New regulations announced by the Indian government reward the renewable energy producers not only for the generating power but also for preventing emission of greenhouse gases into the atmosphere.

The new rules would allow the renewable energy power plants to increase their scope of revenue generation and thus reduce the payback period significantly. The renewable energy power plants can now either sell power to preferential tariff rates or sell the electricity generation and environmental benefits of the project separately.

The renewable energy power producers would earn renewable energy certificates for every megawatt hour of electricity generated. A central authority would be established which would be responsible for distribution of these certificates. Any entity which has the obligation to purchase power generated from renewable energy sources can buy renewable energy certificates from these power producers to meet their targets.

Last year the Indian government made it mandatory for all the state electricity boards to increase purchase of renewable energy-based power by one percent every year. These new regulations would help the state electricity boards to meet their targets with almost no immediate pressures of expanding power evacuation infrastructure for the renewable energy power plants.

India stands at the verge of a renewable energy revolution. It has the fifth largest install wind energy capacity in the world which has more than doubled in the last five years. The recently announced National Solar Mission aims at increasing solar-based generation capacity to about 20,000 MW over the next decade. This mission, a part of India’s National Action Plan on Climate Change, would also include providing various financial and technological incentives to the power producers and also providing subsidies to domestic consumers to install rooftop solar panels which would eventually form a feed-in system to the regional grids.

Investments in renewable energy projects have not gathered sustainable pace yet owing to the high capital costs, long payback periods and lack of tariff parity which makes the sector unattractive to the investors. However, the incentives announced recently by the central and various state governments allow power producers to import equipments at lower rates, provide tax benefits and set preferential tariffs.

Renewable energy would play a crucial role in India’s energy basket in the long-term given the rapidly rising demand and the need to provide power to rural areas. With the target of reducing carbon intensity and increasing pressure to cap the growth of its carbon emissions India could find it difficult to rely on coal and gas as energy sources, especially due to unsustainable supply scenario. India would have developed renewable energy infrastructure not to sustain its economic growth but also to ensure energy security. Therefore, the government needs to put in concentrated efforts to provide financial and technological assistance to renewable energy power producers to attract more investments and ensure sustainable growth in the sector.

Cleantechnica