The government plans to gradually withdraw all the incentives for the renewable energy sector over the next five years, a move that may face stiff opposition from an industry that is to see significant growth in the coming years.
“There will be no targeting of renewable energy after 2022, and we will allow markets to determine the prices as well as kind of support the sector needs to sustain and integrate itself with the mainstream,” a senior government official told ET. The move is in line with the holistic draft National Energy Policy (NEP) drawn up by official think tank Niti Aayog, which has reasoned that the sector does not need any handholding after 2022, the official said.
Reasoning the move, the official said a base load is needed to support the generation of renewables. “This comes at a cost of traditional electricity which therefore gets expensive.” NEP, which is to replaced Integrated Energy Policy of the previous UPA regime, aims to provide levelplaying field for all sectors and hence is batting for withdrawal of all kinds of support to the renewables also.
According to Niti Aayog’s draft NEP, the sharp reduction in tariffs received in bids for solar and wind power is a reflection that these technologies are now exposed to market discipline and that there is a need to now address other lagging renewable sources such as hydro and biomass.
“Therefore, the NEP proposes gradual withdrawal of the provisions of ‘must-run’ status and other supports such as non-levy of inter-state transmission charges,” the draft policy said. Under ‘must run’ status, any power generated by wind and solar power plants should always be accepted by state power distribution companies.
“It is envisaged that as consumers become agnostic to the source of power, renewable energy will soon blend with conventional power and markets will determine dispatch rather than policy levers,” the policy paper said. However, companies operating in the sector are yet to firm up their views on whether this gradual withdrawal of benefits to the sector will help them or not.