Today, India’s 275 GW of installed electricity generating capacity is significantly higher than 140 GW of peak demand. In fact, India’s coal generation capacity alone is higher than its peak demand. Despite installed capacity exceeding power demand, some parts of the country face acute power shortages. The critical reasons are – coal supply shortages, high level of transmission and distribution losses, and poor financial health of utilities. Further, unlike domestic coal, the price of imported coal is unregulated; its price can be quite volatile. Imported coal in the recent past has been significantly more expensive than Indian coal. Distribution companies (discoms) that buy electricity generated with imported coal face significant and unpredictable upward pressure on tariffs. Some utilities have tried to avoid these high costs by simply not buying power, even when the result is local shortages, rolling blackouts, and increase in fixed costs. These fundamental problems in the power sector are hampering the efficient use of the existing system to even meet the grid-connected demand. On top of this, more than 300 million people in India are still waiting for access to electricity. Rampant load-shedding and low-quality electricity supply forces people to resort to private, local, costly and dirty solutions such as diesel generators, which pose both health and environmental concerns. On top of this, estimates suggest that by 2021-22, India’s electricity demand will be more than double the level in 2011-12.1 One of India’s major advantages today and going forward is that its renewable energy (RE) potential is vast and largely untapped. Recent estimates show that India’s solar potential is greater than 750 GW and its announced wind potential is 302 GW (actual could be higher than 1000 GW). India Energy Security Scenarios 2047 show a possibility of achieving a high of 410 GW of wind and 479 GW of solar PV by 20472. The potential of biomass and small hydro is also significant. Thus, renewable energy has the potential to anchor the development of India’s electricity sector.

Presently, renewable energy accounts for ~12% of India’s total installed power generation capacity, and approximately 5% of the total generation. The Government of India aims to reach a renewable energy capacity of 175 GW by 2022. 100 GW of this is planned through solar energy, 60 GW through wind energy, 10 GW through small hydro power, and 5 GW through biomass-based power projects. Of the 100 GW target for solar, 40 GW is expected to be achieved through deployment of decentralized rooftop projects, 40 GW through utility-scale solar plants, and 20 GW through ultra-mega solar parks. Considering these targets, renewables (solar, wind and hydro) will account for ~10% of the total energy mix, by 2022 (IESS 2047).

INCREMENTAL COST OF RE GENERATION COMPARED TO THAT OF NEW COAL GENERATION The Expert Group’s assessment is that at the levels of RE under discussion, RE will predominantly replace imported coal based power generation. RE could easily replace imported coal based capacities avoiding large investments into port infrastructure and/or transportation of coal and power from coasts to inland consumption centers). Hence the current (2015-16) marginal power procurement tariffs are estimated to be in the range Rs 4.0- 4.5/kWh. The utility-scale RE tariffs are considered in range of Rs. 5.00-6.25/kWh, capturing the spread within onshore wind tariffs and large-scale solar PV. RE costs are thus slightly higher as compared to coal power tariffs. 2.7 The objective which the Expert Group set out for itself was to analyse and propose options (primarily financial) to meet this differential at the least cost to Government. The Group relied heavily on two sets of analyses
carried out by the EG members, to estimate the support required to meet these targets. The two analysis are appended at Annexure 2 (Analysis 1) and Annexure 3 (Analysis 2). The analyses also offer insights into non-monetary considerations which the Government may wish to bear in mind over and above nominal cost of support. 2.8 Analysis 1 considers, (more in line with current domestic norms) RE tariffs fixed for 20-25 years with escalating coal power tariffs (fig 4), while Analysis 2 compares the levelised costs of electricity from solar and wind power to a baseline of the levelised cost of electricity from coal (fig 5).

GRID INTEGRATION AND BALANCING COSTS There are no domestic studies carried out in this respect. In 2013, Denmark, Germany and Spain had a generation share of renewable electricity of 56%, 25% and 42%, respectively, with at least half of power generation capacities being renewable-based. The examples of Denmark, Germany and Spain show that up to about 20% to 25% variable renewable energy (VRE), specifically solar PV and wind, in total annual electricity supply do not pose a major challenge and can be easily accommodated in most power systems. Higher VRE shares pose challenges and increasingly require rethinking of the power system operation and planning. At moderate VRE shares, instantaneous penetration levels can become very high in some hours of a year, and VRE supply can sometimes even exceed electricity demand. However, these challenges can be met and there is wide consensus that the challenges of VRE variability create no insurmountable technical barriers to high VRE shares, however, the specific properties of VRE can cause additional costs at the system level (Sims et al. 2011, Milligan and Kirby 2009, Holttinen et al. 2011, Milligan et al. 2011, Katzenstein and Apt 2012, Ueckerdt et al. 2013, IEA 2014, Hirth et al. 2015).

ANNEXURE 2: ANALYSIS 1 – RENEWABLE ENERGY (RE) GENERATION COSTS 21 Taking note of various benefits of RE (contribution to reducing electricity price volatility and energy imports
thereby increasing energy security and positively contributing to reduction in Current Account Deficit, minimal impacts on the local environment compared to conventional sources and its ability to mitigate Climate Change through reduced GHG emissions), the GoI has taken a considered view of significantly increasing the uptake of RE from 2015-16 till 2022. The aim is to have an installed capacity of 175 GW by 2022, which implies an ambitious CAGR of 25% over the next 7 years. While the socio environmental benefits of RE accrue to society as a whole, the direct incremental cost of RE in the
initial years (say in comparison to coal power) has to be borne by the states DISCOMs who are not in the best of financial health for a variety of reasons. With RE, the practice has been to set tariffs (by ERCs) on a levelized basis (depicted by the red line in graph below) and PPAs signed for this fixed price for 20-25 years. While coal power tariffs (depicted by the blue line in graph below) are generally made up of two parts (a fixed component and a variable component). The variable component generally has an element of escalation built into it. The graph below (figure 1) clearly shows the direct incremental costs for DISCOMs in the initial years. This is just a generic representation for illustrative purposes.

Given the national importance of RE for the country, the GoaI has been historically sharing some part of such incremental costs for states through a variety of financial incentives and subsidies. Given the increased deployment target of 175 GW by 2022, the Expert Committee was asked to look afresh into policy options by which GoaI could bear part of whole of this incremental cost.

ANNEXURE 5: SUPPORT FOR RURAL ELECTRIFICATION THROUGH RE-BASED MINI-GRIDS Providing adequate and quality power to domestic and other consumers remains one of the major challenges before the country. There is also an increasing concern to reduce reliance on fossil fuels in meeting power needs and opting for cleaner and greener fuels instead. As a major initiative in this direction the Govt. of India has up scaled the National Solar Mission target to 100 GW to promote ecologically sustainable growth. It has also rolled out “Power for All” programme to address India’s energy security challenge which seeks to provide round the clock electricity to each household by 2019. However, the programme of “Power for All” of the Government of India prove to be ambitious when as of today approximately 400 million people don’t have access to electricity. The recent statistics shows that the total no. of un-electrified villages in India as on 31.03.2015 are 1,845,240. In fact, in addition to these un-electrified villages there also exists a large section of hamlets/paras/bastis in electrified
villages which doesn’t have access to electricity. The reason could be power shortage, forced load shedding or simply the unwillingness of the Distribution Licensees to reach out these areas due to financial unviability. Presently, the need of these section of population is being met partially through variety of decentralized off-grid applications (viz. solar, biomass, small hydro, etc). The RE based applications are playing an important role in servicing the rural demand, thereby making the RE based mini-grids systems increasingly relevant for this sector. In such a scenario, it is felt that the current upward trend in the mini-grid solutions and the concurrent efforts of the Government could lead a way to harness the underlining potential in this segment. To achieve the larger objective of rural electrification, there is a need to focus on such potential which could pave the way to achieve the target envisioned by Government of India for addition of 175 GW solar capacity by 2022.

SOLAR AND WIND MANUFACTURING SUPPLY CHAIN IN INDIA India has a good manufacturing base of solar and wind component manufacturers. Approx. 3,000 MW of module and around 1,400 MW of cell manufacturing is present in India (Refer Figure 1). In Wind, India, has approximately 12,000 MW of Wind Turbine and Generator (WTG) manufacturing/assembly capacity (Refer Table 1).

Financing of renewable energy is a critical challenge due to high cost of debt, high risk perception and less awareness on renewable technologies. It is therefore essential to ensure that funds are made available to OEMs and for purposes of research, development and induction of new and disruptive technologies. Financing to manufacturers can be provided on the lines similar to China where a subsidy to the tune of 600RMB/kW (equivalent to INR 61 lakhs /MW48) for the first 50 MW size wind turbine produced by a company is provided. Similarly funds are available to manufacturers in the US as well, such as the Edison Innovation Clean Energy Manufacturing Fund in New Jersey State. These grants can be used for site identification, procurement, design and permits. Moreover, construction and project completion loans are available at low rates of 2% (New Jersey Economic Development Authority, 2012). A Renewable Energy Manufacturing Fund for India can also be proposed on similar lines.
Export promotion, especially for wind which is now a mature technology in India should be provided through EXIM Bank by providing long-term export finance at LIBOR+1% to 2% with 3 years moratorium period and payback period of 10 to 15 years. Lines of credit should be project-specific, depending on the specific project requirements of the recipient country and procedures must be simplified. More funds need to be allotted to the banking sector to finance exports from India. For wind power, it is often noticed that the existing EXIM’s line of credit is inadequate for export. For China, the line of credit extended goes up to $2 billion for 4-5 years period, while for India it is only $200 million for one year. Indian exporters also have to incur extra logistics cost, since the shipping route is via Dubai/Singapore. To increase wind turbine export from India establishing portfolio fund like US-EXIM
or China–EXIM may prove helpful. India does not have its own standards and specifications for wind technology suited to the Indian climatic conditions; the National Institute of Wind Energy (NIWE) neither has the capacity or expertise for certification of new turbine model. For certification of new turbine model NIWE needs a global certification of turbine model, which renders a re-certification by NIWE redundant. Even after international certification, NIWE takes a long time to certify it again and include it in Revised List of Models and Manufacturers (RLMM) list. Indian wind turbines need to be developed according to Indian climatic conditions, for this there is a need to develop indigenous
standards and benchmarking for wind turbines. For Solar technology, the National Institute of Solar Energy (NISE) is the body identified by MNRE for testing and certifying PV modules. CBTL, TUV Rheinland and UL are also approved by MNRE for testing modules and balance of system. It costs approx. Rs. 25-27 lakhs per project for testing which acts as a deterrent. Also, India doesn’t have India specific standards for PV modules. In addition, Certification of modules which is currently not mandatory should be mandated.


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