Perspective: India's Green Energy Strides | 18 Nov 2024

Why in News?

Recently, the Asian Development Bank (ADB) in its Asia–Pacific Climate Report, 2024 highlighted India’s shift from unsustainable fossil fuel subsidies to investing in cleaner, greener energy solutions.

• The report highlighted India's "remove, target, and shift" strategy that reduced fossil fuel subsidies by 85% from 2014 to 2023, freeing up funds for renewable energy investments.

What are the Key Achievements of India’s Renewable Energy Sector?

• India’s Fossil Fuel Subsidy Reforms: India began reducing petrol and diesel subsidies gradually from 2010 to 2014, followed by incremental tax hikes up to 2017.
  • As per Asia–Pacific Climate Report 2024, by 2023, fossil fuel subsidies were reduced by 85%(from USD 25 billion in 2013 to USD 3.5 billion by 2023), demonstrating India’s commitment to clean energy.
  • Reduced subsidies enabled investments in alternative energy sources, such as LPG for rural areas, balancing environmental and social goals.
  • The additional revenues were redirected to fund clean energy projects such as solar parks, electric vehicles, and grid infrastructure.
• Role of Taxation: From 2010 to 2017, India imposed a cess on coal production and imports, which funded clean energy initiatives.
  • Around 30% of cess collections were allocated to the National Clean Energy and Environment Fund (NCEEF), supporting clean energy projects and research.
  • The cess significantly bolstered the Ministry of New and Renewable Energy's budget, financing key programs like the Green Energy Corridor and National Solar Mission, reducing solar energy costs and supporting off-grid solutions.
• Installed Capacity and Growth: Renewable energy capacity grew by 24.2 GW (13.5%), reaching 203.18 GW in October 2024 (up from 178.98 GW in October 2023).
  • Non-fossil fuel capacity (including nuclear) rose to 211.36 GW in 2024, from 186.46 GW in 2023.
  • Solar power capacity increased by 20.1 GW (27.9%), reaching 92.12 GW in October 2024 (up from 72.02 GW in 2023).
    • The country's potential for solar energy is estimated at 748 GW by the National Institute of Solar Energy (NISE).
  • Wind energy capacity grew by 7.8%, from 44.29 GW in October 2023 to 47.72 GW in 2024.
  • Large hydro projects contributed 46.93 GW to the renewable portfolio and Nuclear power added 8.18 GW to the total capacity.
  • India ranks 4^th globally in total renewable power capacity, 4th in wind power capacity, and 5^th in solar power capacity, solidifying its position as a global leader in the renewable energy transition.
• Renewable Energy Targets: India has set a bold target to achieve 500 GW of renewable energy capacity by 2030, a major part of its commitment under the Panchamrit framework outlined at COP26.
  • The goal is to ensure 50% of the country’s total energy mix comes from renewable sources by 2030.
  • These efforts align with India's broader climate goals of reducing carbon intensity by 45% by the end of the decade and achieving net-zero emissions by 2070.
• Green Hydrogen Commitment: A key component of India's renewable energy strategy is the development of green hydrogen.
  • The government aims to produce 5 million tonnes (MT) of green hydrogen annually by 2030, supported by a dedicated 125 GW of renewable energy capacity for hydrogen production.
  • This initiative is expected to position India as a global leader in clean hydrogen production, which is crucial for decarbonizing hard-to-abate sectors like industry, transport, and heavy-duty power generation.

What are Key Schemes & Initiatives to Boost India’s Renewable Energy Sector?

• Union Budget 2024: The Union Budget 2024-25 allocates Rs 10,000 crore to the Centrally Sponsored Scheme for Solar Power (Grid), marking a significant 110% increase from the Rs 4,757 crore allocated in the previous budget.
  • Additionally, the PM-Surya Ghar Muft Bijli Yojana, launched in February 2024 with an overall outlay of Rs 75,000 crore, has received Rs 6,250 crore for implementation. It aims to promote the adoption of solar rooftop systems.
  • The budget also announces the exemption of Basic Customs Duty (BCD) on imports of 25 critical minerals, essential for the growth of the renewable energy sector.
• PM-KUSUM Scheme: The PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan) scheme plays a crucial role in promoting solar energy in agriculture.
  • It aims to install solar pumps and solarized agricultural feeders, reducing farmers' reliance on grid power and diesel.
  • With a target to install 34.8 GW of solar capacity through decentralized solar projects, this initiative supports sustainable farming practices and enhances rural energy access.
• National Green Hydrogen Mission: India’s National Green Hydrogen Mission, with a budget of Rs 19,744 Cr, aims to develop a competitive and self-reliant green hydrogen industry.
  • The mission focuses on producing green hydrogen at scale and promoting its use in sectors like industrial decarbonization, heavy transport, and energy storage, helping India meet its climate goals while creating jobs and boosting economic growth.
• Solar Park Scheme: India has approved 55 solar parks with a combined capacity of 40 GW under the Solar Park Scheme.
  • This initiative simplifies land acquisition, provides infrastructure, and attracts private investments by offering pre-developed sites for solar projects.
  • It plays a pivotal role in achieving the country’s solar energy expansion goals.
• PLI Scheme for High-Efficiency Solar PV Modules: To reduce dependency on imported solar components, India has launched the PLI Scheme for High-Efficiency Solar PV Modules, which incentivizes domestic manufacturing.
  • The scheme has a target to build 65 GW of annual manufacturing capacity by 2026, with a focus on enhancing the efficiency and competitiveness of India’s solar manufacturing sector.
• Green Energy Corridor: The Green Energy Corridor aims to strengthen transmission infrastructure to efficiently transfer renewable power from energy-rich regions to demand centers.
  • The first phase, covering eight renewable energy-rich states, is already underway, with phase II planned to expand transmission networks to other parts of the country, further integrating renewable energy into the grid.
• Viability Gap Funding (VGF) for Offshore Wind: The Viability Gap Funding (VGF) scheme supports the development of offshore wind projects along India’s coastlines.
  • With a target of 30 GW of offshore wind by 2030, this initiative focuses on Gujarat and Tamil Nadu as primary sites for offshore wind farm development, aiming to create a new source of renewable energy generation.
• International Leadership in Renewable Energy: India has demonstrated its global leadership in renewable energy through initiatives such as the International Solar Alliance (ISA), which it co-founded with France.
  • The ISA aims to mobilize USD 1 trillion in solar investments and facilitate the deployment of 1,000 GW of solar power by 2030.
  • The idea of One Sun, One World, One Grid (OSOWOG) proposed for the first time, in 2018, at the first assembly of the International Solar Alliance (ISA) aims to create a global interconnected renewable energy grid.
    • It involves three phases: connecting India to neighboring regions, expanding to Africa, and achieving global interconnection by 2050.

What are Challenges in the Renewable Energy Sector in India?

• Land Acquisition: One of the major challenges in the renewable energy sector is acquiring sufficient land for large solar and wind projects.
  • Many suitable land areas are either densely populated or used for agriculture, creating delays in project implementation and escalating costs.
• Taxation in Clean Energy: From 2010 to 2017, India levied a cess on coal production to fund clean energy projects.
  • However, the introduction of GST in 2017 subsumed the coal cess into the GST compensation cess, altering fund distribution to offset states’ revenue losses.
  • This shift in taxation illustrates the challenges and ongoing adjustments needed to support clean energy financing within India’s fiscal landscape.
• Availability and High Cost of Technology: The renewable energy sector faces significant challenges due to the high cost and limited availability of critical technologies.
  • China's reluctance to provide access to solar manufacturing technologies is compounded by the fact that 98% of solar module equipment is produced in China.
  • India relies heavily on imports for critical components such as solar panels, wind turbine parts, and electrolyzers for green hydrogen.
  • In FY23, China made up a staggering 94% of India's total solar PV cell imports and 93% of its solar PV module shipments.
  • This dependency exposes the sector to risks related to global supply chain disruptions and price fluctuations, hindering the sustainability of India’s renewable energy growth.
• Grid Infrastructure and Stability: India’s existing grid infrastructure requires substantial upgrades to integrate large volumes of intermittent renewable energy like solar and wind.
  • The lack of adequate storage solutions and flexible grid systems can lead to instability, affecting the seamless supply of renewable energy.
• Financing and Investment: Despite India’s renewable energy growth, attracting long-term capital remains a challenge due to high upfront costs, constant upgradation of technologies, and concerns over return on investment.
  • The sector’s capital-intensive nature requires consistent investment, but uncertainties regarding policy changes and global economic conditions pose risks to potential investors.
• Regulatory and Policy Hurdles: Inconsistent regulatory frameworks and delays in project approvals across states create barriers to the timely development of renewable energy projects.
  • Streamlining regulations and improving coordination between the central and state governments are crucial to ensuring faster implementation and fostering investor confidence.
• Skilled Workforce Shortage: As the renewable energy sector expands, there is a significant need for a skilled workforce, particularly in areas like green hydrogen production, energy storage technologies, and advanced solar and wind technologies.
  • Building a robust workforce through training and skill development programs is essential for sustaining growth in the sector.

Way Forward

• Land Acquisition: To address land acquisition challenges, India must explore innovative solutions such as utilizing non-agricultural or degraded land for solar and wind farms.
• Promoting rooftop solar and integrating renewable energy in urban infrastructure can reduce dependency on large tracts of land.
  • Collaborative land pooling models and policy incentives for landowners can also expedite the process.
• Taxation in Clean Energy: The government should revisit the taxation framework to ensure that clean energy projects receive consistent and sustainable funding. Clarifying the allocation of cess revenues and enhancing tax incentives for renewable energy investments will encourage long-term financing.
  • Strengthening the connection between GST collections and clean energy subsidies can help stabilize funding streams.
• Availability and High Cost of Technology: India should focus on strengthening domestic manufacturing capabilities for critical components like solar panels, wind turbines, and electrolyzers. This can be achieved through incentivizing innovation and production under schemes such as the PLI Scheme.
  • Additionally, fostering public-private partnerships (PPP) to reduce dependency on foreign suppliers and mitigate supply chain risks is essential.
  • Negotiating technology-sharing agreements with countries that have advanced manufacturing capacities could also alleviate the technology gap.
• Grid Infrastructure and Stability: Upgrading grid infrastructure to accommodate renewable energy is crucial.
  • The government should invest in modernizing the transmission network, focusing on smart grid technology, and incorporating energy storage solutions such as batteries to handle intermittency.
  • Strengthening cross-border grid interconnections can help balance supply and demand across regions, enhancing grid stability.
• Financing and Investment: To attract more investment, India should introduce attractive financial models, such as green bonds and renewable energy investment funds, while ensuring policy stability.
  • Clear long-term incentives, a reduction in bureaucratic hurdles, and risk mitigation strategies like power purchase agreements (PPAs) will foster investor confidence.
  • Furthermore, creating a dedicated green energy fund can ease the flow of capital into clean energy projects.
• Regulatory and Policy Hurdles: Streamlining regulatory processes and creating uniform policies across states will expedite project approvals and reduce delays.
  • Centralized platforms for project monitoring and approval can also improve coordination between the central and state governments, ensuring faster implementation of renewable energy projects.
• Skill Development Programs: Expanding training programs for skilled workers in renewable energy technologies will address the sector’s labor shortage.
  • Initiatives like Solar Technology Application Resource Centre (Star-C) and vocational training for emerging sectors like hydrogen production and energy storage will build a capable workforce to support the country’s renewable energy transition.