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India installed a record 15 gigawatts (GW) of new renewable energy capacity in 2021/22, giving visibility to Prime Minister Narendra Modi’s ambitious vision of 450 GW by 2030. This would require new investment in robust renewable energy and grid transmission capacity of $500 billion. It would also dramatically improve India’s domestic energy security, providing a near doubling of capacity while reducing reliance on expensive fossil fuel imports.
However, to date in fiscal year 2022/23. In 2010, renewable energy installations plateaued at the same operating rate of 15 GV per year, instead of doubling to the 30-40 GV per year needed to meet the national target. Meanwhile, the nuclear and Heidel plants are completely shut down. This means that India is being forced to consider returning to an even greater reliance on expensive, high-emissions thermal power generation to deliver the energy that will support the country’s sustainable economic growth. Although new proposals for renewable energy have been denied in recent months, much more effort is needed. If it is to fulfill Prime Minister Modi’s ambition, SECI needs to go back to the highly successful tendering it was conducting before Covid-19 hit.
In the eight months to November FY 2022/23, renewable energy installations (wind and solar) accounted for 99 percent of India’s net new power grid capacity, with 9.6 GW added, as reported by the Central Electricity Authority (CEA). A large hydropower plant makes up the balance, with an addition of 0.1 GW. Despite all the talk of significant new coal-fired power expansions, net grid thermal capacity has fallen by 0.1GW year-to-date.
The addition of 9.7 GW in the first 8 months equates to a 15 GW annual operating rate, on par with the rate of wind and solar installations in the last fiscal year. India needs to see the rate of activity more than double to 30-40 GW per year, supported by 1-2 GW of new hydel and nuclear capacity, to drive grid system diversification, decarbonisation and lower electricity costs while improving energy security and delivers the overall capacity expansion required to meet the sustained robust growth in India’s energy needs.
If India delivers the low end of this range of new investments, renewables should account for 55 percent (63 percent including hydro) of total installed capacity by fiscal year 2030, which would be an over-contribution under India’s nationally determined Paris Agreement. Capacity is not equal to electricity generation, so we forecast renewables to produce 33 percent of total generation (41 percent including hydro). We estimate that India is within 10 percent of peak coal power generation at 1,196 TWh per year by
FY30 (54 percent of the total number).
Bridge to India estimates there are 54GV of new solar project proposals in India’s pipeline: 13GV tender expected soon; Issued 30GV RFS; 3GV where bids have already been submitted; and the balance is the announced results of the offer. As impressive as this is, it is not nearly enough to meet the annual increase in electricity demand across India, given its sustained economic growth. The new wind is sorely missing in action.
We call on SECI, NTPC, state discoms and all state-owned enterprises (Coal India Ltd, GAIL, NLC India, Indian Railways et al) to jointly step up their decarbonisation commitments and speed up tendering activities.
The IEEFA-CEF recently released a report surveying India’s energy company leaders who collectively pledged to quadruple their investments in renewable energy capacity from 56GV currently to 287GV by or before 2030.
We note that these Indian leaders – NTPC, Reliance Industries, Adani Green, ACME, Tata Power, Renev Power, JSV, Sembcorp, SJVN, Greenko and others – have received unprecedented global capital market support, attracted by the huge opportunity to invest in world-leading renewable infrastructure that is financially foregone, given the very attractive 25-year Power Purchase Agreements (PPAs) signed by the Government of India (through SECI or NTPC).
The list of global financial institutions investing in India’s renewable energy and grid is a who’s who of leading players – CPPIB, Amp Energy and CDPK from Canada, Goldman Sachs, BlackRock and KKR from the US, Macquarie Group from Australia, Temasek, GIC and Sembcorp from Singapore, ADB, KfV from Germany and the Abu Dhabi Investment Authority.
This theme was very clear in 2022, with significant global investor interest in the renewable energy and grid infrastructure sector. In recent months this has been reinforced, with Partners Group of Switzerland acquiring Sunsure Energi (US$400 million), Sembcorp of Singapore acquiring Vector Green (S$474 million), JSV Energi acquiring Mitrah Energi (US$1,300 million), Tata Power partners with BlackRock ($500 million) and Shell acquires Sprng Energi ($1,550 million). JMK announces that 2022 is a record year for the purchase of funds from renewable energy sources. NTPC is reportedly looking for a strategic investor for its renewable energy subsidiary and is looking to raise Rs 2,000-3,000 crore in fresh capital to accelerate clean investments.
This collaboration of global finance capital with key industry leaders in India is a powerful force indeed. It needs to be maximized to accelerate investments in robust renewable energy infrastructure, to build energy security and grid diversity, and to meet India’s decarbonisation goals and growing energy needs.
In December 2022, there was an increase in activity. REC launched 1.25GV NTPC and 0.5GV DVC solar tenders. Maharashtra Discom (MSEDCL) awarded 500 MW of its solar Tranche-IKS at 25-year fixed fixed (deflationary) tariffs of Rs 2.90-2.97/kWh, a fraction of the cost of imported coal-fired power generation, in a tender that beat SolarArise, SJVN and Tata Power. MSEDCL has invited applications for selection for procurement of 300MV decentralized solar projects under PM-KUSUM scheme. GAIL India has floated tenders for 600 MW solar power projects in Gujarat. Greenko won the 500MV / 3,000MWh renewable energy storage tender from NTPC at a very competitive price of Rs 5.00/kWh for a deflationary cost for 24/7 firm power supply for 25 years. And Amazon awarded 300 MW of solar projects to Vibrant Energi, a
a subsidiary of the Macquarie Group.
December was an impressive month for renewable energy activity, but as noted above, much more is needed. Development capacity is in place and ready to go, and global financial markets are dead set on supporting India. The obstacle is the continued increase in tenders for renewable energy – covering both utility and rooftop solar, as well as offshore and onshore wind, with support for battery consolidation and investment in grid transmission. This will permanently reduce real energy prices for India. A worthy goal after the hyperinflation of all fossil fuel imports in 2022.
[This piece was authored by Tim Buckley, Director Climate Energy Finance]
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