Originally published on Future Trends.
Welcome to another issue of our new India x Cleantech series! On a monthly basis, we are pulling news from across clean technology sectors in India into a single, concise summary article about the country.
Climate Policy & Carbon Tax
The Prime Minister’s Office is understood to have recommended that clean energy tax on coal consumption be removed. The recommendation was reported widely by several business dailies in the run-up to India’s union budget. However, no such announcement was made in the budget. India charges Rs 400 per metric tonne of coal consumption. The tax was first introduced in 2010 at Rs 50 per metric tonne of coal.
One of India’s largest renewable energy developers, ReNew Power Limited, has raised US$450 million through yet another green bond issue. The company is reported to have raised this amount at a coupon rate of 5.875% which is only marginally higher than the benchmark rate of Reserve Bank of India. The bonds have a maturity of five and a half years. Proceeds for the bond shall be used to set up new projects and refinance existing loans. Before this bond issue ReNew Power had raised around US$3 billion through various bond issues.
European asset management EQT Infrastructure and Singapore’s government investment firm Temasek Holdings have jointly floated a US$500 million renewable energy company. Named O2 Power, the company aims to have 4 gigawatts of solar and wind energy capacity through acquisitions and greenfield projects.
Amazon India will soon join a growing list of Indian companies to have electric vehicles in their delivery fleets. The company has announced that it is working with several EV manufacturers to procure 10,000 three and four-wheeler vehicles by 2025. These EVs are expected to be deployed in large cities including Delhi, Bengaluru, Hyderabad, Pune, and Nagpur. A number of companies are working with manufacturers, including Euler Motors and Gayam Motors, to shift to electric vehicles for last-mile delivery of products. These include online grocery company BigBasket, food delivery companies Zomato and Swiggy, courier delivery companies Blue Dart and DHL and McDonald’s.
India’s Ministry of Industry and Public Enterprises has approved a subsidy for the installation of 2,636 electric vehicle charging stations across the country. The subsidy has been approved under the FAME program phase II. The charging stations shall be installed in 62 cities across 24 states and union territories. Around two-third of these approved stations shall have fast-charging technology. Last year, the ministry approved a subsidy for nearly 5,600 electric buses for various states.
The Indian government reported cumulative electric vehicle sales through November 2019 at around 280,000. Most of the EVs are battery-powered three-wheelers commonly used for last-mile connectivity in cities. Other categories of EVs, especially electric cars, are yet to grab a noticeable share within the EV space itself. Just 1,000 electric cars were sold in India last year. While automakers are coming out with new and affordable models, large-scale procurement is being driven largely by government companies. An income tax incentive introduced by the government last year for personal-use electric cars is yet to yield any substantial results.
MG Motors’ latest offering in the Indian market, an electric compact SUV, has been sold out before its formal launch. The company reported that it received over 2,800 bookings for the car even before it was formally introduced in the Indian market. The company has now been forced to halt all new bookings and will concentrate on delivery of 2,049 units to early adopters. It is worth noting that merely 1,071 electric cars were sold in 2019 in India. ZS EV competes with Hyundai’s Kona electric SUV.
Hyundai Motors India is contemplating launching a mass-market electric car for the Indian market following its bittersweet experience with the costly Kona electric SUV. Kona, launched in India in July 2019, delivers the longest range among all electric cars available in India. However, the car costs more than US$35,000 — not at all an attractive price point for the Indian market. Since Kona’s launch, Hyundai’s competitors — MG Motors and Tata Motors — have already launched cheaper models, albeit with shorter ranges. MG Motors ZS EV, starting at US$28,000, has seen much more demand compared to what Kona was able to generate. With the presence of automakers like Maruti Suzuki and Mahindra & Mahindra, Hyundai would do well to offer affordable mass-market models.
Renewable Energy & Batteries
Three major developers withdrew plans to set up 1.4 gigawatts of solar power projects secured in competitive auctions, citing regulatory delays. Acme Solar, Shapoorji Pallonji Infrastructure Capital, and Azure Power cancelled their contracts with government-owned NTPC Limited to set up large-scale solar power projects. The projects were allocated to these companies through competitive auctions at tariff rates of around US¢3.6/kWh. Earlier, three other developers had cancelled 900 megawatts of capacity.
Indian Railways has announced plans to set up 1 gigawatt of solar power capacity and 200 megawatts of wind energy capacity. The Ministry of Railways, in a statement, said that 500 megawatts of capacity will be installed through rooftop systems atop railway stations. The balance of 500 megawatts will be land-based likely to be commissioned alongside railway tracks.
As per government data, between March 2015 and December 2019 India added 98 gigawatts of power generation capacity. 52% of this was based on renewable energy technologies dominated by solar power, which saw the addition of 30 gigawatts of new projects. Over the last five years, solar power capacity in India has increased 10 times to 33.7 gigawatts as of 31 December 2019. Fossil fuels (coal, diesel, and gas) witnessed the addition of 42 gigawatts of new capacity over the last five years. Coal was, understandably, the dominant technology, adding 41 gigawatts of net capacity with the retirement of several coal-fired power plants.
India witnessed a sharp rise in new coal-based power generation capacity last year, with dirty power plants accounting for 44% of the total new power generation capacity added in the country. The share is a huge increase from just 21% in 2017 and 25% in 2018. India’s power generation sector witnessed 7.8 gigawatts of net coal-fired generation capacity coming online in 2019. The share of renewable energy technologies in new capacity added dropped sharply following two consecutive years to rise. Renewable energy registered a share of 57% in new capacity added, down from 74% in 2018. Share of wind energy in new capacity held a share of 13%, unchanged from last year, while the share of solar power was down from 50% in 2018 to 44% in 2019.
Greenko Energy Holdings and ReNew Power secured 900 megawatts and 300 megawatts of renewable energy capacity in a first-of-its-kind tender issued by SECI last year. As per the conditions of the tender, developers are required to supply firm amounts of renewable energy throughout the day. Developers were required to bid separate tariffs for supplying power during peak and off-peak periods. Peak period constitutes 11 hours in a day. Greenko Energy Holdings has secured rights to develop 900 megawatts of capacity with a peak period tariff of Rs 6.12/kWh (US¢8.55/kWh) and an off-peak period tariff of Rs 2.88/kWh (US¢4.02/kWh). ReNew Power secured a capacity of 300 megawatts with a peak period tariff of Rs 6.85/kWh (US¢9.57/kWh) and an off-peak period tariff of Rs 2.88/kWh (US¢4.02/kWh). To meet the firm supply of 1.2 gigawatts, developers would be required to have a storage capacity of 3,000 megawatt-hours.
Solar Energy Corporation of India (SECI) has issued a fresh tender calling for the installation of 1.2 gigawatts of solar power projects across the country. Participating developers can bid for a maximum of 300 megawatts of capacity, which is significantly lower than the threshold allowed in past tenders. SECI has offered a maximum tariff of Rs 2.78/kWh (US¢3.89/kWh).
Export-Import Bank of India has approved a line of credit worth US$75 million to Cuba to set up solar power parks in the country. The financing agreement has been signed between Export-Import Bank of India and Banco Exterior De Cuba. These funds shall be used for setting up a 75 megawatt solar power park in Cuba. As part of the agreement, Cuba shall source up to 75% of equipment required to set up the solar park from India.