Minister says Indian renewables to ‘boom’ as government hammers too-dirty power companies

India’s electricity sector will soon be “desperately looking” for wind and solar capacity to avoid drastic new penalties for missing targets for purchase of renewable energy that will spark a “boom in demand”, claimed the country’s power minister.

RK Singh hopes stiffer penalties for power distribution companies for failure to fulfil renewable purchase obligation (RPO) requirements will change the procurement landscape in India.

Along with central and state tenders, RPOs that set minimum clean procurement obligations on the nation’s traditionally coal-heavy power companies are one of the weapons in India’s regulatory arsenal as it chases some of the world’s most ambitious wind and solar targets, but the renewables sector has long complained the punishment for non-compliance is too low.

Singh told a BNEF Summit on India: “Currently the penalties are very small so we’re increasing [them]. Demand is going to rise ‘exponentially.”

Distributors that miss their goals face penalties of 0.5 rupees/kWh of the shortfall, rising to 1 rupee/kWh ($0.013/kWh) after a year. “That’s huge,” said Singh.

“I see all the distribution companies coming to the market desperately looking for renewable energy capacity.”

The minister claimed developers should “set up capacity … the demand is just going to boom”.

The stiffer RPO fines are among a series of electricity sector reforms Singh is currently advancing as India chases renewable energy targets of 175GW by 2022 – which many analysts have said is unlikely to be met – and 450GW by 2030. The targets are flagship policies of the government of Prime Minister Narendra Modi.

Singh told the BNEF Summit that India would easily beat its commitments at COP21 to have 40% of its power capacity from non-fossil fuels by 2030. The total is already 37% and by 2030 will be 55-60%, he predicted.

A report from clean energy research specialist BloombergNEF released alongside the summit said India’s example in scaling up deployment and cutting cost of renewables – not least by becoming the world’s largest clean energy auction market – can act as an example for other economies seeking a green stimulus post-Covid.

India’s energy transition represents a $410bn investment opportunity in new power generation capacity, reckons BloombergNEF.

“India is hugely important for the world’s economic growth and development, and equally important for global progress in the fight against climate change,” said BNEF CEO Jon Moore.