Power and Renewable Energy

SUMMARY

• India has the fifth largest power generation portfolio in the world and its current renewable energy contribution stands at 44.812 GW which includes 27.441 GW of Windpower and 8.062 GW of Solar power installed capacity in the country. (As of 31.07.2016).
• The fourth-largest installed capacity of wind power.
• The third-largest installed capacity of concentrated solar power (CSP)
• Renewable energy contributes 14.7% of the total installed capacity in the country as of 31.07.2016.
• The ambitious target of 175 GW of renewable power by 2022 will include 100 GW of Solar power, 60 GW from wind power, 10 GW from biomass power, and 5 GW from small hydropower.

FDI POLICY

• Foreign Direct Investment (FDI) up to 100% is permitted under the automatic route for renewable energy generation and distribution projects subject to provisions of The Electricity Act, 2003.

SECTOR POLICY

Guidelines for Green Large-Area Developments by MNRE:

• These guidelines cover various fiscal and promotional policies for the development of grid-interactive solar and wind energy.
• The package of incentives includes fiscal concessions such as 80% accelerated depreciation, concessional custom duty for specific critical components, excise duty exemption, income tax exemption on profits for power generation, etc.
• Generation based incentives (GBI) of USD 0.007/unit subject to a max of USD 153,846.2/MW for wind power projects (not availing the benefits of AD).
• Viability Gap Funding (VGF) support up to USD 153,846.2/MW based on reverse e-auction for 5000 MW Viability Gap Funding (VGF) scheme to be implemented in 4 years by Solar Energy Corporation of India (SECI). 

The Provision of Central Financial Assistance for Small/Micro Hydro-Power Projects:

• The MNRE is providing central financial assistance to set up small hydro projects both in the public and private sectors. Support is also given to state governments for the identification of new potential sites, including surveys, the preparation of detailed project reports, and the renovation and modernization of old projects. 

The Setting up of the Solar Energy Corporation of India:

• The mandate of the SECI allows wide-ranging activities to be undertaken with an overall view to facilitating the implementation of the National Solar Mission and the achievement of targets set therein. The SECI has the objective of developing renewable energy (RE) technologies and ensuring inclusive REpower development throughout India.

The Announcement of the Offshore Wind Energy Policy:

• To explore and promote the deployment of offshore wind farms in the Exclusive Economic Zone (EEZ) of the country.
• To promote investment in energy infrastructure.
• To promote spatial planning and management of maritime renewable energy resources in the exclusive economic zone.
• To achieve energy security and reduce carbon emissions.
• To encourage indigenization of offshore wind energy technology.
• To promote R&D in the offshore wind energy sector. 

The Policy for Repowering of the Wind Power Projects:

• To promote optimum utilization of wind energy resources repowering policy has been issued.

The National Policy on Biofuels:

• To encourage the accelerated development and promotion of the cultivation, production, and use of biofuels to increasingly substitute petrol and diesel for transport and be used in stationary and other applications.

The Policy for Grid-connected Solar Roof-top Projects:

• Joint Electricity Regulatory Commission (JERC)/State Electricity Regulatory Commissions (SERC) of 29 States/UTs namely Andhra Pradesh, Assam, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Meghalaya, Odisha, Punjab, Rajasthan, Sikkim, Tamil Nadu, Uttar Pradesh, Uttarakhand, West Bengal, Andaman & Nicobar, and Lakshadweep Islands, Chandigarh, Dadra & Nagar Haveli, Daman & Diu, Delhi, and Pondicherry have notified regulations/tariff order for grid-connected solar rooftop projects. 

State Initiatives:

• State Electricity Regulatory Commissions in Andhra Pradesh, Haryana, Punjab, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, Gujarat, Kerala, Punjab, Orissa, and West Bengal have announced preferential tariffs for the purchase of power from wind power projects.
• New Solar Policy in 2016 – Delhi, Himachal Pradesh, and Haryana.
• New Solar Policy in 2015 - Telangana Jharkhand, Gujarat, and Andhra Pradesh. 

FINANCIAL SUPPORT

KEY PROVISIONS IN BUDGET 2016-17:

• Full exemption on excise duty is being provided on Pig Iron (SG grade) and ferrosilicon-magnesium for use in the manufacture of cast components of wind-operated electricity generators.
• The excise duty on solar water heater and system is restructured from 12% to Nil without CENVAT credit or 12.5% with CENVAT credit.
• Full exemption on excise duty is being provided on round copper wire and tin alloys for use in the manufacture of solar PV ribbon for the manufacture of solar PV cells.
• Full exemption from basic customs duty (BCD) is being provided on evacuated tubes with three tires of solar selective coating for use in the manufacture of solar water heater and system. 

Incentives offered by the Government for the development of the Solar Energy sector include:

• Exemption from excise duties and concession on import duties on components and equipment required to set up a solar plant.
• A 10-year tax holiday for solar power projects.
• Wheeling, banking, and third party sales, buyback facility by states.
• Guaranteed market through solar power purchase obligation for states.
• Reduced wheeling charges as compared to those for conventional energy.
• Special incentives for exports from India in renewable energy technology under renewable sector-specific SEZ.
• A payment security mechanism to cover the risk of default by state utilities/discoms.
• A subsidy of 30% of the project cost for off-grid Photovoltaics (PV) and solar thermal projects.
• Loans at concessional rates for off-grid applications. 

Fiscal Incentives for Biomass Power Projects:

• Accelerated depreciation: a claim of 80% depreciation in the first year for certain specific equipment.
• A 10-year income tax holiday.
• Concessional customs duty and excise duty exemption for machinery and components during the setting up of the project.
• An exemption of sales tax in certain states.
• Financial assistance from IREDA for the setting up of biomass power and bagasse co-generation projects.
• A subsidy of USD 30,769 per MW for biomass power projects and USD 23,076 per MW for Bagasse Co-generation projects limited to USD 230769.2 per project. 

Fiscal Incentives for Small Hydro Power Projects:

• Central financial assistance to the State government and the private sector for the setting up of small/mini-hydro projects.
• Subsidy to upgrade watermills and thereby improve their efficiency.
• A subsidy of USD 1.15 million/ MW for special categories and North-Eastern states and USD 0.53 million/ MW for other states limited to USD 3.07 million per project for State government projects.
• A subsidy of USD 230769.2/ MW for special categories and North-Eastern states and USD 153846.2/ MW for other states for the projects developed by private developers.

INVESTMENT OPPORTUNITIES

• From barely 20 MW in 2011, India’s installed solar capacity has increased to 8.062 GW as of 31.07.2016.
• India has vast untapped renewable energy resources — wind energy has an installed capacity of 27.44 GW and an estimated potential of 302 GW at 100-meter height.
• Small hydro has an installed capacity of 4.3 GW and an estimated potential of 19.7 GW.
• Bio-power (including biomass and bagasse co-generation) has an installed capacity of 4.88 GW as opposed to an estimated potential of 22.5 GW.
• Solar power has an installed capacity of 8.062 GW with the potential of 7.48 GW.
• The Solar Policy of Rajasthan notified in 2014 envisages the setting up of solar manufacturing facilities at proposed solar parks.
• 34 solar parks of a total capacity of 20 GW have been sanctioned.
• Land for the solar parks are identified in Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Nagaland, Odisha, Rajasthan, Telangana, Uttar Pradesh, Uttarakhand, West Bengal, and Tamil Nadu.