India: Aim, Hope High
Starting before industrialised Germany and the UK, India has perhaps promoted renewables the longest though a dedicated establishment. The country's Ministry of Non-conventional Energy Sources (MNES) is one of its kind in the world. India has the fifth largest installed wind capacity in the world at 2400 MW. In 2003 alone, India added 615 MW of wind energy. By March 2003, it had 484 MW of installed biomass power/zcogeneration, 53 MW from biomass gasifiers and 2.5 MW of solar PVs. Installed capacity for all renewables by March 2004 was more than 4,600 MW. The Indian government wants to have 10 per cent of additional power capacity till 2012 through renewables. This means additional 10,000 MW from renewables.
Traditionally, India has promoted renewables by subsidising capital costs, giving soft loans and tax grants and by tax depreciation. (see table: India: set to surge?). But the Electricity Act of 2003 sea-change India's electricity sector. The Act completely de-licenses electricity distribution and permits captive power generation. Any person who sets up a biomass gasification plant or a wind farm is free to sell electricity. "This is likely to boost up stand-alone renewable systems, which can then electrify more than 25,000 remote villages," says N P Singh, advisor, MNES. The Act also says that all state electricity regulatory commissions have to fix a certain minimum target (percentage of the total power) of electricity, which power distribution licensees will have to provide from renewable energy sources. "This Act gives tremendous hope to investors," says S V Kulkarni, head of marketing, Enercon India, a subsidiary of Enercon GmBH, a German-based wind turbine manufacturing company.
|India: set to surge?
||Policy measures and fiscal and promotional incentives
||Capital subsidies in certain states, soft loans, buy-back by state boards, concessional import duty on certain equipment, accelerated depreciation in the first year, sales tax, excise duty relief
||Incentives for detailed survey and site investigation, special capital grant for northeast region (Rs 7.5 crore per MW), Interest subsidy, financial support for renovation, modernisation
|Biomass & Cogeneration
||Buy-back by state boards, concessional customs duties, tax holiday and accelerated depreciation, soft loans, interest subsidy, capital subsidy on gasification projects for village electrification
||Capital subsidy for grid-connected projects, 50 per cent subsidy solar home systems and stand-alone power plants, 90 per cent subsidy to special category states and islands (also for remote villages which grid cannot reach)
||Capital subsidy for demonstration projects, financial assistance to Aditya Solar shops, interest subsidy
The National Electricity Plan and the National Tariff Policy will be critical in the support they provide to renewables. "The main shortfall in our policy and support mechanism was the different tariffs and policies of state electricity boards," says Kulkarni. "The single biggest impediment for renewable energy power producers in India is the state electricity boards' poor. As of February 2001, the boards collectively owed over Rs 40,000 crore to various central public sector undertakings and the railways. Over one-sixth of the power distributed in India is pilfered. About 60 per cent of it is either free or subsidised," says Pranab Ghosh, associate director of Mumbai-based Rabo India Finance Private Limited, which finances renewable energy projects in the country.
Back to basics
So what needs to be done? According to A M Gokhale, secretary, MNES wind energy is only a part of the solution. It is ideal for grid-connected power generation, but of no use to villages for it is intermittent, he says." "Only biomass-based technologies can ensure energy security in our villages. But it has been completely ignored," he adds (see interview: "We have completely ignored our biomass sector").
"While the Electricity Act 2003 is a huge step in the right direction, investors will now watch how these enabling regulatory mechanisms are operationalised. As opposed to the earlier emphasis on generation, there is growing realisation of the importance of investments in transmission and distribution infrastructure," says Ghosh. "We have consistently demanded a uniform fixed tariff from all electricity boards. Renewable energy projects also need longer power purchase agreements, at least 10 years, to provide investment security," says Jami Hussain, technical advisor, Indian Wind Energy Association, New Delhi.
As India reforms its electricity sector for more renewable energy, the world is getting together on renewables. Literally. More than 1,000 delegates will gather at Bonn, Germany, for the International Conference for Renewable Energies (Renewables 2004) in June at Bonn. It is being organised by the government of Germany, which along with the EU is a strong votary of globally-binding targets for renewables. But developing countries may not want that. As Gokhale puts it, "We do not agree with them: They cannot dictate targets and time periods to us."