This article forms Part 1 of a three-part series on renewable energy in India. It provides a general overview of the renewable energy sector, its commercial significance, growth drivers and future outlook within the Indian economy.
The series examines the increasing importance of renewable energy, India’s commitments towards sustainable development and the country’s transition towards a cleaner energy future.
ARTICLE DETAILS
- Date: July 17, 2022
- Version: 1.0
- Part: Part 1 – General
- Jurisdiction: India
- Keywords: Renewable Energy, Green Hydrogen, Paris Agreement, COP26
OVERVIEW OF THE SERIES
This three-part series seeks to provide insights into the use, impact and regulation of renewable energy in India.
- Part 1: General overview and commercial aspects of the renewable energy sector.
- Part 2: Regulatory framework governing renewable energy in India.
- Part 3: Storage, transmission, pricing, taxation, labour, financing and other sector-specific considerations.
KEY COMMERCIAL ASPECTS OF THE RENEWABLE ENERGY SECTOR IN INDIA
India has emerged as one of the world’s leading renewable energy markets and ranked third globally in renewable energy installations as of December 2021.
India’s renewable energy installed capacity of approximately 151.4 GW comprised:
- Solar Energy – 49.34 GW
- Wind Energy – 40.08 GW
- Small Hydro Power – 4.83 GW
- Bio-Power – 10.61 GW
- Large Hydro Power – 46.51 GW
In April 2022, India commissioned its first pure Green Hydrogen Plant at Oil India Limited’s Jorhat Pump Station in Assam, with an installed capacity of 10 kg per day.
Between FY 2016 and FY 2020, India’s renewable energy capacity expanded at a Compound Annual Growth Rate (CAGR) of approximately 17.33%, supported by strong government policies and increasing energy demand.
India’s projected energy demand is expected to reach approximately 15,820 TWh by 2040, with renewable energy anticipated to play a central role in meeting future requirements.
The Government has established a target of approximately 523 GW of renewable energy capacity, including 73 GW of hydro power, by 2030.
Investment Trends
Renewable energy investments in India reached a record USD 14.5 billion during FY 2021–22, representing:
- 125% increase compared to FY 2020–21.
- 72% increase compared to pre-pandemic FY 2019–20 levels.
The growth was largely driven by increasing electricity demand, corporate net-zero commitments and growing investor interest in clean energy assets.
Acquisitions accounted for approximately 42% of total renewable energy investments during FY 2021–22.
One of the largest transactions involved the acquisition of SB Energy’s renewable energy portfolio by Adani Green Energy Limited for approximately USD 3.5 billion.
This investment contributed significantly to the addition of approximately 15.5 GW of renewable energy capacity during the financial year.
To achieve India’s renewable energy targets, annual investments are expected to increase to approximately USD 30–40 billion per year, with nearly 70% anticipated to come from private sector sources.
INDIA’S ENERGY MIX AND UTILIZATION MATRIX
India’s energy generation continues to be dominated by thermal power, although renewable energy is steadily increasing its contribution to the overall energy mix.
Thermal Power
- Coal – 195,810 MW (54.3%)
- Lignite – 6,260 MW (1.7%)
- Gas – 24,937 MW (6.9%)
- Diesel – 638 MW (0.2%)
- Total Thermal Capacity – 227,644 MW (63.2%)
Other Sources
- Hydro Power – 45,399 MW (12.6%)
- Nuclear Power – 6,780 MW (1.9%)
- Renewable and Other Sources – 80,633 MW (22%)
According to projections by the Central Electricity Authority, solar and wind power are expected to account for approximately 51% of installed capacity by 2030, compared to 23% in 2021.
During the same period, coal-based power generation is expected to decline from approximately 53% to 33% of installed capacity.
KEY DRIVERS OF RENEWABLE ENERGY GROWTH IN INDIA
International Climate Commitments
India’s renewable energy transition is significantly influenced by its commitments under the Paris Agreement and subsequent climate-related initiatives.
At COP26 in Glasgow, Prime Minister Shri Narendra Modi announced the five “Panchamrit” commitments:
- Achieve 500 GW of non-fossil fuel energy capacity by 2030.
- Meet 50% of energy requirements from renewable energy by 2030.
- Reduce projected carbon emissions by one billion tonnes by 2030.
- Reduce carbon intensity of the economy by less than 45% by 2030.
- Achieve Net Zero emissions by 2070.
Reducing Energy Import Dependence
India remains heavily dependent on imported energy resources and is projected to become one of the world’s largest energy importers by 2050.
According to estimates from the World Economic Forum, replacing even half of imported coal with renewable energy could save India more than USD 90 billion between 2021 and 2030.
Energy security therefore remains a major driver behind the Government’s renewable energy policies.
Geopolitical Factors
Global geopolitical developments have further strengthened the case for renewable energy adoption.
The conflict in Ukraine disrupted global coal supply chains and significantly increased imported coal prices.
According to estimates by ICRA Limited, imported coal prices were expected to increase by approximately 45% to 55% during the first quarter of FY 2023.
Such developments have highlighted the importance of reducing dependence on imported fossil fuels and accelerating the transition towards renewable energy sources.
India’s renewable energy journey is being driven by climate commitments, energy security concerns, increasing investment flows, technological advancement and the need to reduce dependence on imported fossil fuels.
NEXT PART
Part 2 of this series examines the regulatory framework governing renewable energy in India, including key legislation, Renewable Purchase Obligations, Renewable Energy Certificates and Government initiatives promoting renewable energy adoption.
DISCLAIMER
The content of this article is intended to provide a general guide to the subject matter.
Specialist professional advice should be sought about your specific circumstances.
The views expressed in this article are solely those of the authors.
