The shift to green energy in India has bolstered new investments and government initiatives, creating an ecosystem to support targets for the next decade. As the demand for power increases, the third-largest energy consumer in the world is ramping up its green energy production with a goal of 175 gigawatts (GW) of renewable energy by 2022 and 450 GW by 2030. The country ranks fourth globally in terms of overall renewable energy capacity.
According to rating agency ICRA, electricity demand in India is expected to increase by 6% in 2021-22 compared to the same period last year, at an estimated additional power generation capacity of 17- 18 GW. Recently, the government has executed several reforms to promote green energy use among companies in India, including a green tariff policy, which is considered vital for the power sector.
The rise of renewables investments
A report by think-tank Carbon Tracker revealed that India has increased its renewable energy production from less than 20 GW of solar power in 2010 to 96 GW of solar, wind, biomass, and small hydropower in May 2021.
Renewable energy comprises 142 GW or 37% of the country’s current power capacity, and the government is eyeing the production of 450 GW of green energy in India by 2030. According to India’s power minister Raj Kumar Singh, about $70 bn has been invested in renewable energy in the country over the last seven years.
Several companies have declared their own renewable energy goals and their commitment towards the carbon disclosure project (CDP), renewable 100%, and science-based targets (SBTs). Toyota, JK Cement, UltraTech, and NTPC are some of the companies that have submitted their energy compacts.
Speaking at a virtual event organized by the Ministry of New and Renewable Energy (MNRE), Singh mentioned that there has a liberal foreign investment policy for green energy in India, allowing 100% foreign direct investments (FDIs) via the automatic route in the sector. The minister commended Indian businesses’ commitment toward the country’s energy transition plans.
Reforms supporting green energy in India
India is working on a ‘green tariff policy’. It would help state-owned distribution companies (discoms) supply power from clean energy projects at comparatively lower tariffs compared to those from fossil fuel sources, according to Singh.
At present, discoms buy renewable energy as part of their renewable purchase obligations (RPO). However, if such a policy comes into place, they can exclusively purchase green electricity and sell it at ‘green tariff’, which will be the weighted average tariff of green energy that the consumer will pay.
Moreover, the government will establish rules to ensure that companies wanting to procure 100% green energy in India will have their open access applications approved within two weeks.
The government will also carry out measures that would reduce pollution and achieve targets made at COP-21, including green mobility, green hydrogen, battery storage, and ethanol mixing with fossil fuels.
Singh also cited several initiatives in the renewable energy sector, including viability gap funding options for offshore wind energy, launching of green term ahead market, and green day ahead market.
Indian giants are going green
Amid the growing interest in green energy in India, several companies have decided to use renewable resources to reduce their carbon footprint. Last June, Tata Power Co., a discom in Mumbai, reported that 37 of its major customers, including IT firms and banks, have decided to completely transition to green energy.
The transition toward renewable energy in India has been further fueled by the rivalry of two of the country’s biggest conglomerates, the Reliance Group and Adani Group.
Gautam Adani, India’s second-wealthiest man, has been expanding his Adani Green Energy, the renewables business of the Adani Group. By 2030, Adani Green Energy aims to become the country’s largest clean energy player.
Founded in 2015, Adani Green Energy has a portfolio of 15,390 MW of renewable energy across 11 Indian states. It is currently capable of producing 3,023 MW of solar energy and 497 MW of wind power. The firm is also building a hybrid power project that could produce 2,290 MW of power.
However, a rising competition to Adani’s position is the renewable energy business launched by India’s wealthiest man and chairman of Reliance Industries, Mukesh Ambani, in June 2021. Ambani wants to produce the 100 GW out of the government’s 450 GW target through Reliance Industries and plans to invest $10 bn over the next three years to fulfill this goal. Additionally, another $2 bn will be used for investments across the value chain, technology, and partnerships for the new energy business.
Industry experts believe that Reliance Industries could become a major player in green energy in India, in a short span of time. Vibhuti Garg, an energy economist at the Institute for Energy Economics and Financial Analysis (IEEFA), pointed out that Reliance’s expansion of its domestic manufacturing of solar cells, modules, battery storage, and other related items will not only help India’s clean energy objectives but also allow domestic firms to be less dependent on imported materials for green energy equipment.