India's power sector is gravitating towards renewables

Power generation in India is increasingly reliant on renewable energy sources, to a large extent sparked by targeted government efforts and policy initiatives. This is according to a new report by Big Four accounting and advisory firm PwC.

India’s power system supports as many as 200 million people across a vast geographical expanse, making generation and distribution a complex puzzle. Where the system has previously felt the strain of supporting such a large population, PwC reports that installed capacity has been on the rise in India over recent years.

This is combined with improvements in transmission and distribution infrastructure, leading to an overall reduction in shortages. Government initiatives and restructuring efforts have been a key factor in these improvements, and the government’s focus has now shifted to increasing the share of renewable energy sources in the power system.

In 2015, the government laid out a plan to go green with energy generation, pledging to reach 175 gigawatts (GW) of renewable energy generation by 2022. 100 gigawatts of this would be solar power, while 60 GW would be wind power, 10 GW would be bio power, and 5GW would be small hydro power.

In 2018, energy consultancy Bridge to India reported that the progress towards these goals was slow, and that it was unlikely that the government would meet the 2022 target. The firm anticipated that solar energy would only reach 66% of its target, while wind power would reach 87% of the target.

Nevertheless, although still predicted to fall short of targets, renewable power generation has been growing with remarkable speed in India, on the back of significant investments in the sector. PwC reports that renewable sources have grown at a compound annual growth rate (CAGR) of 19% over the last decade.

This gradual shift has not only led to changes in the energy landscape, but also is impacting other parts of the economy, including the wider energy ecosystem and the regulatory framework for energy generation.

“The focus on clean technologies has also led to the need for structural changes in the policy and regulatory landscape and in market design and instruments,” said the PwC report.

Coal being displaced?

One such change has come in the coal sector, which is feeling the ill-effects of a shift away from 'dirty' energy. As of last year, coal was the largest energy source in India, accounting for 55% of all installed capacity and 76% of total electricity generated. However, a number factors are expected to threated this dominance.

With the share of renewables on the rise, the costs of renewable energy generation are expected to decline in the near future, corresponding with a simultaneous increase in coal prices. A dip in solar tariffs is expected to be a key factor in this shift.

The shift away from coal is being welcomed by the government and consumers, given the environmental threats that coal poses, as well as the significant damage it causes for human health. Among the negative externalities of coal are air pollution, water pollution, noise pollution and land degradation. 

The report also details how India’s anti-pollution mechanisms could do with a degree of improvement. “India’s pollution norms need strengthening compared to those of other major economies, including China. Despite this, its power plants fail to comply with even the relaxed levels of performance, lacking the basic technologies to control pollution,” said the report.