Renewable Energy Regulations in India

Posted On - 1 May, 2023 • By - King Stubb & Kasiva

With a population of 1.5 billion people, India requires a significant quantity of energy to run its fast-expanding economy. Since its independence, India has worked hard to achieve energy independence, changing itself from a power-deficient to a power-surplus nation with over four lakh MW of installed electricity capacity. Following the Sustainable Development Goals, the energy generation mix is shifting significantly toward renewable energy in India. India is currently the world’s third-largest generator of renewable energy, with non-fossil fuel sources accounting for 40% of installed capacity.[1]

Despite having the world’s biggest population, India’s per capita CO2 emissions are substantially lower than the worldwide average, with 1.8 tonnes, compared to 14.7 tonnes in the US and 7.6 tonnes in China. India aims to achieve net-zero emissions by 2070 and has set several short-term goals, including increasing renewable energy capacity to 500 GW by 2030, meeting 50% of energy needs with renewables by 2030, reducing cumulative emissions by one billion tonnes by 2030, and lowering the emissions intensity of India’s GDP by 45% by 2030. India’s experience with climate change mitigation will be beneficial to other developing countries as they move to sustainable energy sources.[2]

Current Laws and Regulations

The Electricity Act 2003 (“Electricity Act”) is India’s fundamental legislation governing electricity, including renewable energy. Both the central government and state governments have the authority to legislate on electricity-related issues, but in the event of a conflict, central legislation takes precedence over state legislation.[3]

The Electricity Act does not define renewable energy. However, it is defined under other regulations, such as the Central Electricity Regulatory Commission (“CERC”) (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations 2020. Herein, renewable energy in India refers to electricity generated from renewable energy sources, which are classified as renewable energy sources such as water, wind, sunlight, biomass, bagasse, municipal solid waste, and other sources certified by the Ministry of New and Renewable Energy.[4]

The automatic route in India’s renewable energy market allows foreign investors to invest up to 100% without requiring government clearance, making it an appealing investment choice. While the Ministry of Power is in charge of the development of India’s power sector, the Ministry of New and Renewable Energy is in charge of the country’s renewable energy growth and development. As the government’s nodal agency for renewable energy, it handles all connected affairs.[5]

Other Relevant Policies

Renewable energy in India has various sources, such as solar and wind. Both the Central and state governments have implemented favorable regulations in recent years to stimulate private sector investment in renewable energy, including foreign investment. The Electricity Act requires the Central Government to issue a National Electricity Policy in consultation with the state governments, which guides the development of the country’s electricity sector, with a focus on the best use of resources such as coal, natural gas, nuclear materials, hydro, and renewable energy sources.

Every five years, the government also issues a National Electrical Plan, which offers a short-term framework for the electricity sector. The most recent draught policy, National Electricity Policy 2021, has yet to be made public. The National Tariff Policy, first announced in 2006 and amended in 2016, promotes renewable energy generation and private sector engagement in renewable energy projects.

Incentives in the Sector

To encourage the construction of wind and solar projects, the government provides incentives such as the generation-based incentive scheme and accelerated depreciation benefits. To foster greater adoption of renewable energy, regulatory commissions require distribution licensees to purchase a minimum amount of renewable energy. Most state governments have also implemented particular regulations to encourage private investment in renewable energy, such as simpler land acquisition, faster land conversion, and preferential procurement of renewable power by state distribution licensees.[6]

Wind and solar power facilities have been granted must-run status, which means they are not susceptible to unjustified backdown or curtailment owing to grid infrastructure congestion. India is also introducing regulatory initiatives for electric vehicles, with governments offering incentives to accelerate the process, and the National Institution for Transforming India has produced a paper underlining the need for additional investment to accelerate India’s transition.[7]

Also Check our Related Article: New Pathways To Clean Energy: Virtual Power Purchase Agreements (VPPAs) In India

Potential Challenges

There are several renewable energy challenges in India. This isimpeding its growth and development. Some of these renewable energy challenges in India include:

Land acquisition is one of the most difficult challenges. Land acquisition for renewable energy projects is a complex and time-consuming procedure, particularly for bigger projects. This difficulty is exacerbated by the scarcity of adequate land in locations with significant renewable energy potential. Another major issue is the lack of suitable transmission and distribution infrastructure. Renewable energy facilities may be located distant from areas of strong demand, making transmission of generated electricity challenging and costly. As a result of insufficient transmission infrastructure, a large amount of renewable energy produced in India is squandered.

Financing issues are also a source of concern for the renewable energy sector. While the cost of renewable energy technology has declined over time, the initial investment required to establish these projects remains significant. Access to capital remains a significant barrier, especially for smaller players in the field.

Way Forward

The national and state governments have provided significant regulatory support to renewable energy in India, attracting increased interest from investors, including foreign investors. The government’s priority is to continue bidding on renewable projects of various technologies, in keeping with India’s promise to achieve net zero emissions by 2070 and 500GW of non-fossil renewable energy capacity by 2030. While ambitious, the government’s policies, revisions, and subsidies are making headway. However, issues like land acquisition, consistent finance, and private-sector investment continue to be major barriers to the growth of the renewable energy sector.

Proper legislation for renewable energy sources and power generation is critical to meeting India’s international agreement commitments and attracting private sector funding and investments. Despite these obstacles, India is experimenting with new and interesting sources of renewable energy, including hydrogen, electric vehicles, and storage projects, all of which have enormous promise for growth and development in the industry.