India power minister talks up $100bn renewable energy ambitions

India’s Minister for Power, Coal and New & Renewable Energy, Piyush Goyal, tells Klair White and Rupesh Agarwal from EY about the country’s energy challenges and aspirations
Piyush Goyal à‚  A fivefold increase in already ambitious solar targets and far-reaching policy reforms have catapulted India’s renewable energy market into the spotlight in recent months. Global consultancy EY has just published the latest edition of its Renewable Energy Country Attractiveness Index (RECAI), in which India has reached fifth position behind, in ascending order, Japan, Germany, the US and China. In February, India held Re-Invest, the country’s first conference and expo dedicated to renewable energy investment. Ahead of the event, Energy Minister Piyush Goyal talked exclusively to EY about his hopes for India’s renewables industry.

Q:

India is currently number five in the RECAI. How and when are you going to reach number one?

A:

By 2019 we’ll get to number one. We have a clear and achievable plan, and very practical ideas that we are implementing on the ground. India already had a solar mission of 20 GW by 2022, but we have moved the needle on that to 100 GW by 2022.My personal effort is to do that by 2020. The one big impediment was the anti-dumping duty on solar equipment. We have been engaging with the manufacturers and they have appreciated that, while the government will undertake whatever measures are possible within the international framework to support them and their industry, it will be in their best interests that India looks at large-scale deployment of solar and expands the market using the best of world-class technologies.

I’m very happy that they have come to support the endeavours of the government by withdrawing the anti-dumping duty request, in a way that sets a precedent.On 22 May 2014, four days before Prime Minister Narendra Modi came into power, the Commerce Ministry had adjudicated there should be anti-dumping duties on the US, China and several other countries.I don’t know of anywhere else in the world where domestic manufacturers who had received a favourable order from a national ministry, then realized that it is in the national interest to forgo the benefit and work in a competitive spirit to become technologically superior.

The Indian solar manufacturers have withdrawn the complaint in the interest of the “Make In India” campaign, and with that I think the solar mission is now going to gain a lot of momentum.We’re also bringing in some very bankable purchasers of the solar power. So we’ll have companies with a AAA rating becoming solar power offtakers through a transparent bidding process, which will give comfort both to bankers putting money into the business and to investors, in terms of transparency and reduced risk of future cancellations.

More broadly, we are also working to bring down litigation, reduce the time required to get justice through the courts and simplifying business processes significantly, to bring more transparency into the whole system.We are also focusing a lot on rooftop solar as part of the 100 GW. I’m hoping for around 40 GW, which would have minimal land and power evacuation challenges and already be cost-competitive on a kWh basis for the end consumer. We’re expecting about 20 GW to 25 GW from large-scale solar parks, which are being set up at 19 locations all over the country. A number of highly profitable companies are also now looking at the fiscal benefits one gets from coming to solar. So all in all I’m fairly confident of $100 billion investment coming into renewables, and the solar space in particular, over the next five years.


Q:

And beyond solar?

A:

Wind energy had almost come to a standstill because of the withdrawal of certain fiscal benefits in 2012, which was one of our first steps in the 2014 budget. On 10 July 2014, we reintroduced accelerated depreciation on wind energy projects. We also have corrected a lot of inward duties, both in solar and wind, that were dampening the Make In India spirit and making it difficult to manufacture in India economically. Those have been corrected in the budget, and some more may get corrected in the next budget.

Waste-to-energy is another area we are working on, but I would say it’s still a work in progress to formalize a plan. Storage would be a game-changer if we can make the storage systems cheaper. We have six projects running in parallel on this, including a project with IIT Jodhpur on solar thermal. This could become a fantastic solution for the more remote areas, particularly the Border States and Special States in the Far East, where it’s difficult to take the transmission grid. We could certainly have off-grid and microgrid solutions, but thermal solar will still be one of the most critical elements for that. Alternately, we’re looking at various combinations of solar with wind, hydro or waste-to-energy, so that we can provide 24/7 power to all homes, businesses and industries across the country by 2019. This is our stated mission and commitment to the people of India.


Q:

You’re now targeting almost 200 GW of renewable capacity by 2022, described by some as overly ambitious. Is it really achievable?

A:

Well, I’m looking at targets more from the perspective of what will happen to renewable energy as a mix of my total energy consumption. Currently, we’re doing about 55 to 60 billion units of renewable energy against our annual production of a trillion units. Our effort is to take this to about 15 per cent. Now when you look at the expanded electricity consumption in the next five years, which will go up from one trillion units to two trillion units, and you apply 15 per cent to that, you’re talking about 300 billion units. That in itself requires fivefold growth in the next five to six years. Yes, it’s an ambitious target, but Prime Minister Modi is one who believes in very ambitious goals, very committed timelines and honesty in implementation. So I’m very confident we can get there.


Q:

What is your response to calls for a shift from competitive bidding to fixed tariffs, for fear that falling technology costs could lead to overly aggressive bidding and unviable projects?

A:

This is a very lame argument from certain sections of the industry simply to be able to get into a regulated tariff regime. But a regulated tariff has its own problems. How do we assess tariffs in a market where solar panels, for example, range from $1 million to $2 million per MW? How do we assess the quality of equipment or the quality of output, or what fair pricing should be? It is not for the government necessarily to determine these things. Further, then there’ll be cases coming with individual requests that this terrain is expensive to work in, or the land here or there is cheaper or more costly. So I think the best way is to have a competitive spirit and I’m sure businesses understand that ultimately they will be responsible for the projects that they set up, and bidding will be what is most fair. If someone is foolish enough to bid so aggressively that it becomes unviable, it is at their risk and cost. Well, there is a lot of interest now in building the components required for solar.

For wind, there is already a lot of manufacturing in India, but for solar, one of the problems was that the entire manufacturing chain was not here. So even the few people who manufacture here are very much dependent on the import of components. Differential pricing by foreign suppliers has also added to the problem for Indian manufacturers. We are therefore encouraging more and more backward integration to expand the chain of production in India. Wherever the government procures solar energy, for example, let’s say for the defence establishment, we are trying to encourage that by giving the domestic manufacturers preferred status. This is absolutely permissible under the international framework. Through a variety of such measures, where we can help them get visibility of the flow of orders, we’re hoping that Indian manufacturers will only need a little boost for the first few years and after that they will fly. I’m quite confident two years from now you will come back, interview me and ask me for reservation and preference for the foreign suppliers.


Q:

A significant amount of capital will be required to achieve your ambitious targets. Is this starting to flow into the country?

A:

International investment has very few destinations today. There’s very little growth happening in different parts of the world. China, for example, has reached a certain level of prosperity; wages have gone up and it’s now getting uneconomical to manufacture there. While they invested a lot in their solar manufacturing sector, I don’t think they’ve really been able to use that investment to its fullest capacity ” whereas India is still a nascent market. With the kind of bankable power purchase agreements (PPAs) that the government is now offering, the emphasis on rooftop solar, the increasing involvement of large public sector undertakings and the number of large Indian corporates coming into this field to get the fiscal benefits and energy security that they require, I’m fairly confident capital will be the least of our constraints. This is because it now makes very good business sense to come and invest in the renewables space in India. I’m already seeing a lot of this interest first-hand. In fact, we’ve got about 84,000 MW of commitments already, both from Indian and international players.


Q:

Beyond sending the message that India is the place to invest, what else are you hoping to achieve from the RE-Invest 2015 conference?

A:

I hope to learn what this country should work on and the methods that I should employ to break down the barriers. What are the enablers investors are looking for at a state level, what are the best technologies, how will the solar parks work, how can we continue to support growth in the wind sector? For example, we have thousands of wind projects and now we can upgrade them to 2 MW or even 5 MW units, so I wouldn’t even have the challenge of land procurement. I can actually triple or even increase tenfold the wind energy we’re already producing, simply by replacing existing windmills with higher capacity turbines.

Power, Coal and New & Renewable Energy

Q:

You’ve pledged to make India diesel generator-free within five years. What are the two or three key barriers to achieving this and will you overcome them?

A:

My biggest challenges are of course the T&D networks. India needed to have invested adequate money on its national grid well in advance of significant demand growth, so that we could have a seamless flow of power across the country. I saw that soon after I became a minister and Delhi had a severe breakdown of the power infrastructure after a heavy storm on 30 May 2014. We realized that T&D is the key to the success of any energy programme. That is an area I am focusing on very deeply and an area that will see nearly $50 billion of investment in the next five years. Of this, around $18 billion will be a government-sponsored programme to support the states’ separation of distribution feeders; encourage rooftop solar or other off-grid and microgrid solutions; strengthen the sub-T&D networks; upgrade transformers and replace burnt-out transformers; and install underground wiring in the cities wherever it is possible. All of these are things that should have been done many years ago. So, our focus in the next few years is going to be on T&D, in order to reduce losses and reduce power theft. Simultaneously, we need much more production of fuel within the country, or at least a short-term boost to fuel supply to increase the country’s energy security. That’s another area where there has already been a lot of action in government.

The Supreme Court had cancelled 204 coal blocks that had not been put to use adequately for so many years. We have been proactive and are working toward very tight schedules and deadlines, hoping to get all of them into the production domain quickly so that Coal India Ltd can focus on doubling its coal production over the next five years. And lastly, we are also sorting out all the projects that have been stalled for various reasons. In particular, large and small hydro projects, and some gas- and coal-based plants that are also stalled due to lack of fuel supply. Gas especially has tremendous value as an energy-efficient power producer, as well as a spinning reserve to meet the peak load requirements and improve the frequency in the grid to ensure grid stability.


Q:

Why invest in India, and why now?

A:

I think this is the time where India is providing, as Prime Minister Modi said recently, the three “Ds” ࢀ” democracy, demography and demand. India is providing the comfort of being a democracy where the rule of law prevails. India is providing an administration mindset that is honest and sincere in its working. And India is providing a decisive leadership that does not shirk away from its responsibility; it acts fast and is outcome-orientated, rather than just making promises and papers. When you couple all these measures with a billion people who are looking for a better quality of life and an aspirational middle class of more than 500 million people, you get a demographic that is generating significant demand for power at a scale not seen elsewhere. We are also conscious of our responsibilities to the environment, particularly concerns over carbon footprint and emissions.

Therefore, this effort to give a renewed focus to renewable energy is very sincere. The leadership of Prime Minister Modi is trustworthy and the frameworks that we are designing are bankable. So the three important parameters that any investor is looking for are available here and I don’t think there can be a better or a safer business opportunity anywhere in the world today. That said, we invite investors to come to India and own the fruits of a developing economy as it turns into a developed nation.

Klair White is Editor of EY’s Renewable Energy Country Attractiveness Index (RECAI). Rupesh Agarwal is EY’s India Renewable Energy Advisory Leader. www.ey.com

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