A policy road map to reach 500GW by 2030

India has demonstrated cost-effective renewable capacity deployment through innovative policy measures. Now it is time to build on this strong groundwork

At the Conference of the Parties (COP 26) in Glasgow in 2021, India announced a target of 500 GW of non-fossil fuel capacity by 2030. This announcement builds on the previous target of 450 GW of renewable energy (RE) capacity that was announced by Prime Minister Narendra Modi. The 2030 India Report published by the Lawrence Berkeley National Laboratory concluded that deploying 450 GW of total installed solar and wind capacity along with resources such as battery storage will be a cost-effective way of meeting India’s 2030 load and its second COP commitment of 50% clean electricity generation.

As India ramps up its renewable ambition, a new set of policies will be required to propel deployment to the next orbit. (AFP)

As of January 2022, India installed 105 GW of renewable capacity, of which solar and wind power added up to 90 GW. Another 55 GW of solar, wind and hybrid capacity is in the pipeline. This rapid pace of installation has been enabled by a bouquet of central and state-level policies and regulations, including national solar and wind mission targets (175 GW of RE by 2022), Renewable Purchase Obligation (RPO) at the state level, solar parks to facilitate land acquisition and grid connectivity, bulk procurement and payment guarantees via the Solar Energy Corporation of India (SECI) to reduce offtake risk, waiver of inter-state transmission charges, competitive bidding resulting in low prices and must-run status.

However, as India ramps up its renewable ambition, a new set of policies will be required to propel deployment to the next orbit. Policy measures that integrate renewables into the core of power system planning and operations are the need of the hour. Second, grid-scale battery storage would be key to utilising RE generation for meeting demand during peak hours. Without large-scale deployment of battery storage, more coal capacity would be needed to meet peak load, which would run at low capacity factors, increasing the risk of stranded assets.

Given the trade deficit with China and energy security concerns, the bulk of plant components must be domestically manufactured. Accelerating the pace and scale of renewable energy deployment will require large volumes of affordable debt to be mobilised. Depth in power markets will be crucial, and so will grid flexibility close to real-time. Therefore, five key policy and regulatory measures are needed to address these challenges.

One, adopt a 500 GW non-fossil capacity target along with a battery mandate. The central government should enshrine this target in policymaking by adopting inward-facing “mission” capacity targets for the solar and wind mission. This mobilises the government machinery to work towards it. Based on the 2030 India Report, a mix of about 300 GW solar and 140 GW installed wind capacity is recommended. A battery storage trajectory of about 50 GWh by 2025 and 250 GWh by 2030 could provide a strong signal to industry for deployment as well as domestic manufacturing.

Two, integrate renewables into state-level planning and procurement. Institutionalise a least cost integrated resource planning framework at the state level, thereby integrating renewables into the mainstream of power system planning. The ministry of power and the Central Electricity Regulatory Commission have already initiated work on a Resource Adequacy (RA) framework for the states.

An RA framework will ensure that states can meet their demand reliably and enable them to share their resources. This can be complemented by all-source procurement at the state level, where different types of resources compete in the same procurement process and economic models are deployed to determine the least cost portfolio.

Three, ramp up domestic manufacturing and investment in research and development (R&D). The production linked incentive (PLI) scheme allocating around $5.5 billion over five years to incentivise manufacturing of solar cells, panels and batteries is a welcome development. This was followed by a slew of announcements by industry for setting up about 20 GW of new photovoltaic (PV) cell and module manufacturing capacity and bids adding up to 130 GWh of battery manufacturing capacity. Streamlining the implementation of this scheme, along with enhancing investment in R&D, will be critical for fuelling job growth in the sector.

Four, increase availability and reduce the cost of finance. Additional renewable energy and battery capacity and associated transmission infrastructure required in line with deploying 450 GW will require over $20 billion of annual additional debt deployment. The sectoral lending constraints on banks imply that there is a need to seek new sources of capital such as the domestic bond market, foreign debt markets, and greater investment from domestic and international institutional investors.

While risks on receivables exist, using public money to incentivise these capital flows, in the form of credit enhancement and other risk-sharing mechanisms, will offer the required buffer to attract investment.

Five, build upon ongoing market reforms. The last couple of years have seen several power market reforms, including a real-time market, green day ahead market and ancillary services market. Battery storage is a distinct type of resource which can act as a generator or load, warranting a novel set of market rules to compensate for the full range of services it can provide. SECI has issued draft guidelines for competitive procurement of battery storage systems, which is a great first step. But to achieve large scale deployment, other facilitating business models will be crucial.

India has demonstrated cost-effective renewable capacity deployment through innovative policy measures. Now it is time to build on this strong groundwork by bringing renewables from the margins to the core of power system operations. The aforementioned measures together will offer strong tailwinds to this mammoth task, and help India realise the vision of a clean grid as the foundation of a clean economy.

Shruti M Deorah is senior energy policy analyst at UC Berkeley Goldman School of Public Policy. Kanika Chawla is Programme Manager, UN-Energy, SEforALL 

The views expressed are personal