India's Renewable Energy Sector: Wide Capacity-Generation Gaps Continue; Need To Finance Solutions

According to a Moody's estimates, if India has to achieve its ambitious goal of 500 GW (gigawatts) of renewable energy capacity, its infrastructure companies must invest between US$ 190 billion and US$ 215 billion over the next seven years.

Expanding and enhancing electricity transmission, distribution, and energy storage systems will require another US$ 150 billion to US$ 170 billion.

Altogether, the estimated renewable energy financing needed for India, therefore, can go close to US$ 400 billion in the next seven years.

That is why the fourth Global Renewable Energy Investors Meet & Expo (RE-INVEST 2024) gains immense importance for India’s green energy future roadmap.

RE-INVEST 2024 has been organised by the Ministry of New and Renewable Energy (MNRE) from September 16-18 in Gandhinagar, Gujarat.

Wide Gap Between Renewable Capacity And Generation

The current statistics about India’s installed renewable power capacity look impressive, as installed solar capacity constitutes 19 per cent of total installed power capacity, while wind accounts for another 10 per cent, and nuclear power 2 per cent (see graphic below).

Adding 12 per cent of large and small hydropower capacity and 2 per cent of biopower capacity, the installed non-fossil fuel-based capacity turns out to be a significant 45 per cent.

Fossil fuel-based installed capacity stands at around 55 per cent of the total electricity capacity.

However, the actual primary energy supply composition gives a completely different story.

In 2022-23, solar energy generated a meagre 1.2 per cent of the total, wind energy generated 0.9 per cent, and nuclear energy generated 2.1 per cent of the total primary energy supply.

Once again, adding hydro and bioenergy generation to this, took the tally to just 16.2 per cent of the actual electricity geerated, which implies that fossil fuel-based power generation takes care of more than 83 per cent of the actual primary energy supply in the country.

This wide gap in capacity and actual power generation is both intriguing and challenging from a policy perspective.

Addressing Capacity-Generation Gap Is As Important As Green Finance

There are some legitimate and hard-to-overcome reasons behind this yawning gap between renewable energy capacity and actual renewable power generation.

The intermittency of renewable sources is a primary one.

Solar and wind power contribute a major portion of India’s renewable capacity basket, but both are intermittent by nature.

While solar panels can generate electricity only in the daytime, wind turbines depend on wind speeds. Wind speed below a threshold level would not be able to produce electricity.

This intermittency of solar and wind power, in effect, results in much lower capacity utilisation compared to conventional coal-based power plants.

This is evident from Indian data as well. While the installed capacity of coal is 48 per cent of the total installed capacity of all types of power generation, the share of coal-based power in the actual energy supply is almost the same at 47.4 per cent of the total primary energy supply (see graphic).

In simple numbers, while coal-based power plants have almost 100 per cent capacity utilisation, non-fossil fuel-based power units (including bio and hydropower) have around 36 per cent capacity utilisation.

If we take only solar and wind power, then capacity utilisation comes down to a mere 7.2 per cent.

Renewable energy generation, particularly solar and wind, may fluctuate significantly according to the existing seasonal weather patterns – creating disruption and affecting overall output throughout the year.

For solar and wind, even climate change can affect the final output.

Out-of-season rain or the formation of stagnant air columns due to unusual weather conditions may stall solar or wind power generation. A bit ironic, but that’s the way it is.

All these will keep on adding to the existing capacity-generation gap. Taking care of this gap in the capacity versus generation metrics may take years of innovation and policy efforts.

The second big challenge comes from issues related to grid integration.

India’s grid infrastructure is yet to fully adapt to this fluctuating variability of renewables.

Inadequate transmission infrastructure jeopardises the immediate transfer of renewable energy to the grid, while lack of storage (such as batteries) may lead to wastage of a certain amount of electricity.

Storage limitation is the third challenge that India’s renewable energy mission faces.

The space for innovation in storage facilities including batteries is fast-evolving, but it is yet to reach a technlogically comfortable and cost-effective level that can be adopted immediately.

Therefore, it is immensely challenging for policymakers to match renewable energy supply with the fluctuating annual energy demand patterns.

Comprehensively reviewing the current regulatory and market frameworks to remove the wholesale and retail market barriers for the successful introduction of affordable storage and flexibility in the energy sector is an important task in India.

To be fair, it is equally important everywhere else in the world.

There are also issues related to pricing and costs of renewables.

The low tariffs quoted typically in current renewable energy auctions make renewable pricing competitive.

However, subsidies often support these low prices and the pricing may not reflect the true costs of providing green power.

Way Forward

Mobilising private investors to finance the ongoing effort to augment renewable energy to achieve the broader net zero target is indeed the need of the hour.

However, the capacity utilisation of existing and future renewable power generation is no less an important task. Money needs to be pumped into solutions for increasing capacity utilisation such as viable storage batteries to support the renewable energy industry. 

India is already working to improve the grid structure, bringing in innovation in energy storage solutions, and developing more flexible power systems.

Nevertheless, bridging the gap between renewable capacity and generation is likely to remain an ongoing challenge in the country’s quest to create a greener future.