Political Economy of Renewable Energy Deployment in India

Over the past few years, India has paid considerable attention to the development of its renewable energy (RE) capacity. This can be attributed to the country’s energy security concerns, the necessity to provide reliable electricity to its citizens and the global need to mitigate climate change. India’s ambitious targets project that by 2020, 10% of its power shall come from renewable sources and by 2022 there will be 165 gigawatts (GW) of RE capacity installed. Of this target capacity, there will be a 100 GW of installed solar capacity, 60 megawatts (MW) from wind and 5 MW from other sources such as small hydro and bioenergy. This implies that within the next five years, India has to undertake the mammoth task of almost doubling its RE contribution to the energy mix from the current 6%. The solar sector faces the largest challenge of scaling up its capacity by almost 20 times in six years, from the current 4.7 GW.

Such tremendous growth can only be accomplished through an effective policy and regulatory framework, which is essential to incentivise the deployment of RE. Government intervention is particularly necessary for energy policy because market mechanisms such as falling prices alone are not sufficient to ensure the development of long-term sustainable infrastructure. As a nation’s energy policy determines the future of the basic public services, it is important to have a holistic view from the political, socio-economic and technological aspects.

In India, however, RE policy interventions have not taken such a holistic approach. Current national policies such as preferential-grid access, feed in tariffs (FiT), renewable purchase obligations (RPO) on utilities, tax holidays, RE certificate (REC) trading and accelerated depreciation only address techno-economic barriers. While these are surely important incentives, in the past they have not been sufficient for Indian states to meet their targets.

Further, it appears unlikely that India will manage to meet its financial year 2016 (FY 16) targets in the next few months, looking at the large gap between target and achievement. Therefore, the question arises: What more does India need to do to ensure that its RE aspirations do not remain a pipe dream?

Read the article in Economic and Political Weekly