India has a varied energy mix comprising coal, oil and gas, solar, wind, biomass, hydro and nuclear power. India’s energy needs are presently met predominantly through coal-based thermal power followed by hydrocarbons and then clean and renewable energy. The National Institution for Transforming India (NITI Aayog), the government’s policy think tank has released the Draft National Energy Policy 2017. The policy, which is yet to be adopted, recommends a framework to bring about an overarching energy efficiency policy in India by forging coordination between different ministries dealing with electricity. Under the policy, India’s latest energy development goals are as follows: access at affordable prices, greater sustainability, improved security and independence, and economic growth. NITI Aayog is expected to present the integrated energy policy to the Prime Minister by the end of 2018.
Oil and gas
In the oil and gas sector, improved upstream exploration and production policies such as the Open Acreage Licensing Policy and the Hydrocarbon Exploration and Licensing Policy (HELP) have been introduced since 2016 to incentivise private sector participation by addressing pitfalls of the erstwhile New Exploration and Licensing Policy (NELP).
Solar and onshore wind
The renewable energy sector has experienced exponential growth in recent years and various government incentives (both fiscal and non-fiscal) have played a critical role. The government has taken hitherto unprecedented steps to incentivise the development of renewable energy, especially solar and wind, and has set an ambitious target of producing 175GW of renewable energy by 2022. In this regard, record low solar (INR 2.44 /kWh) and wind tariffs (INR 2.43/kWh) were discovered through competitive bidding in 2017. However, as the renewable energy sector has evolved and achieved grid parity, the government aims to gradually roll back the incentives. For instance, renewable energy project developers (along with other power project developers) had the benefit of a 10-year corporate tax holiday that expired earlier this year. Another instance is the proposed withdrawal of an exemption available to renewable energy projects from payment of transmission charges and losses for using the interstate transmission network. More recently, bids for solar power projects have witnessed an upward trend. The MoP’s Tariff Policy, 2016 mandates that 8 per cent of electricity consumption (excluding hydropower) shall be from solar energy by March 2022.
In this regard, the National Solar Mission (NSM), presently in Phase 3 (2017-2022), is a central scheme envisioned to promote solar energy power generation and forms the dominant framework under which solar power procurement is carried out. Solar projects, under either the NSM or state-specific policies, are envisaged to be developed in a phased manner with a target of achieving 100GW (increased from the original target of 20GW) of installed solar capacity by 2022, of which 40GW is proposed to be through rooftop solar projects. To achieve these targets, the central government is developing large solar parks in collaboration with state governments and has also issued detailed guidelines for their development. The intention is to provide ring-fenced, shovel-ready land to the power developer along with associated power evacuation facilities. Among other things, the NSM provides various tax exemptions, capital subsidies and incentives for several components and sub-components of the solar energy value chain.
For onshore wind energy, under the Ministry for New and Renewable Energy (MNRE)’s Policy for Repowering of the Wind Power Projects 2016, Indian Renewable Energy Development Agency (IREDA) provides an additional interest rate rebate of 0.25 per cent over and above the interest rate rebates available to the new wind projects being financed by IREDA. While India aims to auction 30GW of solar energy and 10GW of wind energy every year for the next 10 years, the past year has witnessed a lukewarm industry response to wind power auctions.
The present policy governing Hydro Power Development has been operative since 1998. In March 2018, a draft policy for hydropower projects pertaining to the period 2018-2028 was submitted by the Ministry of Power (MoP) for the Union Cabinet’s approval. Among other proposals, the draft policy contemplates application of a lower goods and services tax (GST) rate of 5 per cent on engineering, procurement and construction (contracts for hydropower projects, and for distribution companies to receive funds (equal to 4 per cent interest subvention for five to seven years of construction and three years after the commissioning of plants) from the central government for signing hydro power purchase agreements for at least five years for encouraging the offtake of hydropower from private power plants.
Coal bed methane, shale gas, natural gas and offshore wind
Further, the government is actively pursuing the exploitation of coal-bed methane (CBM), shale gas, natural gas and offshore wind potential. Applicable to all sectors uniformly, the New Domestic Natural Gas Pricing Guidelines, 2014 (NDNGPG) governs the quarterly pricing of the wellhead gas price based on average price of liquified natural gas (LNG) imports into India and benchmark global gas rates, with a one quarter lag. NDNGPG was applicable to all domestically produced natural gas, irrespective of the source, whether conventional, shale or CBM till 31 March 2019. However, in April 2017, the government notified the Policy Framework for Early Monetization of Coal Bed Methane allowing CBM contractors pricing freedom based on a fully transparent and competitive procedure for sale, thereby excluding the applicability of NDNGPG to CBM. In April 2018, the Cabinet Committee on Economic Affairs waived the requirement on Coal India Limited (CIL) for procuring separate licences from the Ministry of Petroleum and Natural Gas (MoPNG) for CBM extraction from its leasehold areas.
On 20 August 2018, the government notified the Policy Framework for Exploration and Exploitation of Unconventional Hydrocarbons under existing Production Sharing Contracts, Coal Bed Methane Contracts and Nomination Fields that allows existing private production sharing contracts (PSCs) holders of pre-NELP and NELP blocks to explore and exploit unconventional hydrocarbons including, shale oil and gas and CBM.
On 8 November 2018, the Petroleum and Natural Gas Regulatory Board (PNGRB) announced fresh bidding for 50 geographical areas (GAs) for grant of licence to retail compressed natural gas and piped natural gas, in what will be the 10th city gas distribution (CGD) bidding round. While the first 8 rounds of CGD bidding have seen a mixed response from the industry, the 9th and the largest CGD bidding round thus far, involving 86 GAs, was an overall success. In the 9th CGD bidding round that concluded in July 2018, Adani Gas Private Limited, state-owned Indian Oil Corporation, Bharat Petroleum Corporation Limited and Torrent Gas Private Limited were the big winners.
While onshore wind power projects account for a substantial portion of the installed renewable capacity in India, the government issued the National Offshore Wind Energy Policy in September 2015 with an aim to promote the country’s offshore wind energy potential and recently issued an expression of interest (EoI) from suitable and experienced bidders for the development of 1GW of offshore wind energy anywhere within India’s exclusive economic zone.
Additionally, the MNRE in May 2018 issued a National Wind-Solar Hybrid Policy that seeks to optimise the utilisation of infrastructure like land and the transmission system as there are regions in India where wind and solar energy have moderate to high potential. A wind-solar plant will be considered hybrid if the rated power capacity of either source is at least 25 per cent of the rated power capacity of the other source. The policy not only aims at the development of new windsolar hybrid plants but also at the hybridisation of existing wind and solar plants. In furtherance of this the MNRE, in May 2018, issued a scheme for setting up 2,500MW of interstate transmission connected windsolar hybrid power projects. Also, the Solar Energy Corporation of India Ltd recently issued a tender for the development of a 160MW solar-wind hybrid power project with a battery energy storage system. While initially, the policy provided only for battery storage, it was recently expanded to include all forms of storage, such as, pumped hydro, compressed air, flywheel, etc.
Currently there is no regulatory framework governing electricity storage in India. However, in 2016, the central government announced in its Annual Budget the launch of a new programme for energy storage. With a view to develop a regulatory framework to govern energy storage systems in India, the MNRE constituted an expert committee to propose a draft policy to establish a National Energy Storage Mission (NESM) for India and the committee recently submitted the draft policy to the MNRE. The NESM aims to establish a regulatory framework that promotes manufacturing and deployment of battery storage systems. Further, reports suggest that the government is also working on a policy framework to introduce on-site storage integration for wind and solar power projects. In 2017, the government floated tenders for more than 300MW of renewable energy capacity with energy storage systems. However, almost all the tenders were suspended or withdrawn for various reasons. In 2018, the government issued tenders for about 180MW of renewable energy capacity with energy storage systems, which are currently ongoing.
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