India’s Power Sector Continues to Grow, with Renewables Leading the Way
Rising Demand and Historic Milestones
India’s power sector has experienced significant growth in recent years, driven by the country’s rapid economic expansion and increased demand for electricity. In the previous financial year, the Central Electricity Authority (CEA) reported that energy demand surged by over 8 percent, reaching a historic 1622 billion units. Furthermore, the Ministry of Power revealed that peak demand during the summer of 2024 has already reached an impressive 250 GW, marking a steady increase from 243 GW in 2023 and 216 GW in 2022.
Focusing on Renewables in the Upcoming Union Budget
As India’s power sector continues to evolve, the Union Budget in July 2024 is expected to maintain its emphasis on renewable energy. According to a news article in the Economic Times, renewable sources accounted for an impressive 71 percent of India’s new capacity additions in FY24. This underscores the government’s commitment to shifting the nation’s energy landscape towards sustainable alternatives.
Solar Capacity Expansion and Government Support
India has passionately pursued solar capacity expansion over the past decade, and this initiative has yielded remarkable results. The CEEW-CEF (CEEW Centre for Energy Finance) reported that India added a record-breaking 15 GW of solar capacity in FY24, benefitting from declining costs and robust support from the government. To encourage further growth, India’s government plans to bolster the development of rooftop solar systems through the PM Surya Ghar Muft Bijli Yojana. This initiative provides financial support of up to 3 kW of solar power per household, enabling citizens to contribute to the nation’s clean energy goals.
Accelerating Renewable Energy Expansion
To achieve India’s ambitious target of 500 GW of renewable energy capacity by 2030, it is imperative to accelerate the pace of expansion. As suggested by the CEEW-CEF report, extending the concessional corporate tax rate beyond March 31, 2024, could potentially provide the necessary impetus for continued growth. This measure would incentivize more private sector involvement in renewable energy projects, driving investment and innovation in the sector.
Ongoing Challenges in Onshore Wind Capacity
While solar energy has seen remarkable progress, growth in onshore wind capacity has been more modest. Only 3 GW of onshore wind capacity was added in the previous financial year, highlighting the challenges faced by the sector. A lack of a robust domestic equipment ecosystem and project execution delays have hindered progress in the wind energy space. Nevertheless, onshore wind power remains crucial for achieving a net-zero power grid, thanks to its higher energy output and consistent availability throughout the day.
Driving Integration of Wind Power
To overcome obstacles and expedite the integration of wind power, it may be necessary to implement long-term financial mechanisms such as contracts for differences. These agreements can provide stability and certainty to wind energy projects, ensuring a reliable stream of revenue and facilitating their successful execution. By addressing challenges and leveraging innovative solutions, India’s power sector can further harness the vast potential of wind energy and continue its impressive growth trajectory towards a clean and sustainable future.
