Indian government’s think tank has proposed in the National Energy Policy to withdraw all incentives available to the renewable energy sector to be withdrawn gradually with none available from 2022.
According to media reports, quoting senior government officials, market forces will be allowed to determine the price and position of renewable energy sources within the Indian power mix after 2022. The government believes that with prices already falling to below conventional energy prices the renewable energy sector would not require any support for long.
India has set a target to have 175 gigawatts operational renewable energy capacity by March 2022, a target that will most certainly be missed by a considerable margin.
Wind and solar power projects currently enjoy policy benefits but no major direct financial benefits, except rooftop solar power projects. Transmission of electricity from wind and solar power projects has been exempted from the levy of inter-state transmission charges.
Additionally, theoretically, wind and solar power project enjoy ‘must run’ status – utilities must procure electricity from solar and wind energy projects even if they have to shut down thermal power projects. This directive from the Ministry of New Renewable Energy, however, is not always followed as several state utilities have been reported to forced wind and solar power developers to back-down on generation.
Utilities across India are also obligated to procure a set minimum percentage of renewable energy. The government may abolish that requirement as well after 2022. This could prove disastrous for the renewable energy sector as even today an overwhelming majority of utilities fail to meet their renewable energy procurement targets.