NITI Aayog Says Solar’s Share of Electricity to be 14-18 percent by 2040, Up from Current 1%

The National Institution for Transforming India (NITI Aayog) has released its draft national energy policy (NEP) for 2017. The report predicts that the share of solar and wind to be 14 to 18 percent of the country’s electricity mix compared to 1 percent today. The report also predicts that rooftop solar for homes will become the norm by 2040.

The policy draft calls for electrification of all unelectrified villages by 2018 and universal electrification with 24x7 electricity supply by 2022.

The NEP states, “Close to 304 million Indians are yet without access to electricity, and about 500 million people are dependent on solid bio-mass for cooking. The country still has a long way to go to secure its energy security objective.”

The NITI Aayog found that “the major energy-consuming sectors - industry, household, transport, and agriculture - will undergo dramatic changes in the coming decades. On the energy front, they should be able to internalize volatility in energy prices, which is often the case when markets get integrated globally.”

Urbanization is expected to go up to 47 percent and the population of India is predicted to go up to 1.6 billion by 2040. All these developments will result in energy demand increasing 2.7 to 3.2 times by 2040 says the report.

The policy also focuses on energy efficiency. It is proposed to improve energy efficiency of all electrical appliances and apply Energy Conservation Building Code (ECBC) to all buildings with high energy use, including retrofits. The report predicts per-capita annual electricity consumption to increase from 1,075 KWh in 2015-16 to 2,911-2,924 kWh by 2040.

In the NEP 2017, it is estimated that by 2040 India will achieve installed renewable energy capacity of 597-710 GW. The NEP proposes gradual withdrawal of the provisions of ‘must-run’ status and other supports such as non-levy of inter-state transmission charges which are currently vital for the growth of solar power. It envisions consumers will become agnostic to the source of power, renewable energy will soon blend with conventional power, and the markets will determine the power dispatch rather than policy levers.

In the NEP, it is proposed that capital subsidy needs to be phased out and feed-in tariffs ought to drive the growth of renewable energy. Incentives like deferral of tax (accelerated depreciation subject to provisions in the proposed GST) appear to be appropriate tools over other measures (incentives).

The NEP states, “So far, renewable energy sources have seen concentrated development in resource-rich regions which has led to evacuation problems.” While falling costs will reduce the unattractiveness of this source of energy, however, grid instability concerns will continue to pose a challenge for concentrated development of renewable energy.

Efforts will be made to promote generation by ensuring compliance of RPOs. This also holds the clue to the financing needs of this sector as RPOs can easily ensure growth of renewable energy by blending it with conventional power.

The draft policy is more of a document full of possibilities and predictions, developed to take into count energy technologies, the growing energy markets, and the priorities of the Indian government.

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