Renewable energy incentives call for reorientation

THE RENEWABLE energy sector, believed to be the guarantor of both energy security and environment security in the future, has been given a target share of 10 per cent of total installed power generation capacity in India by 2012 from less than two per cent at present.

Strangely, the basic incentive for expansion of the renewable sector provided by the Government has become irrelevant. The provision of 100 per cent depreciation of investment in renewable energy equipment, which initially attracted organised sectors of industry to put their money in wind mills, solar and biomass projects, has lost its sheen after the cut in corporate tax rates in recent years.

What is more, the incentive attracted people who did not have a basic interest in operation, maintenance and technological upgradation of the renewables sector, especially wind energy. Hence incentives in this sector should be reoriented towards performance of renewable energy plants. This was one of the main demands that emerged during discussions by experts, consultants and entrepreneurs from both India and abroad at the national conference on renewable energy, held as part of the fourth Energy Summit organised by the Confederation of Indian Industry-Southern Region (CII-SR) in Chennai recently.

The negative attitude of State electricity boards (SEBs) in allowing third party sale of renewable energy, high development and wheeling charges levied by SEBs and, above all, the failure of the Union Government to come out with a policy that integrates renewable energy with the basic strategy of energy security and does not leave the sector dependent on a subsidy-based market were highlighted at the conference. Another demand, voiced both at the conference on renewable energy and the Environment Conclave of the Summit, was introduction of a tradable green certificate programme in the country.

(Green certificates will enable those who carry on their activity by achieving emission/pollution levels below the permitted ceilings to sell the surplus entitlement to others who are not able to meet the pollution mitigation obligation. This is a market mechanism intended to make green manufacture a profitable proposition).

According to Dr. V. Bhakthavatsalam, Managing Director, IREDA (Indian Renewable Energy Development Agency), in certain remote areas unconnected to the grid in Bihar and in some islands, people are prepared to pay cash for buying energy from renewables. For further development of the sector, technical, legal, commercial and promotional barriers need to be removed. Cooperative and regional rural banks (RRBs) can be used in overcoming the commercial barrier.

He pointed out that with rising costs of diesel and power from the grid, solar pumping on a life cycle cost basis would be attractive for farmers now using diesel sets and electric pumps. Thus renewables such as solar energy were closely bound up with food security of the country, Dr. Bhaktavatsalam said.

In transportation, use of a mix of ethanol and gasoline as done in Brazil would bring down auto fuel costs and also improve the viability of sugar mills supplying the raw material, he added.

``There is no demand constraint or supply constraint in renewable energy - price is the key factor'', observed Mr. S. Padmanabhan of USAID, New Delhi, while calling for ``vigorous expansion'' of financial intermediation and promotion of stake-holder partnerships with time-bound and properly conceived incentives. A lot of progress has already been made in several developed countries in popularising energy from renewable sources through a mix of policy drivers, favourable legislation, technical solutions, financial options and market development, according to Mr. Terence J.Hart, Director, IT Power Ltd, U.K. If in those countries renewables were promoted mainly from the point of view of environmental mitigation, in the case of India this sector had an additional dimension - poverty eradication - and should be encouraged with greater vigour, he felt.

Germany was implementing a plan to fix solar rooftops in one lakh houses in 10 years. The scheme, which involved purchase of such energy by the Government, was so popular that the Government subsequently made it mandatory for supplying the power free to the grid in the tenth year after installation.

Spain was planning guaranteed markets for wind energy in which it had 1,530 MW of installed capacity. Britain was set to introduce a climate change levy next year and offer concessional VAT (value added tax) for solar users at home and commercial buildings. It had also introduced a tradable green certificate programme. Israel, one of the earliest to take to renewable energy, had made installation of solar antennae for domestic water heating mandatory and provided incentives for organisations which promoted markets for renewables.

Australia had enacted a law on energy rating of buildings, whereby buildings having high energy efficiency can be rewarded with lower property tax or insurance premium. In Austria, a concept of ``green shares'' for children had attracted investments by grandparents. In many other countries such as Holland and Italy, tradable green certificates were either in place or in the offing, according to Mr. Hart. He felt that the MNES (Union Ministry of Non-Conventional Energy Sources) should focus on legislation, quality control, inter-ministerial coordination, resource assessment and awareness creation and not on renewable energy programmes.

According to presentations made at the summit, several private sector and NGO-promoted projects in renewable energy in various parts of India have been making good progress, though the best known and largest ones are in the windmill sector, with Tamil Nadu leading the pack, and also bagasse-based co-generation in sugar mills, again predominantly in Tamil Nadu.

Talking of smaller projects, Agni Services (P) Ltd put up, on a profit-sharing basis, biomass gasifier plants working on paddy husk at two industrial units in Andhra Pradesh. Netpro Renewable Energy India Ltd, a licensee of DASAG of Switzerland, has put up DESI power plants based on wood/agro residues in rural areas at Orchha (M.P.) and Kolar (Karnataka).

International oil majors like Shell and BP and the Tatas have entered the solar photovoltaic energy business, while Alstom has been marketing its gasifiers. Deluge Inc, Delaware, in the U.S., founded by Mr. Brian C. Hageman, designer and inventor of a ``thermal hydraulic engine'' (now under prototype testing) which could be of use in particular in the agriculture and aquaculture sectors, hopes to market its wares in India. In the wind sector, leading companies are watching experiments abroad in operating offshore farms.

Recent initiatives of the Union Government in the renewables sector include the preparation of a draft renewable energy policy, starting construction work on the Sardar Swaran Singh National Institute of Renewable Energy (SSS-NIRE) at Jallandhar and setting up of the Centre for Wind Energy Technology (Ce-WET) at Chennai.

Plans for a 140 MW Integrated Solar Combined Cycle (ISCS) project at Mathania (Rajasthan) with assistance from the Global Environment Facility (GEF) and Germany's KfW have been approved. Demonstration projects for biomethane recovery from tannery wastes and biogas recovery from distillery waste have been undertaken with assistance from the UNDP and GEF, while Montgomery Watson Consultants (P) Ltd, U.K., have been given an assignment by the MNES to prepare a national master plan for development of energy from waste. The Electricity Bill 2000, set for introduction in Parliament, provides for approval by regulators of higher tariff for energy from renewable sources.

R. Gopalakrishnan

in Chennai

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