Drivers for Growth of Renewable Energy in India
Posted July 26, 2008on:
The following drivers indicate that the growth of the RE market in India is likely to be significant and the market fundamentals for investors could be long and enduring.
Access to Energy
The Government of India’s commitment to provide electricity to predominantly rural India will drive the growth of off-grid RE technologies. By early 2007, 44% of Indian households still lacked access to electricity and less than 30% of rural Indian households had access to residential water, primarily due to lack of energy for motive power. There is a current electricity energy shortage of 8% and a peak demand shortage of 11.6%4, with increases in energy requirements projected at 6% per annum and electricity consumption at 7.6% per year and peak demand projected to increase by 77% by 2012. To meet this demand, power generation capacity would need to increase by 2.5 current levels.
The central government has undertaken a strategy to diversify its energy mix to address energy security and RE is assuming an increasingly significant role. India imports approximately 75.5% of its oil, and the International Energy Agency, projects that India’s dependence on oil imports will grow to 91.6% by the year 2020. Energy demand has outstripped domestic production, and India has become a major buyer of energy. Despite doubling its generation capacity over the past decade, India is unable to meet current energy demands. In 2004, India was the 3rd largest importer of ethanol and the 5th largest consumer of energy globally. India currently imports roughly 2.5 million tons of coal annually and is expected to increase coal imports to 7 million tons annually over the next few years.
In addition to the environmental impacts associated with resource extraction, the emissions of conventional fuel production have contributed to the global issue of climate change. India, like many other developing nations, is facing challenges with severe air pollution, limited arable land, and water quality issues. These types of environmental concerns lend additional motivation for cleaner sources of energy production.
The Government of India (GOI) has set an aggressive target of electricity for all by 2012, with an objective to add 10,000MW in RE capacity and source 10% of total power capacity from renewables. In 2006, the Indian President, Dr. A.P.J. Abdul Kalam announced a target of energy independence by 2030 and an increase in RE contribution from current levels of 1-5% to 25%.By 2006, India’s Integrated Rural Energy Program using RE had served 300 districts and 2200 villages.
India averages 300 clear and sunny days per year, has an installed wind capacity of over 7,000 MW, 3.8 million biogas plants, and 15,000MW small hydroelectric capacity. India is the 4th largest producer of wind power, 5th largest producer of energy from commercial biomass and small hydro and ranks globally in the top 5 countries with maximum RE power capacity.
India has the human resources to draw on to enable the growth of a new industry based on RE technologies. For example India has a significant amount of engineering students with 464,743 graduating in 2004-05.
If IP rights are enhanced, India can position itself to adopt the world’s best technology as it builds its future energy infrastructure leading to opportunities for RE technology transfer and leapfrogging as new systems are commissioned, invested in and installed.
Health issues are increasingly becoming a driver for uptake of RE technologies. In 86% of rural households, traditional biomass is the primary cooking fuel, and India experiences the largest number of indoor air pollution related health problems in the world with 500,000 deaths each year, primarily women and children who have the greatest risk and domestic exposure.
The Sustainable Development imperative
Affordable energy has been linked to indicators of human development, and access to energy and electricity can increase access to education, reduce indoor air pollution, provide energy for medical equipment and storage, provide water and sewer services, create jobs, stimulate micro-enterprise, reduce poverty and increase life expectancy.
Growth of the Carbon market
India, as a non-annexure I country under the Kyoto Protocol, is eligible for carbon revenue through the Clean Development Mechanism (CDM). India is currently the world leader in development of CDM projects with a large potential for renewable energy generation from agriculture wastes, hydro and wind.
At the end of the third quarter in 2006, India ranked 3rd in the Ernst & Young Country Attractive Indices, which ranks countries based on RE markets, infrastructures and their technologies and 4th in the E&Y Renewables Infrastructure Index. The International Energy Agency (IEA) predicts $16 trillion of investment inflows in the energy sector until 2030, $8.1 trillion of which is predicted to flow to developing economies to meet energy needs. Though there are some mature RE technologies, such as wind, India remains in a position to undertake technology collaborations, import mature RE technologies and processes to fill technology gaps, and scale up current production through both domestic and international investment.
India has a dedicated Ministry of New and Renewable Energy (MNRE) and a number of ministries have taken on specific renewable technologies to develop and support.
Many resource assessment programs have been implemented or are slated as future projects, including:
Wind Resource Assessment Program (WRAP),
National level Biomass Resource Assessment Program (NBRAP),
and Solar and Wind Energy Resource Assessment(SWERA).
RE specific research institutions have emerged
Centre for Wind Energy Technology (CWET) for wind,
Solar Energy Centre (SEC) for solar,
and National Institute for Renewable Energy (NIRE) for bioenergy.