Here's why Indian renewable energy plan pales in front of Europe and China

An International Energy Agency report suggests that New Delhi's action on renewable deployment on the ground pales in front of Europe and China

As we prepare to exit 2022, a year that rejuvenated fossil fuel businesses despite sparking record prices of coal and natural gas, and enter 2023, India must accelerate its pace of renewables development if it is to keep up with China and Europe, and improve energy security, a new report by the Paris-based International Energy Agency (IEA) shows.

The IEA’s latest report, which forecasts the deployment of renewable energy technologies in electricity, transport and heat to 2027, reveals a renewed global focus on renewable — after Russia’s invasion of Ukraine threatened to impoverish even developed nations of energy.

It is illustrative to see where India stands among global peers in the next five years towards deploying renewables.

The world is expected to build as much renewable capacity in the next five years as it added in the previous two decades, a remarkable, never-before-seen growth in any form of electricity generation. The IEA expects renewable capacity to grow by 2,400 gigawatts (Gw), equal to the entire installed power capacity of China today (India’s total installed capacity is a sixth of China’s) over the 2022-27 period.

Renewables will account for over 90 per cent of global electricity capacity expansion over the forecast period, mainly driven by China, the European Union (EU) and the US. China will contribute to half the new additions in renewable capacity, or 1,200 Gw, that will be added by 2027, the IEA reckons.

“The world is set to add as much renewable power in the next five years as it did in the previous 20 years,” said IEA Executive Director Fatih Birol. “Renewables’ continued acceleration is critical to help keep the door open to limiting global warming to 1.5° C.”

Cumulative renewable electricity capacity in Europe is expected to increase by nearly 60 per cent, or, 425 Gw — exceeding India’s total power capacity today — between 2022 and 2027, more than twice as much as in the previous five-year period (2016-2021). Solar PV installations may reach 600 Gw by 2030.

Europe’s renewed thrust on renewables led by Germany and Spain is a direct fallout of the Ukraine conflict after Brussels decided to eliminate dependency on Russian gas and oil. By 2027, US renewable energy capacity additions will increase by 74 per cent, or over 280 Gw, led by solar PV and wind.

Global trends indicate that solar PVs will be the biggest contributor to renewable additions followed by wind. Cumulative solar PV capacity almost trebles in IEA’s forecast, growing by almost 1,500 Gw over the period. Global wind capacity almost doubles, with over 570 Gw of new onshore wind capacity forecast to become operational.

India’s actions on the ground pale in front of these targets. The Modi government expects to add 500 Gw of renewables capacity by 2030 without offering any details. Of the 120 Gw of existing renewables capacity, accounting for around 29 per cent of total installed power capacity, solar makes up 62 Gw and wind 42 Gw — together, they account for 87 per cent of total renewables, according to the Central Electricity Authority. If one extrapolates a similar ratio to the targets, India will need to add around 315 Gw of solar and wind by 2030, averaging 40 Gw annually. For the next five years, India is forecast to add 145 Gw with solar accounting for 75 per cent followed by onshore wind at 15 per cent, the IEA says, reflecting an average 29 Gw in annual installations — by contrast, build-outs average only 13-15 Gw a year.

India’s auction awards have also declined. From January to September 2022, 77 Gw of new renewable auction capacity was awarded globally, mostly in solar PV and wind, a 70 per cent increase from the same period in 2021, with China and Europe accounting for three-quarters of the total awarded capacity. India auctioned only around 8 Gw of renewable capacity, 30 per cent below the average for these months in 2019-2021, the IEA said, attributing the slowdown to auction organisers focusing on finalising power purchase agreements (PPAs) and developers prioritising the execution of projects already under construction.

Wind fared worse where a large portion of capacity awarded in auctions was delayed or cancelled: as of September 2022, only 45 per cent of the 14 Gw of wind projects awarded during 2017-2020 had been commissioned.

Even from a generation standpoint, where renewables are expected to become the largest source of global electricity generation by early 2025, surpassing coal, India lags far behind. The IEA expects all renewables to account for 38 per cent of the power mix by 2027 with electricity from wind and solar PV providing almost 20 per cent of global power generation. In October, India’s generation from renewables, excluding hydro, was only around 11 per cent.

India’s current market share in critical clean energy technologies remains well under its potential, said Brajesh Singh, president, Arthur D Little, India. India accounts for 10 per cent of the global market for solar, 5 per cent of wind, and 1 per cent of battery storage. In a deeply decarbonised/net-zero world, India should account for some 30 per cent of global solar, 15 per cent of global wind, and 12 per cent of the battery market. A gap exists between current policies and those that would be needed to reach this market potential, Singh added.

A new customs duty on solar module imports and mandating domestic sourcing of panels to boost local manufacturing and reduce dependence on Chinese supplies threaten to slow installations in the short term, developers said. The modules offered are often based on dated technology and are smaller than the top-tier products predominantly used by developers today, the IEA said.

A bigger, longer term hurdle to accelerating renewables growth is India’s distribution companies (discoms). Discoms often lack the financial capacity to sign new PPAs with auction winners, resulting in project commissioning delays, the IEA said. Discoms are a choke point for India’s progress in renewables, said a senior official of one of the country’s biggest developers of solar and wind projects. Another area where more work needs to be done is in grid management. As he pointed out, the question is whether the grid is prepared to absorb so much intermittent renewable energy and whether they have the right systems and processes in place to really be able to service the demand side.

Some states have done well. Over one-third of rooftop PV systems added in 2022 were installed in Gujarat, home to just 5 per cent of India’s population, indicating that effective on-the-ground implementation of policies is crucial to achieve faster distributed PV growth in India.

Eventually it all boils down to whether New Delhi can succeed in disciplining the discoms — improving the financial performance and increasing penalties for non-compliance with renewable purchase obligations — and accelerating execution, all of which will be crucial to achieve faster renewables growth.

Power equations

• The world is expected to build as much renewable capacity in the next 5 years as it added in the previous two decades. Solar PVs will be the biggest contributor to renewable additions, followed by wind
• China will contribute to half the new additions in renewable capacity by 2027
• Cumulative renewable electricity capacity in Europe is expected to increase by nearly 60%, or, 425 Gw — exceeding India’s total power capacity today — between 2022 and 2027
• By 2027, US renewable energy capacity additions will increase by 74% (over 280 Gw), led by solar PV and wind
• For the next 5 years, India is forecast to add 145 Gw; solar to account for 75%, followed by onshore wind at 15%
• At current rates of build-outs, India may add only half the capacity
• India auctioned only around 8 Gw of renewable capacity, 30% below the average for these months in 2019-2021 over the Jan-Sep period
• India’s cash-strapped discoms often lack the financial capacity to sign new PPAs with auction winners, resulting in project commissioning delays