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Government moves to de-risk renewables sector to reduce cost of power

15 November 2016:

The narrative on the renewable energy front, the key discussion theme at the India Pavilion at CoP22 on Wednesday, amplified how India is moving towards de-risking the sector and driving the cost of power down to provide affordable and accessible power for all. The discussions around financing renewables as India moves toward its stated policy of creating 175 GW renewable energy capacity by 2022 was held against the backdrop of the signing ceremony of the framework agreement of The International Solar Alliance (ISA) where over 20 countries pledged their commitment to create a solar rich world across diverse geographies. The ISA was launched by the Hon’ble Prime Minister of India, Mr Narendra Modi and the Hon’ble President of France, M. Francois Hollande, at the sidelines of CoP21 in Paris in December 2015.

Speaking at the inaugural session on Financing Renewables in India, co-hosted by the Ministry of New and Renewable Energy (MNRE), Government of India and the Confederation of Indian Industry (CII), Mr P K Pujari, Secretary, Ministry of Power and MNRE, said that the Government is working on policy interventions and regulatory measures to reduce systemic risk to ensure that the costs of power and capital are slashed. "Cost of managing the grid and ancillary services inflates the cost of renewable power generated so one has to work backwards, considering all costs, to make the cost of RE comparable to fossil fuels," Mr Pujari said. He also explained how measures are being taken to make offtake of renewable energy mandatory by implementing merit order despatch and must run status.

Mr Upendra Tripathy, former Secretary of the MNRE, who has played a significant role in the structuring the ISA, emphasised on how there must be a great push to move investments into this sector. One major move in this regard could be by getting multilateral funding institutions to pledge at least 15% of their funding towards the renewable sector.

Speaking about how stakeholders need to move the construct in the positive way, Dr Ajay Mathur, Director General, TERI said that it is important to look at some fundamental factors to sustain the growth story of this sector. Talking about risks, Dr Mathur said that it is crucial to ensure payment guarantees and provide for structured risk instruments, thereby ensuring a healthy rate of return on capital and aggregating demand.

Adding further, Mr Rahul Munjal, Managing Director, Hero Future Energies Pvt Ltd said that India has equity available, and that pension funds and financing institutions are willing to finance large-format renewable projects given the scale of the Indian market. Mr Rajiv Ranjan Mishra, Managing Director, CLP India and Co-Chair of the CII National Committee on Power, said that grid integration and capacity of the national grid to buy and integrate infirm power will be one area that needs to be developed.

Ms. Kanika Chawla, Senior Programme Lead, Council on Energy, Environment and Water (CEEW) highlighted the need to work on skilling to create the required workforce to meet the growing demand in the renewable space. Meanwhile, talking about policy innovations that have played a role in the development of the renewable energy sector, Mr Ashwini Kumar, Managing Director of the Solar Energy Corporation of India (SECI) said that hybridisation of renewable energy sources would be important to manage costs. He also said that the transparent and well-structured auctions have been instrumental in driving the cost of solar power to historic lows in the country. Whereas Mr Gireesh Shrimali, Director – India, Climate Policy Initiative said that while the Government of India has shown significant political will to reach the 175 GW target, given that it would require about USD 200 billion and the forecasts project towards a 30% deficit in this investment.

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