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In its second year, the Government’s Budget should focus on a big picture plan that can fundamentally transform the trajectory of India’s economy and the fortunes of 1.2 billion people. The country needs an integrated energy policy and the Government believes the solution may lie in a big thrust on renewable energy for which massive targets have been set. The Government has set an ambitious target of 100,000 MW of solar and 60,000 MW of wind by 2022. This requires a dramatic scale up from the current installed capacities for both wind and solar power.
While the domestic wind power industry has been finding its feet in the last decade, solar power has been largely reliant on imports. The last few months have seen a significant policy push to drive solar capacity higher. Recent reports suggest that this renewable energy push is being given policy backing by reviving the long-pending Renewable Energy Bill. The focus should be on specific ideas that can go into policy and can provide inputs to the Government to take necessary steps.
Firstly, power is ultimately bought by the States and State distribution companies, which are not in good financial health. The Government needs to improve the financial health of discoms. But this is a State subject and the Centre can only incentivise and cajole.
Linked to the first point is the attractiveness of buying renewable energy. Today, wind energy costs about ₹6 and solar costs around ₹6.50-7 a unit. Most States see this as higher than conventional power. So, the Government has to work on lowering the cost of renewables to make them more attractive.
One of the easiest ways of doing that is by reducing the financing cost. Power producers are still borrowing at an interest rate of 12-13 per cent and this needs to move down to 8-9 per cent. If the Government can do this, then the cost of renewables will come down and be comparable to where conventional power is.
What is really needed is a clearly spelt-out road map of the direction that the Government wants to take for the sector.
Sinha is Founder and CEO, ReNew Power
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