Executive Summary

For inclusive economic growth and socio-economic development commensurate growth of India's energy sector is crucial. As far as electricity supply during 2009 and 2010 is concerned, there was a deficit of around 10% (12,053 MW) and a peak deficit of 12.7% (15,157 MW). These figures do not take into account the large un-electrified parts of the country. As per the latest data available, around 14% villages remain un-electrified. The Indian government has set a goal of providing all households with electricity at an affordable price by 2012. It has been estimated that to meet the goal of full energy access, India will need to add new electricity generation capacity of at least 300 GW by 2017.

Currently most of the energy needs in the country are met through fossil fuels. However, the potential for renewable energy in India is enormous given its large landmass that receives very high solar radiation; its long coastline and high wind velocities that provide ample opportunities for both land-based and offshore wind farms; its significant annual production of biomass; and its numerous rivers and waterways that can be tapped for hydropower. Some of the major initiatives taken by the country in the forms of policy and regulations include the formation of full-fledged Ministry of New and Renewable Energy (MNRE), Electricity Act, 2003; National Electricity Policy, 2005; National Tariff Policy, 2006; Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), 2005; and Jawaharlal Nehru National Solar Mission (JNNSM). While the contribution of renewable energy is 7.7% in the overall energy mix, government is putting in a lot of efforts in increasing its share. The targets set under JNNSM of 20 GW generation by 2022 learly shows government's commitment to achieve this target. Amongst all the renewable energy sources connected to the national grid, wind energy accounts for 70%.

Among the states, Tamil Nadu is the leader in wind energy exploitation with a total installed capacity of 5072 MW. On the other hand Karnataka is one of the leading states in the installation of solar hot water systems with an installed area of about 2.3 million square meters. These two states are analyzed in detail to understand the reasons of their successes in two very different renewable energy programs. The particular focus has been on lessons learnt from these states, so that supportive environment can be created in other states to promote renewables-based power in other states at a faster rate. On the basis of the experiences in these states, certain broad recommendations are made in the report that may help create environment for the utilization of solar and wind power in other states as well. Apart from the program and policy dimensions, the report also deals in detail with the Indian solar industry and carries out an assessment of solar technology from the point of view of their applications in the country.

These case studies establish that while the availability of good renewable energy resources is a key determinant, the other important factors behind the success of programs include favorable policy and regulatory environment; good grid network in the potential areas; land availability; and specifically in case of retail technologies like solar water heating systems: users' awareness; year-round demand; and established supply chains with reliable after-sales service. The success of wind power in Tamil Nadu underlines the crucial role played by its power utility, Tamil Nadu Electricity Board, especially in the formative years of wind power development in the state. This was a clear departure from other states where renewable energy activities are normally looked after by the state energy development agencies.

In case of solar water heating systems, the role of mandatory regulations along with strong complete supply chain is important. Renewable purchase obligations (RPOs) may have a component on solar water heating systems as these systems act as demand side management measure. The public awareness and education being central to successful programs, it is imperative for state agencies to engage the public through sustained awareness campaigns for different user-groups; including local elected representatives. Towards this a sustained campaign may be mounted encompassing all media resources including print, radio, and television. Apart from specific recommendations, such campaigns must inform public about the places from where these devices and services can be procured. It is also important to focus on research and development to improve technology, reduce costs,and increase ease of installation and use. The other critical area pertains to training of professionals along the complete value-chain. Financial and fiscal incentives help support the growth of solar technologies. However, such incentives, especially the capital subsidy must have a sunset timeframe right from the beginning. Fiscal incentives like tax exemptions, property tax rebates, and electricity bill rebates may be more useful. The electricity distribution utilities may become vehicle to promote solar water heating systems and route the incentives such as rebate on electricity bill. This would also help in reducing the transaction costs. Renewable Energy Service Companies (ReSCOs) may also be promoted to act as a one–stop shop for solar energy-based solutions.

Solar energy should be treated as a national resource and exploitation of the same accorded priority. To bring down the cost of solar power, partial risk guarantee funds could be set up in collaboration with the multilateral development banks and through international funding for propagation of clean technologies. This would also encourage the local financiers to finance such projects. Besides, favorable policies to promote indigenous manufacturing of solar systems may help to bring down the costs. Towards this, the state may consider setting up a solar manufacturing hub for manufacturing solar systems and their components. Apart from (a) servicing the domestic markets with standard equipment and devices and (b) bringing down the costs of solar systems through economies of scale (and therefore ease of introduction of the latest technologies/processes), this hub could cater to the growing export markets as well. Another option is to set up Solar Park in the state. A Solar Park is a concentrated zone of solar development targeting 3,000 to 5,000 MW of generation capacity over time, with a solar manufacturing and technology hub and research facilities. It is believed that a solar park could facilitate reduction in the cost of solar power significantly, due to economies of scale and sharing of common transmission and infrastructure.

Further, it is important that the state-level policy and regulatory regime (e.g. third-party sale, tariff setting, wheeling, and banking of power) be long-term and stable. Moreover, the state needs to ensure (a) evacuation facilities at the potential sites, (b) grid access at nominal charges, if any, and (c) grid stability for reliable power off-take and better capacity utilization. The RPO must also include mechanism for timely compliance of the same. Comprehensive short-term wind energy forecasting models suitable for Indian climate and grid conditions need to be developed and deployed. Considering that a lot of wind assets in states like Tamil Nadu are old and inefficient, but are occupying the prime sites, the government should come out with a clear policy on re-powering of such sites so that the wind power generation could be increased substantially.