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2019-07-06 / Regulatory & Industry Trends

The Sooner Our Solar Sector Stands On Its Own Feet, The Better

The signing of the Paris Accord was a monumental step in our planet’s fight against climate change. 175 countries coming together to make collective commitments and efforts towards a brighter future. The challenge is huge, it has become even bigger since, but thankfully, India has well-defined targets to aim for. Our commitments under the Paris Agreement include reducing greenhouse gas (GHG) emission intensity of GDP by 33-35%, 40% of total power generation capacity from renewable energy sources and increasing tree cover.

While tree cover is a separate story, the link between the energy sector and GHG emissions is well established. As per the ‘Biennial Update Report’ submitted by India to the UN in 2018, the energy sector accounts for 73% of our country’s total emissions. The need for increased capacity and usage of renewable energy is critical and to its credit, India has been active on that front. The target of 175 GW solar and wind energy by 2022 is well within reach and recently, the government announced its intention of taking it up to 500 GW by 2030.

Our population is growing at the fastest rate globally. Against earlier forecasts of our population doubling in the next 80 years, we are now expected to reach there in half the time. As India develops, our energy demand is only going to increase. As incomes rise, more people will adopt a better lifestyle with products like air conditioners. As per the World Economic Forum, the total stock of room ACs will reach over 1 billion by 2050 – a 40-fold growth from 2016. To run these, approximately 600 GW of new power generation capacity would be required. Naturally, the environment will bear the brunt of it, if renewables have a lower contribution to this power consumption. And this is just one such example!

Such a rapid increase in demand for resources also makes transitioning to a circular economy of paramount importance. India is estimated to generate 78 million tonnes of solar e-waste by 2050. Circular economy policies address waste, design, procurement, secondary use, plastics, ocean debris, recycling, waste management among others which is the need of the hour.

Electric vehicles are going to be one of the pivotal factors in meeting our targets for COP21. One of the drawbacks often raised regarding them is that although EVs themselves are environmentally friendly, they rely on power from the grid which in a country like India is predominantly thermal based thereby contributing to GHG emissions. India, thus, needs to not only ensure increasing EV penetration but also increase the share of renewable energy in powering EVs.

While both the intention and steps being taken by the government are increasing the momentum in this sector, but a long-term sustainable view of our development should be the driving factor in the promotion of renewables. 

India is the lowest cost producer of solar power globally. However, there are some drawbacks that need to be addressed, such as the sector being heavily reliant on government subsidies, investments into land availability and evacuation infrastructure for setting up solar plants are also quite large. As a result, the industry requires financial assistance. Rather than subsidies, this assistance needs to come in the form of budgetary allocations – which can be recovered as these then become self-sustainable projects.

Plenty of other steps can also be taken to strengthen the solar industry and making it self-sustainable. For instance, long-term visibility on GST for renewable energy projects – such as a blanket rate of 5% on all renewable energy products – will help reduce the uncertainty in the industry. Further, subsidizing domestic solar panel manufacturers and promoting technological developments to increase their competitiveness globally can propel the sector. The increased demand will necessitate R&D, which will lower the prices and thus overcome the need for subsidies.

The revenues generated through the clean energy cess under the National Clean Energy Fund need to be directed for their intended purpose and support renewable energy, EVs and Make in India for renewables. Strengthening the industry with such measures is essential because this is just the start for us. We carry a strong vision and achieving it will require comprehensive efforts, be it in implementation or regulations. Not just because we want to achieve our Paris Agreement commitments but because our future depends on it.

Contributed by: Mr. Sunil Jain, CEO, Hero Future Energies.

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