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2018 A Sobering Year for Renewable Energy in India

December 10, 2018

In 2015, India announced an aspiring goal of increasing its renewable capacity from 50 gigawatt (GW) to 175 gigawatt (GW) by the year 2022, which consist 100 GW of Solar, 60 GW of wind, 10 GW of bio energy and 5 GW of small hydro plants. India has created a clear roadmap to achieve the target by 2022.

According to the roadmap, nearly 60 solar cities will be developed across India. Renewable sources are expected to meet 40% of India’s power demands by 2030. Currently, India ranks 4th in the renewable energy country attractive index. As the economy grows, the power consumption will increase significantly and we should be able to supply this ever increasing demand. India receives about 300 days of sunlight a year and also has the capacity to generate hydro power. A lot of these potential sources needs to be explored in order to generate sustainable renewable energy.

Despite all these excellent statistics, India is failing to achieve its year on year targets of power generation. According to the report submitted by the standing committee of energy, India had only achieved 36% of its targeted value of 175 GW by Dec 2017.

State of our current renewable energy Projects:-

The number of new projects in the pipeline are slowing down since the current projects are inefficient in power generation and returning very less financial capital. The standing committee has found that The Ministry of New and Renewable Energy (MNRE) has been unable to utilize the funds allocated due to poor financial planning. The report also says that budget allocated to MNRE is under-financed and even that value allocated gets reduced during revised budget allocation. This practice of lowering budget is not in sync with targeted outcome.

The committee also posed a question to MNRE, asking a satisfactory answer for its failure to achieve allocated target. In 2016, India could only achieve 68% of its yearly target of generating 16,600 MW renewable energy. In 2017, it fell to 38%. This failure of under achievements is keeping us further away from the goal of 175 MW by 2022.

The Good and Service tax (GST) is causing additional problems in implementation of the project. While solar panels falls under 5% category, batteries and inverters comes under 18% slab. Government needs to intervene and sought out this confusion of tax differentiation.

Many Projects were implemented expecting a high and quick return EBITDA, but due to improper financial planning and poor implementation, the plan is failing miserably. EBITDA stands for earnings before interest, tax, depreciation and amortization.

Since the number of new projects getting on-board has slowed down, there are a vast number of investors chasing very few projects, resulting in severe competition. Markets are volatile and even though many investors are keen to take new projects, they are taking a cautious approach before they invest in renewable energy market.

Most of the projects undertaken by the renewable sector were based on the EBITDA growth. The strategies implemented are not producing any desired results, as a result of which investors are taking a calculated approach before investing in the renewable market. The decline in investments has also been credited to uncertain trade cases, price fluctuation, rupee depreciation. All of these reasons are contributing to further delay our target of reaching 175 MW by 2022. According to the report of standing committee, in 2017-18, India has been able to produce only 62% of the targeted solar power generation, 15% of targeted wind power and 74% of Biomass power generation.   .

Another problem investors are facing is that there is not enough data available on previous investments in the renewable sector. Normally, businesses analyze the current and previous returns from market and decide whether to make an investment. But in case of renewable energy market, there is no sufficient data available making investors to take costly projects at a very high risk. Many high officials claim that the current scenario doesn’t look good and our failure to take corrective measure will only result in delaying our project to reach the desired target.

Conclusion:-

India has taken an ambitious project of generating 175 GW of renewable energy. To meet the 2022 target, India needs to accelerate its current progress. India plans to increase its dependence on non-fossil fuels to around 57% by 2027, which is higher than the committed value of 40%.

As we move towards renewable resources, we simultaneously need to tackle the issue of our complete dependence on fossil fuels. Coal is the leading fossil fuel used in generation of power, contributing around 57% of total power production. Even though the current reports show a limited growth in coal consumption, we need to develop a system where there is effective utilization of all the available renewable resources. Shifting our focus towards renewable energy production will have a noteworthy impact on the future power demand as well our current climatic condition.

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