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Advancing Renewable Energy in India: Policy Framework and Market Challenges

In a presentation by Debashish Majumdar, Managing Director of the Indian Renewable Energy Development Agency, the focus is on implementing a robust integrated energy policy to foster sustainable growth in the renewable energy (RE) sector. Key topics include the need for long-term regulatory frameworks, conducive investment climates, and niche public finance mechanisms. The presentation outlines major obstacles such as policy instability, high infrastructure costs, and lack of assured markets. Suggestions for overcoming these challenges include consistent policies, establishing a Renewable Energy Development Fund, and enhancing project bankability.

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Advancing Renewable Energy in India: Policy Framework and Market Challenges

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  1. Presentation by Debashish Majumdar, Managing Director Indian Renewable Energy Development Agency Limited New Delhi July 27, 2006 Energy Conclave 2006 Implementing the Integrated Energy Policy: The Way Forward

  2. Need for Policies in RE Sector • To create markets • To reduce risks • Provide acceptable rates of return • Create conditions for sustainable & profitable industry

  3. What is required ? • Long term regulatory frameworks • To create conducive investment climate • Niche public finance mechanisms • To address specific technology gaps / barriers • To aid commercialization through project development • End-user Finance Mechanisms • Carefully designed public support initiatives

  4. Regulatory Issues affecting Growth of RE Sector • Frequent change in policies • Tariff not conducive for renewable energy • Third Party sales discouraged in most States. • High wheeling charges. • Cost of infrastructure development, evacuation facilities and transmission lines left to be borne by developers. • Late or Non-payment by Electricity off-takers. • Government / forest land issues.

  5. Renewable Energy - Key Obstacles to Growth • Absence of assured customer / market • All RE projects are : • Small in size • Widely dispersed in remote locations • Lacking infrastructure (evacuation facilities, roads etc ) • Generally high cost ( not factoring positive environmental and social impacts) • 90% of small hydro potential is in hilly areas which have no industry – No demand. • Only buyer SEBs – Not willing to pay more for RE Power.

  6. Renewable Energy - Key Obstacles to Growth • Absence of aggregating agency / trader. • All small RE projects are forced to market their products (electricity) directly to monopoly buyer (SEBs) – Buyer’s Market. • Higher cost of generation due to : • Small size ( no economies of scale) • Disadvantaged locations • Lack of adequate capital at affordable cost. • Absence of National Renewable Energy Policy.

  7. The Way Forward - Suggestions • Policies to be consistent and valid for long term • Fiscal benefits to be linked to performance preferably through tradeable credits. • State Nodal Agencies to develop shelf of “Bankable Projects” complete with all necessary clearances to be made available to private investors through suitable bidding mechanism. • Special Awareness & Focused Training Programmes on RETs for senior members of SERCs & SEBs. • Availability of adequate and affordable resources.

  8. Resource Mobilization for RE Sector • Setting up of Renewable Energy Development Fund (REDF) • Cess of Rs 5/MT Coal • Cess of Re 1/LPG Cylinder • Cess of 1 paisa / Kwh on conventional electricity generation • Green Stamp Duty on IPOs • Setting up of RE Innovation Fund – to provide Venture Capital for taking R&D and demo projects to commercialization. • Establishment of specialized Assets Re-construction Company – to tackle NPA & recovery. • IREDA to be converted to Apex FI – similar to NHB, NABARD etc. • MoEF, MoRD to contribute to IREDA’s equity.

  9. Conclusion • Conducive policies are the strongest drivers for market development. • Preferential treatment of renewables is important for creating “critical mass”. • Availability of specific funds for RE development and dedicated institutional mechanism for financing of RE sector is critical. • Boosting of private sector confidence required for larger investments • Strong political will and commitment required in the form of Renewable Energy Policy Statement or Renewable Energy Act.

  10. Thank you www.iredaltd.com

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