Development of Renewable Energy Sector in India – Evolution of Policy Regimes - Feedback

Man’s quest for development has encumbered the atmosphere with harmful emissions. After effects of global warming is known to all – be it melting glaciers, rising of global temperature or low-lying islands. Question of the hour is “What we will pass on to our next generation?” To overcome this complex situation, the world has united with an aim to make this world a better place to live in and India has taken a centre place in that. Towards this mission, India has launched an International Solar Alliance (ISA) at the CoP21 Climate Conference in Paris, with an announcement by Prime Minister Shri Narendra Modi that the revolution in the field would bring power to all citizens, and create unlimited economic opportunity. The new body, which has invited all countries located fully or partly between the tropics of Cancer and Capricorn to join, is to function from the National Institute of Solar Energy in India, Gurgaon.

India’s journey towards adoption of clean technology and renewable energy can be dated back to 1993 when first time a developing country like India was adopting FIT (Feed in Tariff) for Wind power plants. The Electricity Act, 2003 which transformed Indian power sector, was the first major policy document which gave a clear directive to promote renewable energy usage. The document talks about a national policy for permitting standalone systems (including those based on renewable sources of energy and other nonconventional sources of energy) for rural areas. The document also emphasized on the point that electricity regulatory commission should promote co-generation and generation of electricity from renewable sources of energy while determining the tariff. The act also categorically mentioned that a percentage of the total consumption of electricity in the area of a distribution licensee should be from some renewable sources. This was introduction of the system which we all know as Renewable Purchase Obligation (RPO).

By 2004, India had already established a biofuel target of 10% and three states had adopted a FIT scheme. Renewable energy generation got a boost with the introduction of Generation-based incentives for wind and PV solar across India in 2007. An important milestone during this journey came when on 30th June, 2008, the then Prime Minister Shri Manmohan Singh released India’s first National Action Plan on Climate Change (NAPCC). The plan identified eight core “national missions” running through 2017 and National Solar Mission was the first in the list. This indicated Govt.’s intention of bringing solar at the centre of renewable energy mix.

The National Solar Mission was aimed to promote the development and use of solar energy for power generation and other uses with the ultimate objective of making solar competitive with fossil-based energy options. The plan included:

  • Specific goals for increasing use of solar thermal technologies in urban areas, industry, and commercial establishments;
  • A goal of increasing production of photovoltaics to 1000 MW/year; and
  • A goal of deploying at least 1000 MW of solar thermal power generation
  • Establishment of a solar research centre, increased international collaboration on technology development, and increased government funding and international support

The mission was renamed to Jawaharlal Nehru National Solar Mission (JNNSM) in 2010 and was given a specific target for installation of solar power plant by 2022.

11th Plan Target


12th Plan

Projection (MW)

Total Projected Capacity by end of 12th Plan (2017) (MW) 13th Plan



Total Projected Capacity by end of 13th Plan (2022) (MW)
200 3,800 4,000 16,000 20,000

Present NDA Govt., led by visionary Shri Narendra Modi has taken this mission to GW level. Overall renewable energy capacity addition target has been set at 175 GW by 2022 – 100 GW from solar energy, 60 GW from wind energy and remaining from other non-conventional energies. With this, India will become one of the largest green energy producers in the world, overshadowing several developed economies.

100 GW of Solar energy capacity addition target comprises of 60 GW of large and medium scale grid connected solar power projects and 40 GW of rooftop solar projects. This will attract investment to the tune of Rs. 6,000 Bn. For preliminary support, the government is providing Rs. 150 Bn as capital subsidy. In rooftop, the government is focusing on viability gap funding based projects which would be developed through Solar Energy Corporation of India (SECI). To facilitate such a massive target the government is providing supporting interventions, like:-

  1. Incorporating changes in land use regulations and tenancy laws to facilitate aggregation and leasing of land by farmers/ developers for solar projects;
  2. Implementation of large scale solar projects through solar park model. SECI will be the implementation agency and will take care of the financial closure of the projects and will closely work with State Govt. appointed nodal agencies.
  3. Identification of large government complexes/ buildings for rooftop projects;
  4. Development of power transmission network/ Green Energy Corridor;
  5. Setting up of exclusive parks for domestic manufacturing of solar PV modules;
  6. Provision of roof top solar and 10 percent renewable energy as mandatory reform under the new scheme of Ministry of Urban Development;
  7. Amendments in building bye-laws for mandatory provision of roof top solar for new construction or higher FAR;
  8. Considering infrastructure status for solar projects; raising tax free solar bonds; providing long tenor loans; making roof top solar a part of housing loan by banks/ NHB and extending IIFCL credit facility to such projects by the Department of Financial Services;
  9. Suitable amendments to the Electricity Act for strong enforcement of Renewable Purchase Obligation (RPO) and for providing Renewable Generation Obligation (RGO);
  10. Incorporating measures in Integrated Power Development Scheme (IPDS) for encouraging distribution companies and making net-metering compulsory.

Other than the above, various other schemes have been introduced and extended in the past to boost renewable energy generation. Significant ones are Generation Based Incentive (GBI), Accelerated Depreciation (AD) and Renewable Energy Certificate (REC).

GBI scheme is applicable for grid interactive wind power projects for the entire 12th plan period (2012 – 2017). Under this scheme, a wind energy generator will get an incentive of Rs. 0.50 per unit fed into the grid for a period not less than 4 years and a maximum period of 10 years with a cap of Rs. 100 Lakhs per MW. The total disbursement in a year will not exceed one fourth of the maximum limit of the incentive i.e. Rs. 25.00 Lakhs per MW during first four years. The GBI scheme will be applicable for entire 12th plan period having a target of 15,000 MW. This incentive will be applicable over and above the tariff that may be approved by the State Electricity Regulatory Commissions (SERC’s) in various states.

AD scheme was introduced to incentivize investments in renewable segment, to accelerate profit-making by reducing the taxable income in the early years and to postpone higher taxes to a later period in time. At present renewable energy developers can claim an accelerate depreciation of 80% in the first year however, it will be reduced to 40% from April 2017. The renewable energy think tank is divided over the implementation of AD and its benefits.

REC scheme introduction assumes significance from the fact that Renewable energy generation potential is not same across the states in India. The Electricity Act, 2003 and NAPCC had provided a roadmap for increasing the share of renewable in the total generation capacity in the country. However, since Renewable Energy (RE) sources are not evenly spread across different parts of the country, this was inhibiting SERCs in these States from specifying higher Renewable Purchase Obligation (RPO). It is in this context that the concept of REC assumes significance. This concept seeks to address the mismatch between availability of RE sources and the requirement of the obligated entities to meet their RPO. It is also expected to encourage the RE capacity addition in the States where there is potential for RE generation as the REC framework seeks to create a national level market for such generators to recover their cost. Till date approx. 32 million RECs have been issued by Renewable Energy Certificate Registry of India (RECRI) and approx. 15 million RECs have been redeemed till date. The market for REC is showing good growth in the past few years.

The journey doesn’t end here. Ministry of New and Renewable Energy (MNRE) has launched specific assistance schemes in each renewable energy sector to draw investment and higher participation in that sector. Ministry of Power, in its recent amendment to National Tariff Policy, 2005 has tried to give another push to increase renewable power installation in the country and improve share of renewable power in the energy mix. Important amendments were –

  • Renewable Power Obligation (RPO): In order to promote renewable energy and energy security, 8% of electricity consumption excluding hydro power, shall be from solar energy by March 2022.
  • Renewable Generation Obligation (RGO): New coal/lignite based thermal plants after specified date to also establish/procure/purchase renewable capacity.
  • Affordable renewable power through bundling of renewable power with power from plants who’s PPAs have expired or completed their useful life.
  • No inter-State transmission charges and losses to be levied for solar and wind power.
  • Swachh Bharat Mission to get a big boost with procurement of 100% power produced from Waste-to-Energy plants.

Lot more can be done for the sector however the present govt. has shown the right intent to address all the ground level issues and take India at the centre of global renewable energy development programme. We are confident that one day it will be a renewable, clean and green world and our future generations will live a better and healthier life.

About Rudranil Roysharma

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