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thermal applications. The programme was recently extended until 2020 and the subsidy is available for a variety of CST applications, such as community cooking, solar process heat and solar cooling.
India is the second-largest global sugar producer. In the sugar industry (which also produces ethanol for fuel and industrial purposes), bioenergy meets a significant portion of energy demand because sugar cane bagasse is used to generate process heat and electricity for on-site use and export.
India is also the second-largest cement producer globally, with output on an upward trend. The thermal energy required to produce clinker, which is used as a binder in cement products, accounts for most of the total energy used in cement production. This thermal energy is typically produced from fossil fuels, mainly coal. Lower-carbon biomass and waste (“alternative fuels”) can substitute for fossil fuels in cement kilns, lowering CO2 emissions. The potential for greater use of alternative fuels, particularly municipal solid waste, is strong in India. The country’s Nationally Appropriate Mitigation Action (NAMA) for waste involves using refuse-derived fuel from urban areas within a specified distance from cement plants, and it anticipates that alternative fuels could generate almost 19% of the cement industry’s thermal energy demand by 2030. India’s waste management rules also promote the use of waste in industry when it is available within a 100-kilometre radius.
Moreover, a large proportion of steelmaking in India is via direct reduction of iron, which could be a viable application for direct or indirect electrification (renewables-based hydrogen). Direct electrification is possible via: electromagnetic technologies for heating, hardening and melting; heat pumps and mechanical vapour recompression; and inexpensive resistance heaters in boilers or furnaces (taking advantage of cheap “surplus” power when available). Indirect electrification can be achieved via hydrogen and its derivatives as an intermediate energy vector. Possible applications include using hydrogen to produce ammonia for fertiliser production or for use in refineries. Further analysis on the commercial viability of these options is needed to assess the market potential.
Assessment
India has emerged as a global leader in renewable energy, notably in solar power. By end of November 2019 grid-connected renewable electricity capacity had reached 84 GW, including 32.5 GW from solar PV and around 37 GW from onshore wind as well as small hydro.
The GoI adopted an ambitious target of 175 GW renewable electricity capacity by 2022; the target is sub-divided into 60 GW utility-scale solar PV, 40 GW rooftop solar, 60 GW wind power, 10 GW bioenergy and 5 GW small hydro. In 2019, the Prime Minister of India,
Shri Narendra Modi announced a new target of 450 GW of renewable energy capacity. Such a medium-term target can help guide further deployment and auction trajectories over time.
The target has spurred unprecedented growth in solar PV and wind in the country and has gone hand in hand with increased international engagement, including the
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establishment of the International Solar Alliance. In addition, modern bioenergy use in power generation and industry has been expanding rapidly.
India has put in place a number of important policies that have underpinned recent strong expansion of renewables. However, it will need to further strengthen policy action and accelerate policy implementation to address a number of barriers that still hamper renewables deployment. Among the main investment barriers and risks to renewable electricity growth in India are the financial health of DISCOMs, weak transmission and distribution grid infrastructure and difficulties in permitting and land acquisition.
According to IEA data, bioenergy and waste is the largest source of renewable energy in India’s primary energy supply (21% of TPES, the third-largest energy source in India). However, more than two-thirds of India’s bioenergy consumption comes from traditional use of biomass in the residential sector resulting in negative environmental and health impacts. The GoI has introduced policies promoting modern and clean use of bioenergy in households, as well as the replacement of the traditional use of biomass with alternative cooking and heating fuels, both renewable (solar cooking) and non-renewable (such as LPG).
Electricity
Historically, large hydropower has been the dominant source of renewable capacity and is still the largest contributor to renewable electricity generation (46 GW), with a large untapped potential. However, other technologies are quickly catching up. The GoI has set out longer-term targets of 275 GW by 2027 and 450 GW of renewable energy capacity thereafter, which would translate into a share of 40% of total installed capacity.
The 175 GW renewable electricity target for 2022 has given an increased impetus to existing policies and measures, while also stimulating the adoption of new instruments, notably centrally run auctions for solar and onshore wind. These aim to address a number of issues including: a) ensuring demand for renewable electricity from financially viable off-takers; b) facilitating land acquisition for projects and timely grid connection; c) reducing policy uncertainty; and d) ensuring sufficient power system flexibility, including robust grid infrastructure, battery storage and smart grids (see Chapter 8 on system integration of renewables).
However, the targets cannot be achieved by central auctions alone. State auctions by DISCOMs are also relevant. Improving the financial viability of DISCOMs (see Chapter 7 on electricity) is thus a key measure for achieving the renewable energy target. At the same time, auctions should better reflect the location and value of power to the system, not only the price offered.
One mechanism that can contribute to ensuring sufficient demand for renewable energy at a state level is the RPO. RECs are used by the obligated entities to meet their specified RPO. The State Electricity Regulatory Commissions determine RPO trajectories and monitor for compliance.
In 2018 the GoI announced an increased ambition of 227 GW renewable capacity by 2022. In June 2018 it raised the quota for RPOs from 17% to 21% for 2022/23, with a view to increasing the share of renewables in the mix of India’s large power consumers in line with the increased ambition. While the relevance of the RPO has somewhat diminished with the increased cost-competitiveness of renewables, ensuring ambitious
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state-level targets and enforcing compliance would provide increased visibility and certainty for the renewables industry.
Transmission grid infrastructure has been expanded, including through the Green Energy Corridors programme. Good progress has been made since the launch of this initiative thanks to the financial support of the central government to the states. However, with the discontinuation of the Clean Energy Fund, further extension of interstate transmission grid infrastructure is at a risk. Much of the deployment does not take place at interstate level, but at the intrastate transmission level. Better transmission planning is critical for the Indian power system and the successful integration of renewables in the system (see dedicated Chapter 8 on system integration).
Solar parks have been designed as an instrument to overcome land acquisition and connectivity issues. They have experienced some delays compared to original schedules, but their further smooth implementation will be a crucial tool for ensuring continued solar PV deployment. Because of lower availability of high-resource land, the solar park concept cannot be replicated readily for wind power plants and land acquisition remains an important challenge for onshore wind.
Contracting for new onshore wind projects moved from administratively set price incentives (generation-based incentive, feed-in tariff) to an auction system in 2014/15. While such a shift is in line with global policy trends, a delay in auctions and issues with auction design led to a hiatus in capacity deployment. Wind additions peaked in 2016/17 as developers rushed to connect projects before the expiry of the generation-based incentive, but then dropped sharply the year after. This policy transition has been challenging in particular for the domestic wind manufacturing industry, which had planned for continued uninterrupted deployment streams. The design and timing of auctions are among the major challenges for maintaining progress. Publishing trajectories for the different time horizons of renewables targets would support the better planning of auctions and transmission, land acquisition and connection needs.
The July 2019 bidding guidelines have addressed some of the issues, notably by increasing the rate of auctions, relaxing the deadlines for land acquisition and easing penalties, and assessing future increases in the ceiling tariffs for auctions.
Most recently, deployment has also been slowing for large-scale solar PV. In 2018 the introduction of duty of 25% on imported PV panels from China and Malaysia led to uncertainty in the solar PV sector regarding actual equipment costs for developers. Another recent challenge has been the depreciation of the Indian rupee vis-à-vis the US dollar. This introduces foreign exchange risk because renewable energy PPAs are in Indian rupees. The resulting challenges for project financing could be further exacerbated by a global trend towards rising interest rates.
In 2018 an unprecedented number of auctions for new renewables capacity were undertaken, predominantly for solar power. While this is in line with the requirements of reaching the 2022 target, ad hoc announcements and very large tendering volumes can bring challenges for successful contracting of capacity. There is also a trade-off between the desire to develop the domestic manufacturing industry and moving quickly. For example, the 10 GW SECI tender linked with 3 GW of annual manufacturing capacity had to be postponed and reduced in size several times due to low developer interest.
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Providing longer-term information on planned auction volumes and adhering to such schedules will be an important measure to support market development. It is welcome that the MNRE has proposed a monthly schedule to co-ordinate activities between SECI, NTPC and public-sector undertakings and state agencies, so as to avoid several auctions at the same time.
The recent price drop for panels has made solar PV technology more attractive for some DISCOMs, but has also increased the appetite for states to renegotiate or cancel contracts for projects previously awarded at much higher prices. In July 2019 the government of Andra Pradesh decided to unilaterally cancel the PPAs that were in the pipeline.
Deployment of distributed solar PV is also facing challenges and so far only 2.14 GW of small-scale solar PV has been installed. Lack of commercial interest by DISCOMs, the relatively small average system size, especially in the residential sector, combined with often low-quality installations are seen as the main reasons for the slow deployment. Nevertheless, good progress has been made in some states, where state nodal agencies and DISCOMs have started to aggregate demand through unification of state tenders for subsidised rooftop plants to standardise quality and cost per installed kilowatt.
Net-metering policies are being implemented in 28 states and could enable faster expansion of distributed solar PV, but tariff reform and the presence of aggregators could improve the approvals process and system design, especially for residential applications where retail tariffs are subsidised significantly.
The political determination behind, and continued improvement of, the policy environment for renewable electricity are highly commendable. Expanding ambition to technologies beyond wind and solar in electricity, as well as taking a more holistic approach across sectors, could further enhance the contribution of renewable electricity to meeting India’s energy policy objectives.
Transport
The development of transport biofuels can support various GoI ambitions and programmes, such as: developing technology, skills and employment under the Make in India programme; increasing farmers’ income; reducing energy imports and therefore meeting the goal to reduce crude oil imports by 10% by 2022; and supporting waste to wealth creation.
India has historically struggled to meet its 5% ethanol blending mandate and biodiesel is at an early stage of development, as there is no formal mandate. Under the new 2018 biofuels policy the long-term drivers for expansion of the fuel ethanol industry are strong. Production capacity is set to increase as a result of the large number of applications for new subsidised government loans, which combined with the expansion of the permitted feedstock base for production should see ethanol output grow.
Increased fuel ethanol production would support the financial health of sugar mills while also displacing a higher share of gasoline demand – which is anticipated to grow at approaching 10% per year over the next five years – with a lower-carbon alternative. Therefore, using domestically produced ethanol is viewed as a means to offset oil demand, in line with the aim of reducing crude oil imports by 10% by 2022.
OMC’s ethanol procurement processes are likely to need streamlining, and interstate logistical barriers (e.g. taxation) and constrained storage capacity at refineries will need to
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be dealt with to ensure the 5% mandate can be met and production can move towards the more ambitious 20% blending target within the new biofuels policy. Besides ethanol, biogas, compressed biogas and methanol are considered to have strong growth potential.
Scaling up biodiesel production and consumption remains challenging, with securing sufficient access to sustainable feedstock a key priority. Growth will require increased plant capacity, feedstock supply mobilisation and policies to facilitate demand. To ramp up production, the collection of waste residue feedstock will be critical. The production of biodiesel and hydrotreated vegetable oil from used cooking oil feedstock offers promise. Aside from offering significant CO2 emissions reduction compared to fossil diesel, such fuels can also lower air pollutant emissions. Enforcing regulations for the reuse of cooking oil to avoid negative health impacts could also spur a framework for collection and foster its use to produce biodiesel or hydrotreated vegetable oil.
India’s support for the emerging advanced biofuels industry is commendable. Advanced biofuel production in India has the long-term potential to support energy security due to the high availability of agricultural residues. Finding alternative uses for such residues is important to limit in-field burning, which damages air quality. However, the development of India’s advanced biofuels industry faces several challenges. These relate to technology development and feedstock logistics such as the collection of waste and residues.
As a founding member of Mission Innovation (MI), India co-leads the Sustainable Biofuels Challenge. The Ministry of Science and Technology (Department for Biotechnology) is co-ordinating the MI programme as key nodal agency. It facilitates national efforts in collaboration with relevant ministries, notably the Ministry of Road Transport and Highways, the MoPNG and the MNRE.
Substantial expertise in advanced biofuels policies is available at international level, from Brazil, the United States and Europe, and the IEA can see significant benefits for India in working through the Biofuture Platform, for which the IEA is the facilitator.
EfW
Despite pressing waste management challenges from urbanisation, population and economic growth trends, EfW activity (in the form of municipal solid waste plants) is very low. Over the longer term, the robust implementation of the 2016 waste management rules should spur uptake.
The use of EfW plants with controlled high-temperature combustion and pollution control technology is a superior solution to landfills, as it can generate electricity for cooling or heating purposes through combined heat/cooling and power generation. This reduces uncontrolled burning, which often happens when waste collection and disposal are inadequate, with negative impacts on air quality. The municipalities need to undertake integrated waste management planning to maximise the reuse and recycling of materials, ensure sufficient collection and source-segregation infrastructure and application of the best pollution control technologies at EfW plants. Factors favouring further EfW deployment include the availability of collection fees, tax incentives and financial de-risking measures. Conversely, low rates of processing and treating collected municipal solid waste hinder sector expansion.
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