Transformation is aided by sustained deflation in renewable tariffs, tech upgrades, cheaper finance, expeditious tendering and political will
India is emerging as a transition force in power generation on par with China and Western Europe.
A report by US-based Institute for Energy Economics & Financial Analysis (IEEFA) says the country’s electricity generation market is changing rapidly. The transformation is helped by a sustained deflation in renewable energy tariffs, technology upgrades in wind and solar sectors, availability of cheaper financing, acceleration in wind and solar tender activity and a national political desire to abide by the Paris climate accord.
The shift in India’s energy generation priorities is amply reflected in the plummeting tariffs in both, solar and wind power sectors. In 2017, tariffs for wind and solar hit record lows of Rs 2.43 and Rs 2.44 per unit respectively in keenly contested competitive reverse auctions. A more recent wind auction on February 28 by the Solar Electrification Corporation of India (SECI) obtained a winning bid of Rs 2.44 per unit, vindicating the falling tariff story for renewable power.
“Solar tender activity in India has been impressive as well, with auctions for a total of 14,000 Mw in the last quarter of 2017-18 and an ambitious 30,000 Mw annual target for the next two years.
India has made recent progress, too on greater integration of variable renewable energy capacity as a result of building out it interstate and international grid connectivity”, the IEEFA report stated.
As per IEEFA’s forecasts, global renewable energy prices would continue to see at least 5-10 per cent annual deflation. For India, it sees the feasibility of prices falling below Rs two per unit barring self defeating import duty on solar modules.
IEEFA has also positioned India alongside China and Western Europe to play a leadership role in South Asia, with continued investment in Bangladesh, Bhutan, Myanmar, and Nepal. The key takeaway here is India agreeing to provide transmission infrastructure to expand energy trade with Bangladesh, with the near doubling of grid capacity from 600 Mw to 1,100 Mw due for completion by June 2018. The report believes this grid construction will open the door to lower-cost, increasingly renewables-based energy exports to the benefit of both countries.
According to IEEFA, a sensible strategy for India’s evolution (in energy) would involve exporting electricity to new markets in Nepal, Bhutan, Bangladesh and potentially Sri Lanka and Myanmar. Such a strategy would accelerate system-demand growth and improve thermal power capacity utilization, alleviating some of the ongoing stranded asset burdens that continue to erode returns in both the Indian power and banking sectors.
Land-poor Bangladesh has struggled to deliver on its renewable energy ambitions, but imports of low-cost wind and solar from India would create a win-win situation that would sustainably help power Bangladesh’s economic growth, the report suggested.
NTPC, India’s largest utility, already has adjusted base load coal-generation to accommodate the increasing availability of cheaper wind and solar energy in India’s renewable energy-rich southern states of Tamil Nadu, Karnataka and Andhra Pradesh. In addition, the central government has extended the waiver of interstate power transmission charges and losses for solar and wind power investments—provided the plants are commissioned by March 31, 2022.