Costs of Non-conventional Energy Sources

Wind and solar power are non-dispatchable. This means that energy can be generated only when there is wind blowing or there is appropriate sunshine.

• Electricity system has to adjust to the demand patterns of electricity. Therefore, there is an integration cost which is not included in the estimates of the levelised cost of electricity.
• This would require that other conventional sources of energy like coal-based power plants have to fill in the gap during times when renewables are not supplying power.
• One solution to the intermittency problem is storage. The future costs of renewable energy generation depend crucially on the path taken by storage technologies and their cost effectiveness.

Opportunity Cost of Land

• One of the barriers to the widespread adoption of solar and wind technologies is the land area requirements for setting them up.
• The land requirement for a coal power plant is usually 2023 m2/MW. Compared to this the requirement of land for a solar power is around 10 times that of coal.
• Advances in the efficiency of solar technologies would lead to decline in the land requirements for solar power in the future.
• The cost of the diversion of land to renewable energy generation is not only the private cost of land incurred by the investor but also the opportunity cost of such land. This would depend on the alternative uses for which a particular patch of land can be utilized.

Cost of Government Incentives

• The role of government in incentivizing investments in renewable energy in India has been considerable. The low tariffs witnessed recently have been partly a result of government subsidies/tax holidays and other incentives.
• Budget estimates for the year 2017-18 indicate an allocation of $420 crores towards subsidies for solar and wind power.
• After increasing from $106 crores to $450 crores in 2015-16, subsidies to solar power has declined to $10 crores and $15 crores in 2016-17 and 2017-18 (B.E).
• On the other hand, wind power has been receiving a considerable portion of the total subsidies to renewables in the recent years.

India’s Current Energy Mix

• Within the energy mix of the country, coal accounts for nearly 55% of the total primary energy supply, followed by oil at 30%, and natural gas at 9%. Only 2% of total primary energy is supplied by renewable energy sources.
• Within the power sector, thermal power (particularly coal) dominates the share of total installed power capacity in India.
• Coal based thermal power accounts for around 59% of the total installed capacity of 327 GW, while 18% of the installed capacity is coming from renewable energy sources (RES). Out of the total RES installed capacity of 57 GW, around 56% is wind-based power.

Future Electricity Transition Scenarios

• India has set itself ambitious targets in the area of renewable energy. Moving ahead in this direction, India is implementing the largest renewable energy expansion programme in the world.
• It envisages an increase in the overall renewable energy capacity to 175 GW by 2022. This includes 100 GW of solar, 60 GW of wind, 10 GW of biomass, and 5 GW of small hydro power capacity.
• The capacity addition in coal-based power plants is expected to be around 50 GW between 2017 and 2022. Further, according to these projections, no more addition in the installed capacity of coal-based power generation would be required in the period 2022 to 2027.
• As a result, the share of renewables in total installed capacity in this scenario is likely to increase to around 43% in 2027.