The uprising of renewable source of energy can finally solve the energy crisis by replacing fossil fuels. This renewable sector has most definitely grown with time, all thanks to government incentives, infrastructure investments and policies. India has a target of installing 100 Giga Watts for solar and about 75 Giga Watts for wind by FY22. This requires an investment of $150 billion, which is one of the highest investments across the sector in India.
As reported by the Ministry of New and Renewable Energy (MNRE), now the growth in this sector is quite evident, thus attracting strategic players from across the globe – particularly private equity players and global utilities.
Long Term Growth
Demand is one of the most essential risks in any sector as demand cannot be created by one’s wish. The growth we see in renewable sector is mainly due to the government’s intent to use it, thereby reducing its risk. This sector has signed a long-term Power Purchase Agreement (PPA), thus keeping the sector safe from revenue fluctuations. This promises a stable profit operation for at least 25 years. Long-term PPAs firm along with stable performance in the last 3 – 4 years has eased market risk and boosted the confidence in the renewable sector.
This confidence in the sector is seen as long as it is backed by the government. Because of unavailability of grids, it is seen that some states are backing out from the sector. Due to grid issues in Tamil Nadu, Discom has curtailed wind power. Investors face a constant risk with these projects due to uncertainties building up. Investors, especially among Independent Power Plants (IPPs), are having a lot of doubts about the investments.
We see a lot of grid issues in countries like Germany, US and China and learning from their mistakes is what we need to do. You could see a lot of wind power projects in China in regions like Gansu, Ningxia, Mongolia etc. while Central and East regions remain the major consumption center. There were issues regarding wind-generated power as there were no transmission facility to carry to populated areas. In India, robust grid infrastructure should be the primary matrix for renewable sector success.
The fate of thermal power did seem a little bleak as Coal India failed to deliver its promise. Projects for fuel supply that had Letter of Assurance couldn’t convert to the fuel supply agreement by Coal India Limited (CIL). Many investors have had a hard luck with thermal sector and are very skeptical and cautious about the renewable sector.
Renewable Future in India
The developers and investors shouldn’t be fined by Discom for undrawn capacity. A clear differentiation for payment must be made by PPAs on the basis of deemed generation.
Renewable sector can save itself from grid issues by combining solar and wind projects to Central Transmission Utility (CTU). This will ensure that the renewable sector is in the ‘must run status’.
Regional Load Dispatch Centre (RLDC) will impartially schedule power, thus ensuring that the renewable sector is not affected by power sources.
In the Indian power sector, the long-term growth remains strong and with increasing demand in India, there will always remain a high demand for power in the country.