FROM THE DESK OF DIRECTOR GENERAL
In India, there is the will to move away from fossil fuels as much and as early as possible. This is clear from the announcements made by Prime Minister, Shri Narendra Modi, at COP26 in Glasgow in November 2021. Today, greenhouse gas emissions have become central to any discussion on energy ystem choices. Technological progress has brought to the fore a growing number of technologies that can be adopted at a commercial scale. Furthermore, there is urgent need to eliminate the dependence on fossil fuels. We are pitching for energy transition in international forums and displaying that intent in our domestic policies. India has aimed high, decarbonizing 50% of its energy by 2030. Innovative policies to avoid dependency on fossil fuels and ensure long-term sustainability are required. In addition to this, investment in R&D has to be scaled up. Domestic manufacturing also needs appropriate incentives to become Aatma Nirbhar Bharat.

PREFACE
The electricity sector in India has undergone rapid transformation in recent decades. The country has successfully electrified all households. There is adequate power generating capacity whose optimal utilization is facilitated by an integrated national grid. The per capita electricity consumption in India stands at 1208 kWh up from 559 kWh in 2001This would increase at least three times as India’s economic development gathers greater momentum and living standards of its citizens rise in the coming decades. Reliable, affordable, quality, round-the-clock power supply to all is the goal to be achieved in the next few years.

EXECUTIVE SUMMARY
The highly ambitious goals announced at COP26, Glasgow of having 500 GW of non-fossil fuel capacity and meeting 50% of energy requirements from renewables by 2030 are achievable. However, this would be very challenging. It may well turn out to be a lower cost pathway for meeting growing energy demand and thus, serving the socio-economic imperatives of a developing country. The pace of installation of renewables, which has been high, would have to be accelerated very rapidly. Larger shares of variable renewable energy (VRE) need greater flexibility and resilience in grid management, creation of large-scale storage would be essential for providing this resilience and also for fully utilizing the huge increase in solar power generation. Fortunately, solar power with storage has now become cheaper than electricity from new thermal power plants.

INDIA’S NEW 2030 DECARBONIZATION TARGETS

India has continued to demonstrate climate leadership and a firm commitment for achieving the clean energy transition. At COP26 in Glasgow, the Prime Minister of India announced the five nectar elements or Panchamrit—The Gift of Five Elixirs.The four targets to be achieved by the year 2030 included the following:

-India will reach its non-fossil energy capacity to 500 GW by 2030.

-India will meet 50% of its energy requirements from renewable energy by 2030.

-India will reduce the total projected carbon emissions by one billion tonnes from now onwards till 2030.

-By 2030, India will reduce the carbon intensity of its economy by less than 45%.
The fifth target announced at COP26 is India’s commitment to net-zero by 2070.

India’s climate ambition has increased substantially from Paris (COP21) to Glasgow (COP26). A snapshot of India’s commitments at COP21 and COP26 is given in Figure 1.

Achieving these ambitious commitments would need deep decarbonization efforts on a gigantic scale. In order to reach India’s new 2030 targets, the country would require the installation of an additional 340 GW of non-fossil fuel energy capacity in this decade. India has witnessed the fastest growth rate in renewable energy capacity addition amongst all large major economies in the last seven years.5
It will need to upscale capacity addition of renewables significantly at an average of approximately 40–43 GW of non-fossil fuel energy capacity per year.

GROWTH OF RENEWABLES

Renewable energy capacity in India is now over 100 GW. It has grown rapidly in the last decade. This growth has given confidence to all stakeholders. It has been achieved by smart policies. Capacities have been created by private investors and developers in a competitive industry structure. India has been able to take full advantage of the global decline in costs of renewables, which has been phenomenal. Figure 2 shows the growth of RE capacity in the country over the last two decades.

After the start of the National Solar Mission in 2010, growth has been accelerating especially after India’s NDC commitments at Paris. The renewable capacity in India has grown at a CAGR of 10% in the last five years and over 20% during the last decade. Renewable energy generation costs have fallen sharply over the past decade in the world. This has been the result of remarkable progress in manufacturing technologies, economies of scale, competitive supply chains and greater developer experience (IRENA, 2020). Solar and wind power have transitioned from being an expensive niche, to
becoming the cheapest source of electricity when the sun shines or the wind blows. Figure 3 depicts the global decline in levelized costs of electricity (LCOE) from utility scale solar and wind power technologies from 2009 to 2019. There is now a clear commercial case in favour of renewables. For the first time, there is the fortunate convergence between what is the least cost option for meeting growing electricity needs and what is best for rapid decarbonization of the electricity system. In this section, we examine the trajectory of this remarkable growth of renewables and the policies that were adopted
and which made this growth possible.

Wind Power
Indian wind industry has achieved remarkable growth through private sector investments from as early as the mid-1990s. This growth was triggered by incentives, fiscal as well as non-fiscal. India was also able to develop a globally competitive wind power manufacturing industry, which was facilitated by the growing domestic market. Table 1 provides the growth of wind power capacity in the country during the last decade.

The initial fiscal incentive of accelerated depreciation provided by the central government and the provision of the banking mechanism by the state governments made private investment in captive wind farms attractive in the states where there was good wind potential. These two mechanisms propelled the growth of wind sector in the country. Wind power tariffs declined as the investments scaled up. Figure 4 depicts the declining trends of wind power tariffs from 2011 to 2022.

Accelerated Depreciation
Accelerated depreciation was introduced as a tax saving mechanism in 1994 for wind energy projects with a depreciation rate of 100%. It did not provide direct financial assistance to wind power projects but gave huge post-tax benefits to the investor. The mechanism attracted investments from high net worth individuals (HNIs), corporations, and smalland medium-sized enterprises (Chaurasiya, et al., 2019). Private sector investment in captive wind farms began to surge. These investors harnessed wind energy to meet their captive demand and also used it as an instrument to offset the profits from their other businesses and paid less tax. Private investments created the domestic market for wind
turbines, which in turn led to the growth of the manufacturing industry and other allied services. During the initial years, wind power plants were set up primarily for captive consumption. During 2004 to 2014, the wind sector grew at the phenomenal compounded annual growth rate of 24%.

Generation-based Incentives to Tariff Bidding
In 2009, the Ministry of New and Renewable Energy (MNRE), Government of India, announced the generation-based incentive (GBI) scheme in parallel to the AD scheme for the period 2009–2012. This scheme was introduced to facilitate the entry of large independent power producers, including foreign direct investors to the wind power sector. Being IPPs and not captive power plants they were not in a position to avail the AD benefit. GBI policy provided an incentive of payment of `0.50 per unit of electricity sold to the DISCOM through the grid, over and above the tariff fixed for the power for a period of not less than four years and a maximum period of 10 years. After it expired in 2012, the GBI scheme was reinstated after a gap of one year in August 2013. The GBI scheme facilitated the creation of 7 GW of the wind power capacity during its operational period up to March 2017. As costs
had declined, it was felt that incentives were no longer required for wind power. Guidelines for tariff-based competitive bidding were issued and the process of wind power development through competitive bids began. Figure 5 provides an overview of the somewhat modest wind capacity additions during the period 2019–2020. There is a need to bring back the momentum of wind capacity in order to achieve 2030 targets.

Banking of Wind Power
The concept of banking was first introduced in the state of Tamil Nadu in 1986.8 and since then it has been used by several states. The DISCOM took the electricity generated by a captive wind farm of an industrial enterprise located where there was wind power potential and banked it. This banking was notional. The industrial enterprise was billed on a net basis after deducting from its electricity consumption the quantum of wind power it had banked. The industrial enterprise located elsewhere took electricity from the DISCOM to meet its actual electricity needs. The banking mechanism proved to be an attractive option for industrial consumers. The DISCOM tariff for industrial consumers ranged between `7–9/kWh.

Viability Gap Funding
After the success in getting attractive bids from private solar power developers during the initial phase of bundling, the programme needed to be scaled up. The availability of unallocated power from NTPC power stations was limited. Viability gap funding (VGF) was then introduced by the MNRE to take the programme to the next level in 2013. With VGF, the tariffs continued to fall rapidly and did not need financial support anymore. Since then, solar projects have been coming up through competition in the reverse auction process.

SOLAR AND WIND POWER DEVELOPMENT

India has been remarkably successful in the growth of grid-connected large-scale private solar power projects. In the last twelve years, it has installed solar power capacity of 54 GW. In this period, it has added 40 GW of wind power capacity. The annual rate of capacity addition, however, needs to be raised rapidly to achieve the 2030 goal. The 500 GW non-fossil fuel capacity target over the course of the next 8 years is very ambitious and challenging. Capacity addition growth needs to take place at 18.34% CAGR, requiring ~40–43 GW annual addition from the current pace of 9–10 GW per year. This extraordinary pace has to be achieved for the realization of the 2030 targets. The key challenges for such a massive scale-up appear to be:

Finances
India has achieved over 100 GW of renewables capacity with private investment. These projects have come up with financing from the market. Developers have also been accessing global finance. The availability of global finance is increasing. Hence, availability of finances as such may not be a constraint.

Land
Availability of adequate land is clearly essential for the accelerated development of renewable power projects to achieve the 2030 targets. For such scaling up, land needs would rise proportionately and so would the challenges related to land assembly. These would need to be addressed. Grid-connected wind and solar projects, for example, require land in excess of 2 hectares per MW (Thapar S, et al., 2017). States have been facilitating land assembly for the development of solar power projects. Private developers have developed the ability to assemble land efficiently for their projects. The Government of India is in addition implementing a scheme for setting up of 52 Solar Parks of aggregate capacity 38 GW in 14 states. Solar power projects of an aggregate capacity of around 9.2 GW have already been commissioned in these parks.9 More such solar parks would need to be set up in the coming years. Work for these may be initiated now.

Demand
In the last few years, in some states there was a view that they had already signed PPAs for power in excess of their need and they, therefore, do not need to enter into fresh PPAs. The phrase ‘surplus power’ in terms of generation capacity gained currency. The overall PLF of thermal power stations in the country came down to less than 60% from a high of over 75%. As the growth rate of the economy moderated, actual demand growth of electricity became lower than projected by the CEA. Further, when demand is fully met and there are no power cuts, the PLF of thermal power stations have to be lower if there are no separate peaking power supply arrangements as the demand curve is not flat.

GRID-SCALE STORAGE

There are grid integration challenges with increase in the share of renewables. The primary challenge is of ensuring quality supply on a real time basis – minute by minute, second by second – with a rising share of variable solar and wind generation, which is intermittent and depends on weather conditions. The power system would need to have increasing flexibility. The achievement of the target of 500 GW of non-fossil fuel capacity involves a fundamental transformation of the all India integrated electricity grid system. Electricity demand would have to be met fully when the sun does not shine, and the wind does not blow. The capacity to ramp up supply from other sources instantaneously to meet demand, to maintain grid stability and provide reliable power supply to all consumers would become more challenging. In 2022, SECI issued the tender for setting up 500 MW/1000 MWh Standalone Battery Energy Storage Systems (BESS) in India.18 Out of the total capacity being procured under the tender, 60% of the capacity will be taken by SECI on behalf of the buying entities, and the balance 40% of capacity will be with the developers for third-party or market sale. Out of the 60% capacity off taken by SECI, 30% will be earmarked to be used by the National Load Dispatch Centre (NLDC),
Power System Operation Corporation (POSOCO) for Grid Ancillary Services. India has an opportunity to leapfrog in adoption of ancillary services by adopting regulatory mechanisms such as pay for performance, that creates incentives for better performing technologies to be deployed for improving grid reliability.

The decline in storage costs is likely to be faster with volumes and competition. Figure 10 depicts IEA projections of increasing share of BESS technologies by 2040 in India occupying one-third of global share. There are mature technology options for large-scale grid storage, which India should go in for now. This would enable scaling up with the downward movement of the cost curve that should follow with volumes and scale.

Pumped Storage Plants
Pumped Storage hydropower plants have been put up across the world, mostly in the last century for meeting peaking power requirements. The technology is relatively straightforward and accounts for 94% of world’s energy storage capacity.19 These plants are 80% energy efficient through a full cycle, and the facilities can typically provide 10 hours of electricity (TERI, 2021). Pumped storage plants (PSP) may be developed to provide a major part of the storage needed by 2030. The exercise of identifying potential sites and completing pre-feasibility studies should be taken up and completed at the earliest.

Concentrated Solar-thermal Power (CSP)
CSP projects use mirrors to concentrate the sun’s rays and store it in molten salt. This stored energy is used to run a conventional thermal plant turbine to generate electricity. Because of its ability to store solar energy thermally and convert it to power, CSP can deliver power on demand, making it an attractive renewable energy storage technology. CSP projects have seen limited modest development worldwide so far with 6.4 GW installed at the end of 2019. India has an immense solar power potential of over 2,700 GW through CSP.

CSP technology being able to despatch energy at any time of the day is very promising (Figure 12). The Department of Energy (DoE), US is currently funding research to explore the potential pathways of heat transfer mediums and reach the goal of reducing the cost to 5 cents per kWh through innovative solutions (Young, C., 2022). Solar towers using molten salt as a high temperature heat transfer fluid and storage medium (or other high temperature medium) appear to be the most promising CSP technology. This is based on their low energy storage costs, the high-capacity factor achievable, greater efficiency of the steam cycle, and their firm output capability. An additional advantage is that in areas with excellent solar resources, low cost solar PV can naturally be paired with CSP to allow round-the-clock generation. The confluence of extremely low-cost solar PV, onshore and even offshore wind combined with the
installation of CSP could decarbonize power systems rapidly. Globally, CSP plants are concentrated in Spain (2.3 GW), the United States (1.6 GW), Morocco (0.5 GW), China (0.5 GW), and South Africa (0.5 GW). The Middle East and North Africa MENA region is at the forefront. Recently, the lowest PPA for a CSP project was granted in Dubai (United Arab Emirates) at $0.073/kWh for the DEWA 950 MW CSP-PV hybrid project.

Developing pilot projects at sites and bidding for solar thermal plants with storage should begin now. This would lead to price discovery. Successive projects of competitive bidding would give a sense of the potential movement down the cost curve. With cost reduction from volumes, competition among developers and domestic manufacturing, CSP may become a very attractive cost-effective way of achieving large-scale grid storage that India would need as it moves to achieve its 2030 goals and then on to net zero.

Battery Energy Storage Technologies
Battery energy storage technologies are gaining popularity globally for grid level applications due to rapidly reducing costs of installations along with technological advancements. It has features like quick response time, distributed energy/power- balancing capabilities, and phased installation, which make them eminently suitable for handling the reliability and intermittency of RE generation (TERI, 2021). India has initiated efforts for the deployment of gridscale battery storage on scale through the recent SECI tenders. BESS may emerge as one of the preferred options for flexibility and ensuring grid stability. According to estimates by the International Energy Agency (IEA), the global share of India in battery deployment would be 35% by 2040.

Hydrogen Energy Storage Technologies
The potential of hydrogen-based energy storage, especially for medium- and long-duration storage, is being pursued because of the technical advantages it brings in comparison to battery storage. Green hydrogen, rather than fossil fuel-based hydrogen production, is the way forward for complete decarbonization. The cost of green hydrogen is declining due to the falling price of RE. The focus is now on reducing the cost of electrolysers, which is the major component in the green hydrogen value chain. Policy and regulatory support to foster production of green hydrogen is being put in place under the National Hydrogen Mission. Further, the use of hydrogen in pilot hydrogen energy projects for (a)
remote locations as a substitute for diesel generation and (b) for seasonal peak needs may be taken up.

shows the share of installed capacity envisaged in 2030 in India by CEA and TERI.

Projections of installed capacity of India by 2030

As observed from the table, the share of renewables was estimated to range between 50% and 57% in the capacity mix by 2030. As per projections of the Central Electricity Authority (CEA), Glasgow announcements of achieving 500 GW of non-fossil fuel energy could be achieved by combining 435 GW from wind, solar and other RE sources; 61 GW from large hydro and 19 GW from nuclear energy capacity. The projections from various studies for 2030 capacity additions are broadly in line with India’s 2030 goals announced at COP26.

Levelized Cost of Storage Technologies
In April 2020, Lawrence Berkeley National Laboratory (LBNL) estimated the cost of utility-scale lithium-ion battery systems and solar plus battery costs and resultant tariffs for the Indian market. LBNL estimates the levelized cost of storage (LCOS) for a stand-alone BESS would be 5.06/kWh and4.70/kWh for a solar PV combined with BESS in 2025, which would drop to 4.12/kWh and3.81/kWh by 2030. The study estimated the price for a PV-plus-storage PPA would be 3.32/kWh by 2025, falling to2.83/kWh by 2030 (Deorah, et al., 2020).

According to TERI’s analysis and projections, solar plus battery storage cost would be at par with the costs of non-pit head coal power plants by 2030. The costs of generation from various technologies levelized over its lifetime have been estimated as indicated in Figure 16.

Battery energy storage systems (BESS) based on low-cost Li-ion batteries may enable India to use stored solar energy to meet peak demand in mornings and evenings. As per TERI’s analysis in a high renewable generation scenario for India, wind and solar curtailment would be reduced from 4% without storage to less than 0.2% with BESS. The LBNL analysis predicted that by 2030, 4–6 hours of energy storage would be cost-effective for diurnal balancing. Since their development and implementation cycles are much shorter than thermal power plants, renewables and storage could provide a pathway for India’s energy transitions.