RE space to gain more momentum in 2023

Amisha Yadav @CCMS Bureau

As country’s renewable energy sector grows apace, the reforms undertaken in this sector have opened up the way toward a clean energy future. India’s total installed capacity in renewable energy has doubled in the past five years, as per an estimate.

The super charged growth of the renewable energy sector points to a direction of India emerging a leading country in securing a green future.

The overall investment in India’s renewable energy sector grew more than 125% year on year to touch a record $14.5 billion in 2022. This shows the pace has already been set.

The government has been very proactive in implementing various policy incentives in the renewables space to enable a smooth energy transition. These include tenders introduced by the Solar Energy Corporation of India (SECI), which ensures that the requirements of consumers and generators are met. This is in line with the government’s efforts to tap into the market potential of renewable energy capacity generation, and encouragement to developers to participate in the market. Further, the introduction of the Green OA Policy in 2022 was a key positive development as far as the regulation of the renewable energy OA market is concerned.

While these efforts are greatly appreciated, however, there could be apprehensions from developers regarding the returns on their investments, as well as the outlook for energy prices as and when more renewable sources are added to the grid. This is critical particularly in the case of solar energy since the solar plants will be generating power during solar hours and if more plants generate power during these hours, there can be price instability, leading to concerns around profit- ability. The solution to this lies in the usage of storage technology. In this case, the developers would benefit greatly from the introduction of storage units for solar products such as a solar plus battery or solar plus pumped storage. With an increasing number of solar power plants, the requirement for such products is bound to grow.

Another renewable source get- ting increased attention currently is green hydrogen. However, at present, it is not commercially viable, as the technology is still at a nascent stage of development.

Nevertheless, the demand for green hydrogen is likely to witness growth, as this has also applications in the storage of solar energy.

Over the past few years, there has been an attempt at separating renewable and conventional energy markets, although the renew- able energy market is unlikely to display a lot of liquidity over the next two years. Furthermore, there is increasing speculation about a unified carbon trading market, in line with the expectations that both markets will be merged. This is in addition to the market’s expectation of a long-term policy statement from the government concerning transmission charges. Backed by a conducive policy environment and accelerated investments in the sector, several corporates have pledged towards 100% green energy in alignment with the Prime minister’s vision of achieving net zero emissions by 2070.

The government is likely to introduce a range of initiatives to support India’s energy transition in the Union budget, including a Rs 21,650 crore scheme to encourage the establishment of grid scale battery energy storage systems (BESS), Rs 3,765 crore in viability grants for such projects, and reduced import duties on parts to build BE.

This, alongside the already existing schemes for the growth of the new energy sector, such as the Green OA Policy, National Wind among others, clearly indicates a big push for renewable energy sector in India over the coming year.

With ambitious goals, visionary initiatives and strategies, India has rapidly accelerated the renewable energy generation endeavors in the last few years. In 2022, the government aggressively pushed the production of renewable energy, manufacturing of solar equipment, and energy storage facility to achieve its 500 GW renewable energy generation target by 2030. Currently the clean energy capacity of the country is 173 GW and projects of 80 GW capacity are under construction. Targets, India needs in- creased emphasis on renewable energy generation in 2023 and beyond. To reduce the share of fossil fuels in the energy mix, which is currently approximately 59%, the country needs to increase the generation of renewable energy by about 30-35 GW this year. In the coming year, the sector is expected to witness a huge flow of investment, around $25 billion, further providing impetus to its energy generation plans and strategies. Through this, it can not only accomplish this year’s goals, but surpass them as well. Currently, the solar industry is expanding rapidly than others. While the nation must sustain or accelerate this expansion, it must also concentrate on other sectors like on-shore and off-shore wind and green hydrogen to achieve its RE targets. The broad coastline and enormous landmass give a fantastic opportunity to harness the power of wind energy and raise its share in the country’s renew- able energy mix. The Union Budget 2023, which is a few weeks away, would be the opportunity for the government to resolve hurdles.

The high investment, low tariff, and project execution challenges make the renewable energy sector an enviable investment option for investors. For instance, if we talk about investment, a solar power plant costs around Rs 4-5 crore for 1 MW, whereas a wind power facility requires around Rs 7.5-8.2 crore for 1 MW. Similarly, the tariff rate is continuously decreasing due to stiff competition in the market and other factors, resulting in low return.

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