Carrot and Stick for Renewable Energy sector

Sustainable energy sources are one of the ways which we can end our reliance on polluting fossil fuels, and the Indian Government is cracking the whip, it seems. One sees a new carrot and stick policy to get the beast moving is in the offing.

First, the carrot, for foreign producers:

India is planning to lift a key trade barrier on solar modules. This will deliver a blow to the nation’s ambition of quickly expanding local production, according to domestic manufacturers.

The Economic Times reports that officials are considering a relaxation of rules that restrict imports from China and other foreign producers, for the next two years. This is because local plants can’t keep up with rising demand.

India is aiming to install 280 gigawatts of solar generation by 2030, compared to about 64 gigawatts now, as it overhauls its coal-dominated power grid. That would require the addition of 27 gigawatts of capacity every year for the rest of the decade — more than double the volume installed last year, according to Bloomberg NEF forecasts.

The proposal risks stalling efforts by Indian companies to expand local production, say the locals. Production by Indian units are crucial to meet the Union Government targets to raise the use of renewable energy, and to encourage more manufacturing under the “Make in India” campaign.
“Such volatile changes in government policy show that businesses can’t be dependent on policy support,” said Vinay Rustagi, managing director at Bridge To India, a renewable energy consulting firm. “It’s a dampener for domestic manufacturing prospects.”

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Members of the Asean bloc of nations, which has a free trade agreement with India, could add as much as 15 gigawatts of annual module imports over the next two years, says Rustagi.

A major increase in trade with China — which previously supplied India with nearly 80% of modules — remains unlikely because of a 40% tariff imposed last year, he said.

Module maker RenewSys India Pvt. wants to seek more clarity before pushing ahead with any expansions, and may need to reduce current output, according to Chief Executive Officer Avinash Hiranandani.

Next, the stick for Indian companies:

In the meanwhile, India will exclude renewable power companies from government contracts for between three and five years if they do not meet project completion deadlines, a government order shows, as the country looks to speed up green power projects.

“If any renewable energy project is not completed by the prescribed date of completion, then its bank guarantee should be encashed and the developer blacklisted after asking to show cause,” the order issued by the new and renewable energy ministry said. The blacklisting will be for three to five years, the order issued on Wednesday 15 February said, according to the Economic Times.

So far India has not blacklisted any company from renewable energy generation contracts for delays.


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