Solar and wind power can rise to a 10% share by 2015 in India

A so-called national action plan on climate change recommends India should generate 10% of power from solar, hydro power, wind energy and other renewable energy sources by 2015, and 15% by 2020. But the high production cost and its effect on state power utilities’ budgets is viewed as a deterrent.

The report by ratings firm Crisil Infrastructure Advisory assesses the renewable energy potential of states, the renewable energy purchase obligations of state utilities and its impact on tariffs. It says the additional costs will be minimal.

"The incremental impact on power purchase costs pan-India would be about 1.5 paise a unit in 2011 diminishing to 0.1 paisa by 2015," says the report. "The maximum impact for any state would be 4.2 paise a unit in 2011, which would go down to about 1 paisa by 2015."

India has to import nearly three-fourths of its energy needs due to a limited stock of conventional energy sources. India’s renewable energy potential is 100,000 MW from solar energy and another 85,000 MW from non-solar sources, like wind turbines. Of that, only around 17,220 MW has been tapped.

This includes 69% from wind energy, 16% from small hydropower units and 8% from cogeneration. The remaining 7% covers solar energy and other sources, according to Crisil.

"Though wind farm based power has the highest share in total renewable energy installed capacity, it also has the highest gap (between potential and production capacity) among non-solar renewable sources, providing an opportunity for further harnessing wind energy. The biggest potential exists for solar power," the report says.

More reliance on renewable energy will not only help India reduce its import bill but also cut back its contribution to polluting gases that are blamed for climate change worldwide.

The Central Electricity Regulatory Commission (CERC) has come up with guidelines on issuing renewable energy certificates (RECs) from September to promote green energy. Certificate holders will be able to sell green energy to states, individuals or other trading entities.

States have been allotted different renewable energy purchase obligations (RPOs). While Gujarat met its target for 2009-10, states such as Tamil Nadu came close.

Sixteen state electricity regulatory commissions have specified the RPOs for their licensee distribution companies. They have also notified regulations to determine the tariff of energy generated from renewable sources.

"While some states had issued final regulations on the REC mechanism, several others were awaiting approval of the norms drafted by the respective state electricity regulatory commissions," said Pramod Deo, chairperson and chief executive of CERC.

The Crisil report says RPOs reflect the target set out in the national action plan–5% of renewable energy in 2010, followed by a 1 percentage point increase every year, leading to 10% in 2015 and 15% in 2020.

The potential for renewable energy differs across states.

"For instance, most of the wind potential is available in states like Tamil Nadu, Karnataka, Gujarat, Andhra Pradesh, Maharashtra, Rajasthan, Madhya Pradesh and Kerala. There are also states like Chhattisgarh, Uttarakhand and Himachal Pradesh where there is moderate RE (renewable energy) potential (primarily small hydropower). Remaining states have very little RE potential," the report says.

Sushanta K. Chatterjee, deputy chief for regulatory affairs at CERC, said a standard RPO for all states is neither possible nor desirable. "There will need to be different trajectories for different states at varying potential levels."

He said most renewable energy projects were located in poorly connected areas, and transmission of power was a major challenge.

By Padmaparna Ghosh, Mint,