Policy stability will spike renewable growth in India: IEEFA

Policy stability will spike renewable growth in India: IEEFA

Policy certainty will increase domestic and international investment in India, a replacement return on Thursday by the Institute for Energy Economics and Financial Analysis (IEEFA) said.

The report, India's Renewable Energy Policy Headwinds - Recommendations for Urgently Accelerating Activity within the Renewable Energy Sector, finds variety of recent policy positions that have undermined growth during this sector.

"India is one among the world's largest and fastest-growing markets for renewable energy and power transmission," report author and IEEFA's Director of Energy Finance Studies Tim Buckley told IANS during a statement.

"Domestic renewable energy tariffs are now two thirds the value of domestic coal-sourced power tariffs and half that of latest imported thermal power costs.

"India must be very pleased with this result, and that they must leverage this chance to reinforce energy security whilst securing deflationary domestic energy investments.

"The cost of delaying India's electricity sector transition is just too high.

"With a couple of policy tweaks, India might be back on target to satisfy its ambitious target of 450 gigawatts of renewables by 2030," said the report.

The IEEFA report identifies variety of policies currently stifling growth within the renewable energy sector in India.

They include the imposition of the photovoltaic cell and module trade duty in 2017, which the govt is now looking to increase beyond 2020.

The duty has neither reduced imports nor significantly improved the competitiveness of Indian manufactured solar cells. Instead, it's severely bogged down solar installs in India, both thanks to the additional cost imposed but equally due to the confusion on delayed implementation.

"The uncertainty of this trade duty has been one among the foremost serious impediments to India's renewable energy-momentum," said co-author Kashish Shah, IEEFA's energy finance analyst.

"Instead of trying to form Indian manufactured solar cells competitive by increasing the worth of imported modules, the industry needs an assured offtake in domestic markets, as was achieved within the recent, very successful solar manufacturing tender. It also must be incentivised for exporting."

Better centre-state coordination on renewable energy development and increasing the expansion of necessary transmission networks and balancing capacity (batteries, pumped hydro storage, demand response management and more flexible thermal capacity) are further policy areas requiring immediate attention.

"Renewable energy developers are currently experiencing delays and price overruns while expecting the central and state governments to speak to every other and streamline their activities. this is often jeopardising their project economics and stalling further investment," said Shah.

The report finds a key pre-requisite for continuing India's renewable energy investment ambition is concurrently building out and modernising India's national transmission grid to accelerate the big progress achieved over the last decade.

"India could attract $500 to 700bn in new investment by 2030 - the chance is large ," said Buckley.

"To do that , India's grid must be urgently expanded. The slow-down in transmission capacity is slowing India's renewable energy ambition.

"And the continuing ballooning underfunding of subsidies and rising state-discom debt is severely hampering the financial industry's ability to finance new renewable energy development, as is a few state's desire to renegotiate on projects. this is often not on - and creates instability for investors."

The report concludes that sovereign risk, policy risks, and erratic discom payments are all creating unnecessary financial constraints for the Indian renewable energy sector.