2024: The Year Of Resurgence For Renewables In India's Energy Sector
As we look back on 2023, there have been several positive developments in growing India's renewable energy (RE) capacity, encouraging the development of local supply chain for key components of RE, and finally, spurring growth of new technologies, like BESS and green hydrogen.
The year witnessed the rollout of key initiatives, such as the commitment from the central government to bid out 50 GW of renewable energy capacity annually until FY2028, including a minimum of 10 GW of wind power, approval of Rs 3,670 crore for the development of 4,000 MWh of battery energy storage systems (BESS) to further strengthen the integration of renewables into the power infrastructure, allocation of total capacity of 39.6 GW for domestic solar PV module manufacturing, and rollout of the National Green Hydrogen Mission with a budget of ₹19,744 crore, aimed at producing 5 million metric tonne of green hydrogen annually by 2030.
As we move into 2024, India is gearing up to accelerate its renewable energy capacity, with a target of surpassing 500 GW by 2030. This stated commitment is aligned with the ambitious targets set at COP28 by 118 countries to triple their renewable energy capacity over the same time period. The current financial year saw a surge in project tendering, with over 16 GW of renewable energy projects bid out and another 17 GW in progress. The installed renewable energy capacity is expected to increase to ~170 GW by March 2025, up from 132 GW as of October 2023.
Drop In Cell, Module Prices
A critical factor supporting this expansion is the substantial drop in solar cell and module prices, which have fallen by ~65 per cent and ~50 per cent, respectively, over the past 12 months. The general trend of falling solar module prices reversed in the last quarter of FY ’21 due to higher costs of raw materials like polysilicon and aluminum. This had a negative impact on ~20 GW of projects auctioned across FY2021 and FY2022, as developers had factored in the falling price trend while bidding. The current decline is driving a healthy improvement in the project economics and viability for upcoming solar power projects.
The government's suspension of the Approved List of Models and Manufacturers (ALMM) order until March 31, 2024, has also provided a temporary window of respite for developers, allowing them to utilize cost-effective Chinese modules. The lower prices across the value chain will also provide a cushioning effect to developers who were expecting to pay higher prices for domestic modules once the ALMM comes back into effect.
Furthermore, the government's policy to promote round-the-clock (RTC) power with solar, wind and storage is expected to catalyse the development of projects requiring the integration of multiple technologies. The aforementioned 50 GW of tendering annually is expected to have a strong bias towards dispatchable power as opposed to plain vanilla solar and wind projects. India has also set a target of achieving 140 GW of installed wind energy capacity by 2030, including 30 GW of offshore wind (primarily focused on Tamil Nadu and Gujarat).
Promoting Technologies
The government is also actively promoting new technology developments in areas such as battery storage manufacturing through initiatives like the Production Linked Incentive (PLI) scheme for battery chemistry. The rise in renewable energy capacity over the next six years is projected to increase the share of renewable energy plus large hydro in India’s electricity generation from 23 per cent in FY 2023 to around 40 per cent by FY 2030. Advances in battery chemistries and domestic manufacturing will help accelerate the adoption of renewable energy while ensuring stability of the grid.
Despite the positive outlook, challenges persist, particularly in acquisition of land for project development and the rate of addition of infrastructure relating to transmission and distribution, which could impede or derail the rate of capacity additions. The continued dependency on imported solar PV cells and wafers also remains a concern until fully integrated module manufacturing units are developed in India, to support the domestic growth ambitions.
To summarise, 2024 is poised to be an interesting year for India's renewable energy sector. With substantial government support, reduced costs of solar modules, and a strong focus on hybrid projects, India is steadily advancing towards its ambitious renewable energy targets. While challenges in execution and infrastructure development remain, the country's commitment to a sustainable energy future remains firm and is expected to drive significant growth in the renewable energy sector over the coming years.
