15 September 2009

Wanted! Renewable Energy Policy for India

By: Kaavya Nag

Renewable energy is today, the fastest growing energy sector in the world, with the capacity to supply half the energy needs of the world by 2050. It continues to remain a top candidate for a safe and optimal development strategy that decouples high-carbon technologies from economic growth.

Nations that can afford to invest in renewable energy unilaterally are making strong choices; several have even enacted renewable energy laws as early as 2000. India too, as a major developing economy, is taking similar strides, although not at comparable speeds. 

In recent years, India has emerged as favourable destination for renewable energy investors, and continues to introduce promising policies that will bring down the cost of renewable energy technologies, and make it on par with coal-based power in a decade or two from now.

However, a glaring gap in India’s grand renewable energy plans is the lack of a National Renewable Energy Policy, still under development through the MNRE. International trends indicate that in spite of electricity laws, countries like Germany, China, Australia and Austria for example, have renewable energy policies and laws that build stability and security that investors seek in making the required large-scale investments for renewables.

Nevertheless, particular positioning still gives India an advantage.  A latest McKinsey report suggests that 80 percent of 2030-India is yet to be built. In addition, India currently has an installed capacity of 13.2 GW of renewable energy, but at full stretch and owing to its tropical geography, has the potential of generating 90 GW of energy from renewable energy sources. The combination of geographic position and being at an initial stage of growth give India a unique opportunity to deploy low-carbon and energy efficient technologies that will strengthen the country’s energy security and leapfrog inefficient technologies. But this is an advantage we will not have by 2030 or even 2020.

So far, although steps in the right direction include policy-level, top-down drivers and soon-to-be-announced missions, we show our desire to move along the low-carbon track with a typical Indian inertia capable of flummoxing any fast-acting nation.

While the Energy Conservation Act 2001 and the Electricity Act 2003 exist for electricity and energy conservation in India, most renewable energy sources do not come under the purview of any law. To add to this glaring lack of general direction, constitutionally, electricity is a state subject. This means that rules and policies vary between states, and renewable energy promotion is left to individual states. In total, this has translated into fewer incentives for investment in the sector.

Efforts to streamline policies are already under way – the outcome of the National Action Plan on Climate Change has been a Renewable Energy Certificate Mechanism (REC) and the proposed National Renewable Portfolio Standard, both due to be released by December 2009. Both these aim for a holistic approach and integrated energy planning, while accommodating pre-existing laws and policies.

However, large-scale and ambitious development and deployment of renewable energy is only possible with government legislation, policies, and financial and other incentive mechanisms that then create and build the necessary environment for investment and business opportunities. The Indian juggernaut must move forward faster and capitalize completely on this dually beneficial opportunity.

References: 1.Handbook of Best Practices for the Successful Deployment of grid-connected Renewable Energy, distributed generation, cogeneration and combines heat power in India. USEA for APPCDC, 2008; 2. Overview of Renewable Energy potential of India. Meisen P. 2006. Global Energy Network Institute; 3.Environmental and Energy Sustainability: An approach for India. Mckinsey & Company 2009; 4. India Wind Energy Outlook 2009. Global Wind Energy Council; 5.Climate Change and India – Some Major Issues and Policy Implications. Prasad H.A.C. & Kochher J.S. 2009. Department of Economic Affairs, Ministry of Finance, Government of India; 6.Identifying optimal legal frameworks for renewable energy in India. 2008. Baker & McKenzie.

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