Solar and wind power have made significant inroads into India’s energy mix, and constituted 8.4 per cent of total generation in FY21 (1,2), up from 7.1 per cent in FY19. But how did India’s renewable energy (RE) sector fare since the nationwide COVID-19 lockdown in March 2020? Keep in mind that the shutdowns severely impacted economic activity and caused electricity demand to fall by 28 per cent, before recovering when restrictions were eased months later. How did India manage the RE integration challenges, and what lies ahead?
Solar power capacity additions during FY21 fell by 36 per cent as compared to FY20 (3). This can largely be attributed to disruptions in supply chains, construction delays and logistical restrictions because of the lockdown. But even then, India’s aggregate solar capacity in February 2021 surpassed its total wind capacity. The must-run status of RE, reinforced during the lockdown, did have an effect.
Between April 2020 and February 2021, solar generation was almost 8 per cent higher than in the previous fiscal, and its share in the total supply was also consistently higher.
Unfortunately, 2020 was not just the year of the pandemic; it also produced a flurry of anomalous weather events. This was bad news for the wind sector. Despite an increase in installed capacity, India witnessed a sharp and unexpected 24 per cent drop in wind power generation in the peak wind season (June-September) compared with the same period in 2019 (4). The primary reason was a drastic and unusual drop in wind speeds.
The Western region, which houses 40 per cent of India’s total wind capacity, countered the drop through a 12 per cent increase in hydropower generation between June and August 2020 relative to the same period in 2019. The share of coal power also increased by 4 per cent in June and July 2020 relative to the previous two months. Wind speeds recovered by December 2020 to partially compensate for the hit. Worryingly, however, the increased frequency of weather anomalies could make wind resources more unpredictable.
The contribution of large hydro (> 25 MW) was 22 per cent higher in June and July 2020 than in the same period in 2019 (5), compensating for the reduced wind power generation. Hydro also emerged as a flexible resource during the nationwide ‘lights off’ event on April 5, 2020, when hydro capacity ramped down by 66 per cent in just 25 minutes (2045 to 2110 IST) (6).
But just like solar and wind energy, hydropower is not immune to the effects of nature. On 7 February 2021, flash floods in the Chamoli district of Uttarakhand damaged two hydropower projects, highlighting the risk that hydro faces from natural disasters.
Even as electricity demand fell drastically during the lockdown, there were several positive market developments that signalled the attractiveness of the RE sector. Auctions continued, record low solar tariffs were discovered, new market entrants won bids, commissioning deadlines were extended, must-run status was ensured, and investors generally showed a strong interest in the shares of RE companies. Additionally, Indian RE companies raised billions of dollars of debt from overseas sources as FY21 drew to a close (7, 8, 9, 10). One dark cloud, however, is the large chunk of auctioned capacity, mostly solar, which has not yet found buyers. This is perhaps a sign of how RE has become a victim of its own success.
The first is grid integration. Solar-wind hybrids and the new market platforms can help until, and even after, grid-scale storage becomes affordable. The second challenge comes from overhangs of unsold capacity. Dynamic tariffs which share the benefit of future declines with discoms could be the answer. The third is raising the massive capital to meet the targets. Tapping additional sources of capital is imperative, and mechanisms such as subsidised credit enhancement that open up the domestic bond market to RE can be invaluable.