Context:
India will likely fail to meet the February 10 deadline for submitting its third round of climate action plans under the Paris Agreement on account of hurdles in the adoption of renewable energy (RE). A major setback is that 40 GW of RE projects tendered by government agencies remain unsold.
Key Challenges in Renewable Energy Adoption
Lack of Power Sale Agreements (PSAs)
- 40 GW of RE projects handed out by SECI, NTPC, NHPC, and SJVN are still in the unsigned books.
- Neither do the state governments want to buy this power, forcing a bottleneck in the adoption of RE.
Dropping Renewable Energy Prices Threating SEBs
- The cost of solar power per unit is ₹2.50, and this makes it the cheapest source of electricity. This also gives rise to another challenge as SEBs are hesitant to sign long term agreements due to prices which keep falling with every auction.
- A study by TERI and the Climate Policy Initiative predicts that solar power prices could fall to ₹1.9 per unit by 2030, making future contracts cheaper than current ones.
Stalled Investments and Regulatory Setbacks
- SECI’s failure to sign power purchase agreements (PPAs) has led the Central Electricity Regulatory Commission (CERC) to reject tariff approvals for the first ever grid scale battery energy storage systems (BESS) tender.
- BESS technology is essential for storing RE and ensuring a stable power supply, but its development has been hampered.
Coal Continues to Dominate Power Generation
- RE still stands at 46.3% of India’s installed capacity, while coal remains the primary source.
- Without an efficient storage system, the stochastic nature of RE makes coal indispensable for reliability in power supply.
Consequences for India’s Climate Targets
- India plans to raise non fossil fuel based power generation capacity to 500 GW by 2030, which is not feasible due to structural reasons.
- Lack of PSA/PPAs, Stalled investment and dependence on coal would retard India’s trend towards Newly introduced low carbon energy sources.
