As the renewable energy market shifts and evolves each year, industry experts need to know where the next hot region will be in order to keep up with the changing tides.
Luckily, global consultancy Ernst & Young has released its Country Attractiveness Indices each year since 2003, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.
Here is the firm’s assessment of India:
Ding ding, round two. As part of its goal to install 10 GW of solar capacity by 2017, after almost two years, India has officially launched phase two of its flagship National Solar Mission.
In early October, the first round of phase two saw the Government invite bids for 750 MW of capacity. The national program aims to reduce the cost of solar power to compete with other forms of grid-supplied electricity by 2017; the 2 GW of current installed capacity has helped cut average costs by about 51 percent since the auctioning of licenses through the National Solar Mission began in 2010.
Plugging the gap. The new auction will see the Government offer a baseline tariff of INR5.45/kWh for projects with capacity 10 MW-50 MW. Developers will then submit bids for additional funds — up to 30 percent of the project cost — in what will effectively be a reverse auction process. Winners will be those needing the least funds. This additional support is part of the Government’s new “viability gap” funding scheme that will offer around INR18.75b (US$303m) in grants through the tender process. It will stagger disbursal of the grants, with 50% to be paid upon plant completion and the remaining in 10% increments to meet various generation targets.
Local content restrictions or just restricting? The latest auction also calls for 50 percent of the 750 MW on offer to be met using domestically manufactured solar cells and panels, with developers permitted to compete in either or both of the open and domestic content categories. This requirement is not expected to have an immediate bearing on the current dispute with the US at the World Trade Organization over domestic content obligations under phase one of the solar mission, but it has still raised some concerns that the restrictions could raise costs and compromise quality given the current lack of a competitive PV manufacturing sector in India.
Record breaking solar. The sector has also been boosted by plans to build a 4GW solar plant in Rajasthan state, expected to be the world’s largest and more than doubling India’s current installed capacity. In context, the country’s biggest PV project to date is a 150-MW plant in Maharashtra. There are currently no indications of whether the “Sambhar Ultra -Mega Green Solar Power Project” will be based on PV or CSP technology, or a mixture of the two. The JV set up to run the project, comprising five public sector utilities, hopes to ahve the first 1-GW phase commissioned by the end of 2016.
Raising the bar. Mid-August finally saw Cabinet approval for the much anticipated reinstatement of the generation-based incentive for wind projects, the March 2012 expiry of which resulted in a 42 percent plunge in turbine installations. Wind farms built between 2012 and 2017 will receive INR500/MWh (US$8.20), with installations during the hiatus period qualifying retroactively. The updated scheme also increases the cap on the total support a project is eligible for by 61 percent to INR10m/MW (US$164,000).
Too little, too late? The wind sector has of course welcomed the reinstatement, but the changes may not be enough to enable India to add the 3 GW per year needed to meet its target of 15 GW of wind capacity in the period 2012 to 2017. India wind farm developer, Simran Wind Project Pvt., had planned to add as much as 150 MW annually, but halted this financial year’s expansion, saying government subsidies arrived too late. An estimated 1.5 GW of capacity was not built as a result of last year’s expiry.
Crystal ball gazing. A decree passed in July requiring all wind farms larger than 10 MW to forecast their generation for the following day every 15 minutes is also anticipated to make it harder for the sector to play catch-up with finanacial penalties incurred where actuals deviate by more than 30 percent. The Wind Independent Power Producers Association has already filed for an injunction at the Delhi High Court amid claims that the level of accuracy required is not possible and could result in penalties amounting to as much as 15 percent of revenue according to the CEO of Goldman Sachs-backed ReNew Wind Power.
Offshore anticipation. India’s offshore wind sector is also playing catch-up, with China relaunching its stalled offshore wind program and Japan already constructing a huge 1-GW offshore project. But it looks like India is finally ready to eneter the race, with the government confirming plans to establish a National Offshore Wind Energy Authority to carry out resource assessments and ultimately enter into contracts with project developers. A recent study commissioned by the government confirmed the huge potential of the country’s 7,500-km coastline, highlighting the waters off Tamil Nadu State in particular as holding a significant resource. A more detailed development strategy by this newly appointed offshore wind body is now eagerly anticipated.
Infrastructure investment steps up. Increased levels of policy and project activity in recent months signal a strong outlook for India’s renewables sector. However, insufficient transmission infrastructure will continue to be a barrier to large-scale deployment, and present a risk of further nationwide blackouts.
Acknowledged by politicians and investors alike, things are changing. The Government plans to spend €6.0 billion (US$7.9 billion) on new transmission lines across seven states over the next five to six years, with Germany’s KfW development bank contributing €1.0 billion (US$1.3 billion) in loans and grants toward these so-called “green corridors”. The first US$400 million tranche of this KfW contribution is expected shortly.
In other positive infrastructure news, India’s Rural Elecrification Corporation, a leading state-run infrastructure finance company is looking to raise INR350b–INR370b (US$5.4 billion–US$5.7 billion) in the year to March 2014 to finance and prmote power geneteration, transmission and distribution. Late September also saw the announcement that the Asian Development Bank will lend US$500 million to Rajasthan to set up a transmission network to support clean energy projects in the state.
For more information on renewable energy development in India, contact the report’s author Sanjay Chakrabarti.
Lead image: Taj Mahal via Shutterstock