DELHI -- India, with a growth in total investment of 62% to 12 billion, has shown the fastest expansion in the investment of any largest renewables market in the world, according to the United Nations Environment Programme (UNEP), which recently released its Global Trends Report for 2012.
The study showed that global investment in renewable power and fuels increased 17% to a new record of $257 billion in 2011. Developed countries made up 65% of this total investment while developing countries did 35%
The report attributed India’s “advance to an increase in the financing of solar projects under the country’s National Solar Mission, and rises in wind capacity addition and venture capital and private equity investment in renewable energy companies.”
Lavleen Singal who heads Acira Solar Pvt. Ltd., which invests in solar technologies, highlighted certain policies pursued by the Indian government that “have made solar very attractive.” Singal, for instance, pointed out that it is mandatory for every state in India to use a percentage of renewable energy in its total energy mix, which is called Renewable Purchase Obligation.
“If they cannot produce their own electricity from renewable, they can buy Renewable Energy Certificates from either from other state electricity distribution companies or from the renewable power producer directly,” he said. “This has given a fillip to solar sector in India.”
India’s National Solar Mission, launched in June 2008, has set an objective of producing 20,000 MW power generation from solar technologies by 2022.
“This National Solar Mission has the pride of place in India’s National Action Plan on Climate Change,” Prime Minister Manmohan Singh said at it launch. “Its success has the potential of transforming India’s energy prospects, and contributing also to national as well as global efforts to combat climate change.”
In an interview with SmartPlanet, Dr B Bhargava, the former director at Ministry of New and Renewable Energy, who retired in December 2011, cautiously noted that it’s too early to gauge the mood of investors in the solar power sector but signs look healthy.
Bhargava explained how the National Solar Mission had given impetus the country’s solar energy drive. “The JNNSM (Jawaharlal Nehru National Solar Mission) acted as a catalyst, and different states in the country too jumped into the fray by providing feed in tariffs higher than that of conventional power,” he said.
Bhargava talked about why loans had become more easily available for solar powered initiatives. “Banks and financial institutions now generate greater confidence in solar power because there is a guaranteed return in form of power purchase agreement signed between generator and state owned National Thermal Power Corporation (NTPC),” he said.
The former director explained that these agreements guarantee a fixed tariff for solar power producers for 25 years. The Central Electricity Regulatory Commission (CERC) is the apex authority in India, which fixes tariffs as well as adjudicates on transmission and distribution cases. CERC has given a return of investment (ROI) in solar at 19 per cent for the first 10 years and 25 per cent for the next 15 years.
“In the early days of the solar mission there was some hesitations from banks and financial institutions in giving loans to solar, but the situations has changed since,” he said. “India is a power hungry country and any electricity generated will be gobbled up.”
The report said that in 2011, renewable power (excluding large hydro) accounted for 44% of new generation capacity added worldwide in 2011, up from 34% in 2010.
Achim Steiner, head of UNEP, writes that the $237 billion invested in building these green power plants compares with $223 billion of net new expenditure annually on building additional fossil fuelled power plants globally last year. “So we’re certainly seeing a green growth trajectory in the power sector, even if we have quite some way to go to achieve an energy mix that is truly sustainable,” he said.
The UN report also found that total investment in solar power in 2011 was twice as high as that of wind energy. The solar energy sector saw a 52% increase to $147 billion in 2011 while wind energy was at 84 billion down by 12%.
Research shows that the growth of the solar sector is attributable to the decreasing technology costs. The price of photovoltaic module prices fell by almost 50% while onshore wind turbine prices fell by 5% to 10%. “These changes brought these two leading renewable power technologies closer to competitiveness with fossil-fuel alternatives such as coal and gas,” the report said.
The slowdown in wind energy also resulted from policy uncertainty in Europe and a slowdown in China’s previously high growth in wind installations.
China and US compete for top spot
The study also found that the United States saw its renewable energy investments increase by 57% to $51 billion, closing the gap with China, which currently leads, increased by 17% to $52 billion- just ahead of the US. “Two highlights of 2011 were the performance of solar, and the performance of the US,” it said.
The report, however, called the US growth “a temporary resurgence.” It warned that lessening policy support for renewable energy in developed countries that were reflected in Europe as well as legislative deadlock in the US congress. Investment in Germany – which competed with the US for second position in 2010 – dipped 12% to $31 billion.
“This policy hiatus, coming ironically at a time when fully competitive renewable power is starting to be a realistic possibility in a few years’ time, is posing a threat to continued growth in investment in the sector in 2012 and beyond,” the report said.
In a section of the report called, threats to investment, the study said that governments are reluctant to approve policies that increase energy prices during a time when consumers feel a pinch on their finances. The US Congress, it pointed out, had withdrawn it support for clean energy and putting a price on carbon in the face of low natural gas prices.
Sunita Narain, who heads the Centre for Science and Environment in India, noted that solar energy, even with its decreasing costs, could not compete with natural gas. Narain expressed concern that the US impetus on shale gas would deflect attention away from research and investment in clean technologies. She described natural gas as “at best a transitory option.”
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