single technology or sector to economy-wide. By the end of 2016, at least 176 countries had targets for renewable energy. At least 150 countries had adopted targets relating to the share of energy from renewables
in power; at least 47 countries had renewables targets in place for heating and cooling; and at least 41 countries had targets for transport.

POLICIES FOR SOLAR WATER HEATERS
Demand for hot water in buildings is an important driver of growth in the demand for energy in emerging economies. In these countries, hot water is often produced with inefficient electric immersion heaters, which can contribute to electricity shortages
and blackouts. Because many of them have excellent potential for solar energy, solar thermal water heaters offer a good alternative; several countries have already enacted policies to promote them. Solar thermal growth has been particularly impressive in China (Figure 2.5), driven by ambitious solar thermal targets and low prices for the systems. The country’s 12th Five-Year Plan (2011- 15) had a target of reaching 400 million m2 of solar water collector surface, which it exceeded by 10%. A total of 800 million m2 is planned for installation during the 13th Five-Year Plan period.

Renewable energy solutions for transport range from liquid biofuels, biomethane, renewable electricity, and renewable electricity-derived hydrogen, to ammonia and synthetic fuels (power-to-X or P2X). Some of these energy carriers can be used in conventional vehicles (internal combustion engines), whereas others require the use of
alternative vehicles (Figure 3.4). Fuels and vehicle technologies vary greatly in terms of their technical maturity and level of sustainability (AFDC, 2018a).

The air quality benefits from biofuels relative to fossil fuels vary according to fuel used and vehicle type; however, analysis indicates biofuels can reduce carbon monoxide, hydrocarbons and particulate matter emissions. A modal switch from internal combustion vehicles to electric vehicles cuts tailpipe emissions, resulting in improved local air quality, especially in urban environments, apart from the benefits of using electricity produced by renewable sources to fuel vehicles.

The potential of auctions to discover real prices has been a major motivation for their adoption worldwide. As Figure 4.7 illustrates, the price results of solar and wind auctions have gradually decreased in recent years. In 2016, solar energy was contracted at a global average price of USD 50/megawatt hour (MWh), a striking difference from 2010’s average price of almost USD 250/MWh. Wind prices also fell in the same period, albeit at a slower pace (since the technology was more mature than solar in 2010). The average price in 2016 was USD 40/MWh, down from USD 80/MWh in 2010. Even auctions for other renewable technologies attracted investment in 2016. Examples include auctions for offshore wind in Denmark, Germany and the Netherlands; for bioenergy capacity in Argentina and Peru; and for solar thermal power in Dubai (IRENA, 2017b).

Where the goal is expanding energy access to rural communities, decentralised solutions feature lower costs and shorter wait times compared with grid extension. In this context, many countries are prioritising renewable decentralised technologies to meet energy access and broader goals. Energy access strategies can also be designed to address key barriers to successful renewable deployment in off-grid settings. Such barriers include financial constraints, lack of trust in renewable technologies and sustainability issues related to long-term operation and maintenance of renewable systems.

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