India's renewable energy plan of 175 GW by FY22-end faces multiple risks

Sector comes of age with large companies driving growth, but land acquisition and regulatory delays hamper the immediate target of achieving 175 Gw capacity by FY22 end

India’s renewable energy journey has taken a sharp turn in the last one year with the country’s largest companies entering the sector and overshadowing the plans of pure-play green power generators and gear makers. The country will now chase its target of 450 Gw of renewable power by 2030 with a host of firms of all sizes in the market.

However, several issues, including delays in the signing of power sales agreement (PSAs) for tenders that have already been finalised, stand in the way of realising the immediate target of 175 Gw by financial year 2021-22 (FY22) end. “Three major issues converge and hamper large renewable projects — land acquisition, transmission system, and regulatory delays,” said Vickram Jadhav, vice-president, Vestas, a leading wind power solutions company.

For the big companies with major contracts in hand, scaling up will be a huge task. Adani Green, for instance, announced last year that it had won a government contract for 8 Gw of solar projects and 2 Gw of additional solar cell and module manufacturing capacity at a cost of Rs 45,000 crore by 2025. A little over a year later, on June 25, Reliance Industries announced it would achieve a solar power capacity of 100 Gw by 2030 (from its current zero presence). 

One of the earliest in the renewable energy space, both as gear maker and generator, was the Tata group. Tata Power Solar, the market leader in complete solar EPC (engineering, procurement and construction), is set to be merged with its parent, Tata Power. Another subsidiary, Tata Power Renewable Energy, has an installed capacity of 3.5 Gw.

State-owned thermal power giant NTPC is also planning to add 60 Gw of renewable capacity by 2030. Meanwhile, a host of smaller players, such as Goldman Sachs-backed ReNew Power and Suzlon, have built India’s wind capacity in the initial years of the push for renewable energy under the UPA government. When the market moved more towards solar companies, ReNew Power shifted focus to solar generation and so did Hero Future Energies.

But there have been upsets, too, along the way. SoftBank Energy, which had committed to invest $1 trillion in the Indian market, sold its entire portfolio to Adani Green in May. And the Jagan Mohan Reddy government in Andhra Pradesh in 2019 cancelled all renewable energy projects, citing high rates. 

Around 16 Gw of solar and wind energy capacity awarded across the country do not have power purchase agreements (PPAs) or PSAs, as states are reluctant to buy renewable energy, according to a 2020 report of the Central Electricity Authority, a technical regulator and data repository for the power sector. 

The financial distress of power distribution firms is a major reason for the delay in confirming contracts and the release of payments to operating units. Their overdue amounts towards renewable projects stand at Rs 11,368 crore as on May. 

According to industry data, 20 Gw of solar and wind power projects have been auctioned in the past three years, but barely 20 per cent have been commissioned. The pandemic-induced lockdowns have delayed the projects further. 

Jadhav also points to the disconnect between the Centre and the states when it comes to renewable energy. “The Centre awards mega project capacities, but state governments do not have a land allotment / approval process,” he says. 

For example, in 2018, Gujarat refused to allot land to solar and wind projects that central agencies had awarded to private companies. It also said land would only be allotted to those projects that would sell power to Gujarat — an impasse which delayed close to 1 Gw worth of projects.

Two years later, Gujarat revised the land policy and said that project developers would have to supply only a part of the power to the state and pay an annual rent for the land. But the damage was already done. 

Even after land issues have been sorted out, transmission connectivity is often delayed. “The thermal sector mindset of agencies such as Power Grid, CEA, and CERC delays the commissioning of (transmission) projects and thereby hurt their viability. A thriving ecosystem alongside the tall targets is much needed,” said Jadhav.

In its annual CEO survey for 2020, Bridge to India, which consults on renewable energy, highlighted industry leaders’ disappointment with policy hiccups. “All major demand-supply side factors, including power demand, land acquisition, transmission connectivity, debt financing and discom off-take, worry industry. Over 60 per cent of responses rank these factors as ‘extremely challenging’ or ‘challenging’,” it said.

Mega projects, such as NTPC’s 4.75 Gw Kutch solar park, could help in meeting the 450 Gw target, but it is located in an eco-sensitive zone and could find it tough to get environment clearance. “The two should co-exist — green energy and ecology.  Indian solar industry is ready to balance biodiversity and ecology while achieving RE targets,” said Subrahmanyam Pulipaka, chief executive, National Solar Energy Federation of India, adding they have formed a committee to look into the environmental aspect of renewables.