Introduction
In a remarkable stride towards a sustainable future, India has embarked on an ambitious journey to harness the power of renewable energy sources. The financial year concluding in March 2024 witnessed a significant milestone, with renewable energy (RE) sources accounting for a staggering 71 percent of the total 26 GW of new power generation capacity added to the country's energy mix. This remarkable achievement not only underscores India's commitment to mitigating the effects of climate change but also paves the way for a cleaner, greener, and more sustainable tomorrow.
The Renewable Energy Dominance
The dominance of renewable energy in India's energy landscape is undeniable. Of the total 18.5 GW of RE capacity added, solar energy, including grid-scale and rooftop installations, continued to lead the charge with an impressive 81.3 percent (15 GW) contribution. Wind energy sources also experienced a remarkable surge, nearly doubling their share and accounting for 17.6 percent (3.3 GW) of the new capacity. Small hydro and bio-power sources, though modest in their contributions, further diversified the renewable energy mix with 0.3 percent and 0.8 percent, respectively.
Milestone: Coal's Diminishing Share
In a historic milestone, the proportion of coal/lignite, categorized as a polluting fossil fuel, in India's total installed capacity has fallen below 50 percent for the first time, now standing at 49.2 percent (217.6 GW). This remarkable achievement aligns with India's long-term climate objective of achieving 500 GW of installed electricity capacity from non-fossil fuel sources (Renewable Energy and Nuclear) by 2030.
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In line with India's ambitious renewable energy (RE) goals, RE auctions hit a record high in FY24 with approximately 41 GW of auctioned capacity, according to a report. Additionally, eight auctions featuring energy storage components were completed this financial year, reflecting a shift towards innovative power procurement formats.
Gagan Sidhu, Director of CEEW-CEF, stated, "The CEEW-CEF Market Handbook revealed that roughly 95 percent of India’s targeted 50 GW annual RE bidding trajectory was achieved in FY24. The 47.5 GW of bids issued are nearly three times the RE capacity added annually in recent years. Moreover, there's a noticeable shift away from traditional RE procurement. Innovative formats like wind-solar hybrids, firm and dispatchable renewable energy (FDRE), and RE-plus-storage accounted for 37 percent of the auctioned capacity. This trend is likely to continue, as these innovative formats made up 57 percent of the bids issued. The significant drop in battery energy storage systems (BESS) tariffs is promising, with FY24 seeing a 59 percent decrease in BESS tariffs, providing two hours of storage per day (compared to August 2022). However, India’s main challenge with RE now is scaling up financing. Specifically, how can we ramp up financing threefold to support the 47.5 GW of issued bids? Unlocking the domestic bond market for corporate green bond issuances could be a catalyst for achieving this scale."
The report also noted that peak power demand (met) continued to rise in FY24, reaching a new high of 240 GW. This increase was driven by factors such as a rapidly growing economy, lower-than-expected rainfall in August and October 2023, above-normal temperatures in November 2023, and severe cold days during the winter months in North India. In terms of electricity demand (met), there was an uptick of about 8 percent compared to FY23.
Riddhi Mukherjee, Research Analyst at CEEW-CEF, commented, "To meet India's ever-increasing electricity demand, the Ministry of Power amended the Electricity (Late Payment Surcharge and Related Matters) Rules of 2022, mandating the sale of un-requisitioned surplus power on exchanges. This is expected to increase supply-side liquidity and promote competitive price discovery on power exchanges. Moving to RE, FY24 saw several policy initiatives aimed at expanding beyond utility-scale RE. For instance, the PM Surya Ghar: Muft Bijli Yojana was introduced to boost rooftop solar installations in the residential segment, potentially adding around 30 GW."
On the green financing front, foreign direct investment (FDI) in non-conventional energy exceeded USD 2 billion for the second consecutive year, according to the CEEW-CEF Market Handbook. Additionally, the Reserve Bank of India conducted four sovereign green bond auctions totaling INR 20,000 crore (up from INR 16,000 crore in FY23), with proceeds intended to finance or refinance eligible green projects.
Ambitious Targets and Policy Initiatives
Recognizing the urgency of addressing climate change, the Ministry of New and Renewable Energy (MNRE) has announced plans to solicit bids for a staggering 50 GW of renewable energy capacity annually for the next five fiscal years, up to FY 2027-28. This ambitious target underscores India's unwavering commitment to transitioning towards a low-carbon economy and achieving its climate goals.
Moreover, the government has introduced the PM Surya Ghar: Muft Bijli Yojana, a centrally sponsored initiative designed to furnish complimentary electricity to one crore Indian households. This scheme aims to promote rooftop solar power installations, with households receiving a monthly allocation of 300 units of electricity at no charge. By offering subsidies covering up to 60% of the solar unit cost for systems up to 2 kW and 40% for systems ranging from 2 to 3 kW, the scheme incentivizes households to embrace renewable energy sources, thereby contributing to the nation's clean energy goals.
Innovative Procurement Formats
India's renewable energy journey is not limited to traditional procurement methods. The country has embraced innovative formats such as wind-solar hybrids, firm and dispatchable renewable energy (FDRE), and RE-plus-storage, collectively accounting for 37 percent of the capacity auctioned in FY24. This shift towards innovative power procurement formats not only enhances the reliability and stability of the energy supply but also paves the way for further integration of renewable energy sources into the grid.
Financing the Renewable Energy Transition
As India accelerates its transition towards a renewable energy future, securing adequate financing remains a crucial challenge. With bids totaling 47.5 GW issued in FY24, approximately three times the RE capacity added annually in recent years, the scale of financing required to support this ambitious endeavor is immense. To address this challenge, India is exploring avenues such as unlocking the domestic bond market for corporate green bond issuances, which could serve as a catalyst for achieving the necessary financing scale.
Energy Demand and Generation
India's rapidly expanding economy and dynamic weather patterns have contributed to a steady increase in peak power demand, reaching a new peak of 240 GW over the course of the year. Total electricity generation in FY2024 rose by 10.4 percent compared to the previous fiscal year, driven by factors such as lower-than-average rainfall in August and October, followed by warmer-than-usual conditions in November-December and severe cold spells in January, particularly affecting North India.
Green Financing and Foreign Direct Investment
The commitment to a sustainable energy future has also garnered international support, as foreign direct investment (FDI) flows towards non-conventional energy exceeded USD 2 billion for the second consecutive year, according to the CEEW-CEF Market Handbook. Furthermore, the Reserve Bank of India concluded four sovereign green bonds auctions of INR 20,000 crore (vs INR 16,000 crore in FY23), with the proceeds potentially being used to finance or refinance eligible green projects.
Conclusion
India's renewable energy revolution is a testament to the nation's unwavering commitment to combating climate change and fostering a sustainable future for generations to come. With ambitious targets, innovative procurement formats, and a strong emphasis on financing and policy initiatives, India is poised to emerge as a global leader in the renewable energy sector. As the world grapples with the challenges of climate change, India's remarkable strides in harnessing renewable energy sources serve as a beacon of hope, inspiring nations worldwide to embrace a cleaner, greener, and more sustainable path towards a better tomorrow.
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