India’s government is striving to achieve some massive electrification objectives.
On the one hand, India’s government wants to deliver on its promise to deliver ‘electricity to all’ by 2019. At the same time, the government aims to increase the country’s total renewable power generation capacity to 175 Gigawatts (GW) by 2020.
According to Tarun Kapoor, Joint Secretary with India’s Ministry of New and Renewable Energy, renewable power will play a key role in achieving the government’s electrification agenda. Recently, Santosh Kamath, KPMG in India, sat down with the Joint Secretary to talk about the challenges and opportunities ahead.
Santosh Kamath (SK): India has set very aggressive targets for renewables. Are the targets achievable?
Tarun Kapoor (TK): Right now, India’s total renewable capacity is around 42GW of installed capacity and that accounts for between 6 to 7 percent of the energy currently going into the grid. The aim is to take it to 15 percent by 2020 and – if we achieve our objective of 175GWs by 2022 – we will be at 17 percent. It might be very difficult but I believe we can achieve it.
SK: What are some of the challenges you worry about when working towards this goal?
TK: I think there are three big challenges. The first is transmission because most of the renewable power will come from wind and solar so we will need to focus on building transmission lines out to the solar parks and wind turbines which are often in more remote parts of the country. The second challenge is around the continued willingness of the distribution companies to buy increasing amounts of renewable power, particularly since some of them are already in a surplus situation. And the third challenge is bringing in low cost financing because renewables can often be a very capital intensive proposition.
SK: What role will renewables play in the government’s electrification program?
TK: There are around 18,000 villages that are not electrified and about 3,500 of those cannot be connected to the grid, either due to cost or practicality. So those villages will need to be supplied through standalone renewable sources, mainly solar. There are also significant areas of the country where power simply isn’t reliable so we are working to develop standalone renewable generation in those locations to help ‘even out’ the power supply.
SK: I understand the government is also working to install a significant number of solar water pumps throughout the country.
TK: Yes. In fact, there are already about 60,000 installed and plans are in place to install another 150,000 or so in the next 2 to 3 years. India has around 25 million water pumps used for farm irrigation and these consume approximately 20% of the total grid supply of power. Many of the solar pumps are fairly simple pumps but we are also working with farmers to install 25 to 50 horsepower pumps that can supply water into the irrigation system. And we have proposals to put up small solar plants in farming areas to feed power into the system during the daytime when the farmers need it most.
SK: What role should the government play in funding renewables to achieve the electrification agenda?
TK: The power sector as a whole is a commercial sector that generally doesn’t need extra money from tax payers or the government but there are some sectors that will need additional investment. If you have a village with just 100 houses that needs a line to the grid, you can’t just load the cost of that connection onto the 100 families that live there because they probably can’t afford it. But in other parts of the country, the cost of connecting a consumer is not very high, so you really need to look at how you cross-subsidize that and use money from the whole power sector. Further, the Government has made a budgetary outlay to fund rural electrification that have provisions for renewable based mini & micro-grids.
SK: Will affordability become a bigger issue as more renewable power comes into the network?
TK: I think that – over the past 4 or 5 decades – we have not been very good at communicating the cost that was required to develop the system so people don’t really appreciate that a new system will cost money. Once we get to a larger scale, however, I think the question affordability becomes less of a problem. Solar power has already fallen to rates of just 4.5 rupees per kilowatt hour so it’s already quite comparable to other power sources.
SK: Do you envision a world without fossil fuels?
TK: I firmly believe that anyone working in the renewables sector – investors, developers, engineers and others – need to work with passion and not be all-consumed by the profits and economics for now. Those are certainly important, particularly if we want a sustainable renewables sector. But we need passion and dedication to the mission of eliminating fossil fuels. We need to always keep that goal in mind and make sure that we don’t shut down new ideas.
SK: Can foreign investors and developers play a role in helping achieve India’s renewables and electrification objectives?
TK: Absolutely. India is a fantastic market for renewables and we welcome investments, ideas and technology from all over the world. Policies in India have changed significantly and there are essentially no restrictions and no entry barriers with the opportunity to maintain 100 percent ownership (FDI) in renewables. We really need affordable and clean power and are looking for investments of around USD200 billion over the next 5 to 7 years to achieve our agenda. I think that should interest many large companies and investors.