PPAs in India: Renewable Energy Opportunities on the Sub-Continent

Author: James Lewis’s expertise is in international renewables, with emphasis on emerging markets in India.

India is the largest democracy on the planet, and home to many multinational companies’ Asian operations. With a population of approximately 1.3 billion people, India provides great commercial opportunities, but also faces extraordinary social and environmental challenges.

Acknowledging issues such as the need to diversify its energy mix, provide more stable electricity supply, and generate electricity for more than 200 million people who currently do not have access to modern energy sources, the incumbent Modi Government has enacted several policies designed to accelerate the installation of renewable energy projects of various technologies and sizes.

The centerpiece of this approach is an aggressive target of 175GW of renewable energy installed by 2022. Of this, 100GW will come from solar (40GW of which will be rooftop), 60GW from wind, 10GW from biomass, and the remaining 5GW from small hydro. While the policy is national, many of the levers that will be needed to achieve this are designed and administered at the state level, meaning a company operating across several Indian regions will need to take a geographic approach to its renewable energy strategy.

The suite of policies includes an RPO (Renewable Purchase Obligation) underpinned by a renewable energy certificate (REC) system , feed-in tariffs, supportive land acquisition policies, and waiving of various taxes and charges, all aided by the global price reduction of renewable technologies.

Competition was created in the energy sector via the Open Access system, by which consumers can choose from where they purchase their electricity. This is a long-standing system that has encouraged reform over the last decade or so. It is proving valuable in enabling renewable energy access at scale.

Organizations in India with load as low as 1MW can now access offsite renewable energy at competitive rates in many states—particularly those in the south of India, such as Karnataka and Tamil Nadu—via power purchase agreement (PPA). This means that companies can enjoy savings on their power bill, locked-in power prices over 10-20 years (highly valuable in an uncertain and volatile market), enhanced energy security, and the rights to the environmental attributes.

In addition to the low 1 MW power consumption threshold, several other benefits exist to companies participating in the renewable energy market in India.  Organizations are encouraged to act sooner rather than later to capitalize. As an example, companies signing solar PPAs in Karnataka enjoy a 10-year exemption from the significant cross-subsidy charge. However, this applies only to projects commissioned before the deadline of March 31, 2018.

Onsite solar solutions are attractive across many states, limited of course by location and solar resources. Companies have installed systems as large as 4MW in order to save money, secure a captive supply of electricity, and benefit from improved environmental credentials.

Now is an ideal time to begin considering a renewable energy strategy for operations in India.  Contact us today for more information on how to understand the risks and capitalize on the opportunities of renewable energy in India.

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