The electricity landscape is poised to be a game changer as it undergoes a transformation, becoming more complex than ever before with rapidly evolving technologies, declining costs, and shifting regulatory landscapes. These three trends in particular are converging to produce game-changing disruptions: electrification, decentralisation and digitalisation. While, rapidly falling tariffs is fuelling their adoption by the customers thereby paving way for smart meters, connected devices and grid sensors to increase the efficiency of network management and, more importantly, allow customers to have real-time information about energy supply and demand across the system.

In this scenario, the government of India has taken a bold stance of commissioning 175 GW by 2022 from renewable energy and is leaving no stone unturned to achieve this. In doing so, the government is showcasing its intention of pursuing ‘clean energy agenda’ and is not averse to absorbing the social cost of renewable energy. This will allow the country to connect the unconnected and provide electricity to nearly 304 million people without access to any form of electricity and allow clean cooking fuel to nearly 500 million people, who still depend on biomass.

India requires over $1.5 trillion in investments in the next 10 years as the country continues to grow at 7 per cent per annum. The government needs to continuously push policy measures for creating an enabling environment for increased capital flows and better the performance of the infrastructure sector, especially in the energy space to counter the dwindling interest of the private sector.

Together, the renewables manufacturing eco-system especially solar, procurement spectrum on one side and past speculative bidding on the other have severely impacted the banking and financial sector’s ability to infuse new funding to the market.

The key issues affecting the private sector include:

Over-leveraged balance sheets owing to the past speculative bids

Shallow debt markets and limited refinancing options

Limited bids

Absence of sanctity of contracts.

The key issues affecting the banking/ financial sector include:

Sector limits and exposure mandated by the Reserve Bank, and its other financing guidelines/ rules

Absence of strong and dedicated infrastructure financing institutions

Insufficient infrastructure project appraisal capabilities of commercial banks

Significant levels of non-performing assets across the sectors

Energy demand

As per the energy modelling exercise undertaken by the NITI Aayog — India Energy Security Scenarios (IESS), 2047, the energy demand of India is likely to go up by 2.7-3.2 times between 2012 and 2040, with the electricity component itself rising 4.5 fold. With urbanisation expected to go up to 47 per cent, all these developments will result in the energy demand increasing by 2.7-3.2 times between years 2012 and 2040.

Over the last few years, India has moved towards making power affordable and has achieved a new low in the solar power tariff recently at Rs 2.44 per unit during the auction of a 500MW capacity at Bhadla Park in Rajasthan. This price is around 25 per cent lower than the average price of Rs 3.2 charged by India’s largest generation utility NTPC for electricity generated by its coal-fired plants.

India has well and truly achieved ‘grid parity’ and is fast moving towards achieving its target of 40 per cent of its cumulative electric power capacity from non-fossil fuel based energy resources by 2030. Further, a recent survey, tabled in the parliament states that India has delivered and is well on track to achieve its voluntary pledge of reducing emission intensity of its GDP by 20-25 per cent by 2020 over 2005 level.

The decision of the government to move to electric mobility by 2030 will have a profound impact on not only mobility, but also on the power sector. It is projected that the country could save $60 billion, reducing energy consumption from motorised transportation by 64 per cent and 37 per cent of carbon emissions. This calls for infrastructural development and upgradation of technology to support the additional capacity in national grid. Powering all EVs through renewable energy would lead to zero vehicular emission, plus make the grid more flexible. EVs can also help renewable supply easier to integrate in the grid, and DISCOMs more solvent.

Opportunity

This growing focus on renewables presents a great opportunity for India to transition to a low carbon economy. Overall benefits and successful achievement of the renewable energy targets can only be realised by focussing on multiple fronts of the renewable energy ecosystem such as indigenous manufacturing and grid integration. The Indian grid should be enabled to adapt to the new challenges of high installed base of variable renewable energy source. Development of more efficient evacuation infrastructure, forecasting infrastructure of renewable energy, developing balancing capability must be focused on along with accounting for costs related to balancing, and introducing market mechanisms.

With collective ambition from stakeholders across the private sector and government, India has the potential to turn this vision into reality and merge as a global role model in adoption of clean energy and its integration.

(The Writer is Chairman, Hindustan Power Projects)