India’s development of renewable energy as an alternative to conventional fuel has so far been a success story. The country’s installed renewable power generation capacity has grown rapidly in the recent past, posting a CAGR of 15.92% between FY16-22.
Leveraging these tailwinds, the Government of India has announced ambitious plans to install 500 GW of renewable energy capacity by 2030. A committee constituted by the Central Electricity Authority has confirmed that an investment of at least INR 2.44 lakh crore or INR 2.44 trillion will be required to manifest India’s grand vision of expansion to reality. Inevitably, achieving such a milestone will require both public and private buy-in.
To the Government’s credit, its support and implementation of strategic policies has also played a vital role in aiding India’s renewable sector to become a lucrative investment opportunity today. These policy initiatives range from making it easier for renewable energy consumers to draw power directly from the grid by open access, to streamlining the process for registering and trading in renewable energy certificates (RECs) as an additional revenue stream for generators. Underlining these policy initiatives is also the enactment of the general network access regulations by the Central Electricity Regulatory Commission (CERC) as a step towards fulfilling the vision of one nation one grid.
The previous year is also punctuated with the levy of basic customs duty in India on solar cells and modules imported from China, which was undertaken to reduce dependency on Chinese imports. To supplement this, the Government of India allocated INR 19,500 crores towards production linked incentive schemes related to solar modules in the Union Budget for 2022 – 2023.
It would also be remiss to not mention the promulgation of the Energy Conservation (Amendment) Act, 2022 on 20 December 2022 which amends the existing Energy Conservation Act, 2001 and provides for incorporation of a nodal agency, namely the Bureau of Energy, to enforce measures for efficient use of energy and its conservation. Amongst other things, the amendment also empowers the Government to provide for a carbon credit trading scheme for reduction of carbon emissions and to issue carbon credit certificates to entities which comply with the requirements of the scheme. As an incentive to potential investors, these carbon credit certificates can now be traded in markets as well. Taking this a step further, the Government has also introduced voluntary trading that allows designated consumers to purchase energy saving certificate or carbon credit certificate on voluntary basis (previously, this right was available only to consumer/entities who, having energy consumption more than the prescribed standards, were looking to purchase energy savings certificate to meet their compliance obligations).
In 2022 at the COP 27 summit in Egypt, India has committed to achieve net zero emissions by 2070. As a step in that direction, 7 on 4 January 2023, the Government approved the National Green Hydrogen Mission, allocating an amount of INR 19,744 crores towards its implementation. The initiative promises to reduce carbon emission, reduce dependency on fossil fuel imports and set up 125 GW of renewable energy capacity and invite investment in the sector. The mission also aims to develop an additional electrolyser capacity of 60 MW – 100 MW by 2030.
Given the policy focus that the Government has had on the growth of renewable energy, immense growth is anticipated in this sector in the near term. Foreshadowing this sentiment, the Union Budget 2022-23 has provided a budgetary allocation of INR 3365 crores for the solar power sector alone.
From an employment perspective, wind and solar energy markets already employ a workforce of around 111,400 people. Of this, utility-scale and rooftop solar are the dominant employers accounting for 77% of this total workforce in FY 2021. If India’s grand vision of creating 500 GW of generating capacity by 2030 are realized, it is expected that the renewable energy market will potentially employ around one million people.
India has set a target to reduce the carbon intensity of the nation’s economy by less than 45% by the end of the decade, achieve 50% cumulative electric power installed by 2030, and achieve net-zero carbon emissions by 2070. Much of the world has its eyes peeled on India’s journey towards meeting these targets.
This article was originally published in The Economic Times on 26 January 2023 Co-written by: Deepto Roy, Partner; Shubham Sharma, Senior Associate; Disha Adhikary, Associate. Click here for original article
Contributed by: Deepto Roy, Partner; Shubham Sharma, Senior Associate; Disha Adhikary, Associate
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