Policy initiatives to open up the sector to private players powered the growth

The 1990s is when renewable energy industry made a beginning in the country, although the history of wind power generation goes back to 1985. That was when the then Ministry of Non-conventional Energy Sources began an exercise to collect wind data extensively across the country. After the exercise, the Ministry estimated the wind power potential of India at 45,000 MW.

Today, the country has 20,000 MW of wind capacity and the latest estimate of the potential is over ten times that capacity.

This journey was possible, thanks to policy initiatives. First, at a time when electricity generation was the Government’s preserve, the Government opened wind power to the private sector. It gave those who put up windmills the 100 per cent ‘accelerated depreciation’ benefit — a major tax saver. Besides, profits from wind-generated electricity were exempt from income tax for five years.

About five years back, distribution utilities were mandated to buy a portion of electricity they sell to consumers from renewable energy sources. And, facilitating those States that did not have possibilities of generating electricity from renewable sources was the renewable energy certificate, which could be traded.

Wind power

Regulators also specified feed-in tariffs — favourable and higher tariffs — to be paid to wind energy generators; this made it attractive for investors to put in money. The Centre also came up with a generation-based incentive for wind energy projects.

Chennai-based company NEPC (which had been looking at windmills for pumping water for agriculture) entered into a joint venture with the Danish wind power major Micon for producing turbines in India. Its small, 250 kW machines were a huge success and this encouraged other manufacturers. All through the 1990s, companies such as NEPC-Micon, RRB-Vestas and Enercon good business.

Still, by the end of the 1997-98, India’s wind power capacity was less than 1,000 MW. Almost all of it came because of the ‘accelerated depreciation’ tax sop, so much so that detractors of wind energy dubbed the windmills as ‘depreciation machines.’ But now, the industry has outgrown the ‘depreciation’ mode. While there are investors who put up windmills for availing themselves of ‘accelerated depreciation,’ a crop of independent power producers has also come up. On the other side, a manufacturing base has developed. Today, India has 29 wind turbine manufacturers. Even though 90 per cent of the sales are with the top six of them, a solid manufacturing base exists today. While foreign companies such as Vestas, Gamesa and more recently GE and Siemens have come up, India’s home-grown Suzlon has emerged as one of the top ten global wind companies. Although the industry is going through a tough time at present, the general expectation is that another growth phase will begin next year, when a couple of key incentives which were withdrawn, will be brought back.

Solar power

The solar story in India begins in January 2008. The Centre announced a grid interactive solar ‘demonstration programme,’ under which it offered an attractive tariff of Rs 15 per kWh produced. Six companies came forward to put up nine solar projects totalling 15 MW.

Today, India’s grid-connected solar power plants add up to a capacity of 1,475 MW from practically nothing in January 2008. The period between then and now has been eventful.

Indians have become sensitised about ‘solar’ energy. This awareness is the basis for the industry’s growth. Several programmes, both by the Centre and the States, have come up with interesting features. Following the ‘demonstration programme,’ the Government of India came up with a Rooftop PV and Small Solar Generation Programme. In 2010 came the Jawaharlal Nehru National Solar Mission, with two notable features. For the first time, tariffs were determined by a bidding process. Second, solar power was brought down to around Rs 5 a unit to the electricity distribution companies by averaging it out (or ‘bundling’) with the power available with NTPC for sale in the spot market.

The country is on a learning curve, experimenting with lot of methods for developing the industry, which is bringing in rich learnings. Making solar power affordable to discoms by ‘bundling’ was one. Gujarat offered fixed tariff of Rs 15 for the first 12 years and Rs 5 for the later 13 years of the 25-year PPA period, and is today the foremost with an installed solar capacity of about 800 MW.

Tamil Nadu’s programme has mandated specified consumers to buy solar power. Now, the Phase II of the JNNSM is about to begin with 750 MW being put up for bidding — developers would bid for ‘viability gap funds’ from the Central Government, against a fixed tariff of Rs 5.45 a unit.

Apart from these, the JNNSM mandated local content requirements, which is now a subject of a debate. A solar manufacturing industry has developed, with a capacity of 2,000 MW for modules and 1,000 MW for cells (cells are made into modules).

A large EPC industry has emerged — a number of companies are now in the business of building solar power projects for others.

‘Social solar’ is taking root, with awareness that small, inexpensive solar projects can power villages. The country is realising the transformative role of these projects, in terms of educating and empowering rural India.

On the non-electricity side, awareness is building on various use of solar energy — such as solar-powered water pumps in agriculture and solar cookers for community cooking.

The holy town of Shirdi, for instance, has earned a global distinction — food for 20,000 people is prepared daily with solar-powered cookers.

However, there is a flipside to all this. For instance, the solar manufacturing industry is not doing well.

The industry has been hit by cheap, finance-backed imports and has been clamouring for mandated domestic purchase by solar power project developers. Second, solar thermal projects (500 MW being put up by seven companies) have not taken off at all, and have been given a year more to complete.

Third, not all projects are performing well — there are reports of under-performance, either dust-induced or due to breakage of modules — and this has spawned a debate on the perils of driving down costs using bidding processes. Fourth, the ‘rooftop’ programme has not taken off quite well, as the economics still do not work out for households to put up solar plants on their roofs.

ramesh.m@thehindu.co.in

(This article was published on June 27, 2013)
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