Analysis of India’s Renewable Energy Policy mix using top-down approach with focus on Rooftop Solar.

Executive Summary

This paper uses the top-down approach laid out by Ossenbrink et al. to describe the policy mix adopted by government of India in deploying renewable energy to its energy mix, with special focus on Rooftop Solar (RTS). Though India, implemented its first set of policies around RTS in 2010, it has not been able to successfully scale RTS in comparison to other form of renewable generators like large scale solar, on and offshore wind. The policy mix analysis in this paper adopts some of the characteristics of policy mix introduced by (Rogge et al., 2016). The timeframe for the analysis is rom 2015 (when the 175 GW was announced) till 2021.

India has set a goal of deploying 175 GW (un.org, 2021) of renewable energy in the national grid by 2022. Out of which 100 GW has been implemented by 2021. Out of the 175 GW, 40 GW (un.org, 2021) is to be deployed through RTS. RTS unlike the large utility scale plants brings about a different set of challenges as it also deals with “societal function” and needs high degree of involvement with the consumers. The paper discusses the policy mix around RTS and analyses the need and space for improvement which could be a lesson for policy makers as well.

India’s transition towards a low carbon energy system is complicated as it involves scaling of new technologies (niches) and destruction/destabilizing of the old technology (regime). The paper also discusses the destabilizing mechanism with inspiration from (Kivimaa and Kern, 2016) framework which emphasizes the importance of destruction of old system along with creation of the new technology. India employees more than 20 million people (scroll.in, 2021) directly or indirectly in its coal regime, a large vote bank and the biggest challenge for the transition.

Introduction

India is the third largest producer of Green House Gas (GHG) “landscape” (Geels et al., 2017) after China and the US (carbonbrief, 2019)). India’s coal-based power sector “regime” (Geels et al., 2017) contributes approximately 2.4% of world’s total GHG emissions (cseindia, 2020)). India’s power sector is one of the dirtiest in the world with coal power accounting for 75% of total electricity generation. India is home to 13 out of 30 most polluted cities in the world (idronline, 2021). India can contribute immensely towards cutting the global GHG by 7.6% (un.org, 2021) which is a must to achieve the 1.5-degree reduction of the global temperature as per the Paris accord. As per its commitment to the Paris Accord, India has pledged to cut its GHG emission by 35% and increase its non-fossil fuel power capacity to 40% (phys.org, 2021).

India has a complex government system for energy. It has Five fuel-based ministries: coal, power, petroleum and natural gas, new and renewable energy, and atomic energy (Van et. al. 2016). India’s transition towards a cleaner energy system has accelerated since 2015 (after Paris agreement) compared to when it initiated in 2008 through the National Action Plan on Climate Change (NAPCC). As per the revised Jawaharlal Nehru National Solar Mission (JNNSM) in 2015 India took a target of deploying 175 GW of renewable energy “niche” (Geels et al., 2017) in the national grid by 2022. The 175 GW is broken up into four major parts, 100 GW solar, 60 GW wind, 10 GW bio-power and 5 GW from small hydro (un.org, 2021). The 100 GW solar deployment can be further divided into two distinct categories, 60 GW from utility scale large plants and 40 GW from Rooftop Solar Systems (RTS). India had made strides in deploying wind energy. In 2015 when India tool a target of deploying 60 GW of wind by 2022, it already had an installed capacity of 25 GW (downtoearth,2020). In the next five years it only added 12 GW of total wind capacity out of the 100 GW installed capacity of renewables (downtoearth, 2020). Since wind is a “complex Product” and system (Huenteler, Joern, et al, 2016) it would not have the similar innovation pattern compared to other technologies. Instead of applying “one size fits all” (Huenteler, Joern, et al, 2016) strategy to all renewable policies, India should design and redesign its transitional policies with technology dynamics consideration.

Out of the various renewable energy technology, India has not been able to successfully scale it’s RTS program. Transitional failure concept combined with market failures and structural system failures concept paves a way for policy interventions (Weber, Matthias and Rohracher, 2012). The policy supporting market formulation and price comparativeness are prominent in India for RTS but policies that boost consumer knowledge and help articulate demand are missing. India also has structure failure problem as it struggles with its old transmission and distribution system. The nature of Variable Renewable Energy (VRE) poses a threat to these old infrastructures. These are some of the reasons RTS has performed dismally with only 7 GW deployed out of the target of 40 GW (downtoearth,2021) backed by unwillingness of Distribution Companies (DISCOM). DISCOM “regime” has been a hurdle in deploying renewable energy in India, especially on a distributed level. Therefore, programs like SRISTI introduced incentives for DISCOM, which will be discussed in later part of the paper.

Policy Mix

Source:Based on Ossenbrink et al. (2019)

The government of India launched the Jawaharlal Nehru National Solar Mission (JNNSM) under the National Action Plan on Climate Change (NAPCC) to promote the growth of solar power in India in 2010 (Rathore et al., 2018). JNSSM has been revised a couple of times since its inception. Phase I of JNNSM had a target of deploying 1 GW of Solar by 2013, Phase II of JNNSM took a further challenging target of 10 GW by 2017 and phase III of JNNSM (figure 1-1) is the most aggressive with a target of deploying 100 GW of solar by 2022 (iea.org, 2021). Rooftop Solar program (RTS) received a go ahead from Government of India in 2015 under “Grid Connected Roof-top and Small Solar Power Plants Program” (Rathore et al., 2018) (Figure 1-2) is a part of JNSSM ambitious goal. JNNSM is a part of the broader renewable energy strategy of India which targets to achieve 175 GW (Figure 1-3) of renewable energy in the grid by 2022. RTS phase II (Figure 1-2) was introduced in 2019 to give a boost to a much needed RTS program which was only able to meet half of its goal of phase I. 175 GW (Figure 1-3) BY 2022 is part of GoIs overall commitment towards the Paris accord.

Initially policy instrument designed around RTS was gross metering or feed in tariff around 2010. This instrument allows all electricity generated from the RTS to be fed into the grid at certain price per kWh which is set by Central Electricity Regulatory Commission. In 2012 net metering (figure 1-a) was introduced in India. Both feed in tariff and net metering regulation was only passed in 2013 (Rathore et al., 2018). India was behind 48 countries which had already deployed net metering policy. Net metering allows a customer to install solar rooftop system at their premises, consume the electricity produced by solar rooftop and export the excess electricity to the grid and get credit for the exported electricity on one unit to one unit basis. 32 states (Rathore et al., 2018) in India have deployed net metering and feed in tariff instruments to help scale RTS in their respective states. Though a provision from the center, each state has their own form of net metering policy. They differ in regulatory and financial modality.

Renewable Purchase Obligation (Figure 1-b) is designed to incentivize DISCOM to increase the share of renewable energy in their network. DISCOM are the biggest challenge in scaling Renewable Energy (RE) in India. Renewable Energy Certificates (REC) (Figure 1-c) is directly linked with RPO as REC is the paying mechanism for RPO.

To make RTS competitive with other form of electricity generation, CAPEX subsidy was introduced in 2010 in the form of Central Financial Assistance (CFA) (Figure 1-d). 30% of the benchmark cost would be reimbursed under the RTS CFA program for qualified projects. CFA is different for general category (30%) states and special category states (70%). CFA has various different subsidy schemes, some CFA’s provide upfront subsidy based on per kW. Recent changes in CFA for the household sector, which amounts to 40% (mnre.gov.in, 2021) of upfront cost for system less than 3 kW might boost RTS deployment in small rooftop category. Even with CFA support, RTS deployment was only 2 GW by end of 2018. To further enhance the deployment of RTS, Sustainable Rooftop implementation for Solar Transfiguration of India (SRISTI) (Figure 1-d) (mnre.gov.in, 2021) scheme was introduced in 2017. This instrument was the first of its kind which incentivized DISCOM for increasing share of RE in their system. DISCOM are the most crucial nodal agencies in deploying RTS. Without DISCOM’s approval net metering or feed in tariff is not possible. DISCOM’s also have the sole discretion to curtail RE. Incentive scheme is designed in such a way that if there is RE penetration of less than 10% than DISCOM would not get any incentive and the incentive grows as the percentage of RE increases.

Production Linked Incentive (PLI) (Figure 1-f) Scheme for High Efficiency Solar PV Modules: To enhance India’s manufacturing capabilities and exports, on 28.04.2021, Ministry of New & Renewable Energy (MNRE) has issued the Scheme Guidelines for ‘National Programme on High Efficiency Solar PV Modules’, with an outlay of Rs. 4,500 crores. The Scheme has provisions for supporting setting up of integrated manufacturing units of high efficiency solar PV modules by providing Production Linked Incentive (PLI) on sales of such solar PV modules (mnre.gov.in, 2021). To boost make in India program, PLI was also introduced on highly efficient solar panels. India has also imposed tax and duties on imported panels and imposed ban on certain brand of Chinese panels. Along with PLI, CFA (Figure 1-g) is also provided up to 50% of the cost borne by universities or companies spent on research on development of solar related products. For informative purpose on RTS or any other renewable energy

India has very few instruments. ARUN (Figure 1-h) was launched in 2017 with objective of providing key information on RTS like rules and regulation, schemes and subsidies, installation guide, financial calculator, and various other information. Though the app is developed not many people know about the app and usage has been minimal. Different states in India implement net metering and other instruments to boost RTS. Each state has its own set of regulatory and financial policies. State like Gujarat has been a front runner in deploying RTS in past few years.

Critical Reflection

Technological Innovation System (TIS) focuses on enhancing technology but does not consider demand side issues like consumer behavior and societal challenges (Grubler, Kuhl, Nemet and Wilson, 2012). RTS is a more sensitive energy system and requires attention to details and not only technology enhancement. RTS deployment depends on how well “societal function” (Geels, Sovacool, Schwanen and Sorrell, 2017) has been defined and the ease of adopting the new technology in comparison to other technologies. If a RTS is not as easy as switching on the light and paying the bill as the conventional electricity system, then it would be hard to scale.

The policy strategy - JNSSM and RTS combined with instrument mix - market establishment, competitive pricing and manufacturing/R&D that have been implemented to scale RTS as a part of a larger RE goal seems to be adequate but at the same time it has not been able to meet its desired goal. RTS program in comparison with other solar programs has not succeeded in a similar manner. This is what we call a socio-technical system transition, it implicates co-production of social, behavioral and technological change in an interrelated way (Steinmuller et al. 2018). RTS interacts closely with the consumers. Unlike large solar plants it requires high involvement of entrepreneurs and a sense of a larger responsibility which is more than financial gain.

In a complex socio-technical transition (Rogge et al., 2016) especially in the case of RTS Indian policy makers should have adopted “compulsive policy-making” (Hoppman et al.,2014). It took policy makers seven years to formulate a policy around DISCOM to scale RTS deployment. In comparison to evolution of German FiT policy which in its early stage realized the importance of grid operator and designed incentives towards the grid operator which helped in scaling of RTS in Germany (Hoppman et al.,2014), the Indian policies lag way behing. SRISTI (Figure 1-e) was introduced in 2017 and was fully implemented in 2019. The scheme had designed incentive mechanism for DISCOM. The compulsive policy making is opposite of “reflexivity failure” (Weber, Matthias and Rohracher, 2012), in India’s case, the reflex has been slow stalling the deployment of RTS.

Devi et al. in their paper “Here comes the Sun …” argue that there are many missing pieces in policy and policy implementation in case of RTS. They argue that success of RTS is highly dependent on customer interaction and a coherence (Rogge et al., 2016) of implementation process. Whereas in case of RTS

Deployment, there is not enough information for the customer regarding the technical, financial and regulative aspect of the system. “Policy coherence as referring to synergistic and systematic policy making and implementation processes contributing – either directly or indirectly – towards the achievement of policy objectives” (Rogge et al., 2016). The RTS policy also lacks consistency as the interplay between instrument mix and policy strategy (Rogge et al., 2016) is not prevalent in case of RTS. The policy strategy of implementing 40 GW of RTS by 2022 clearly lays the goal but policy makers have not been successful in assessing the missing pieces to scale RTS. Upfront cost is one of the main barriers in deploying RTS and Indian policy makers have not done enough to formulate policies around OPEX model, which allows consumers to pay per unit of electricity generated by RTS, which will help scale RTS. Recent changes in net metering policies and some states opting out of net metering scheme also damages the reputation and questions the credibility (Rogge et al., 2016) of the policy mix. If the policy is ever changing, it stops being believable and reliable (Rogge et al., 2016). Devi et al. also raises a valid point that for residential RTS to be successful a bottom-up policy formation approach is required as it is very customer sensitive. They also find the RTS policies to lack “flexibility” (Geels, Sovacool, Schwanen and Sorrell, 2017)" and follow a rigid uniform set of top-down policies. If transitional policies are not flexible and adaptive, the “societal function” (Geels, Sovacool, Schwanen and Sorrell, 2017) will be disrupted which will have a negative impact on the overall policy strategy.

“Policy mixes favorable to sustainability transitions need to involve both policies aiming for the ‘creation’ of new and for ‘destroying’ (or withdrawing support for) the old" (Kivimaa and Kern, 2016). Though India’s transition towards a clean energy system has been steady, it has not managed to create “window of opportunity” to derail growth of the coal-based power system and use of other fossil fuel. As seen on Figure 2, the total use of coal has been steady through last five years.

The four innovation/system influence on policy instrument for destruction (regime destabilization) suggested by (Kivimaa and Kern, 2016) layout a framework which could be followed to discontinue dirty fuel regime in India. India’s energy consumption is forecasted to double by the year 2040 (iea.org, 2021). If the current regime of dirty fuel is not replaced by clean energy system, it will cost the entire globe an opportunity to bring climate change under control. India has introduced a few changes in “regime rule” (Kivimaa and Kern, 2016). Central Electricity Authority (CEA) has announced that India will not build any coal plants after 2022 and there has been mandates for using clean brickets in some of the coal plants. Though there has been some effort, they are not enough to even put a small dent in the coal regime. The political argument for a “just” transition has hindered a rapid transformation. India employees 2.6 million people only in coal mining and 20 million (scroll.in, 2021) other in coal related jobs. India politicians have been careful and have not implemented many policies to destabilize the coal regime though the call for it has been loud and clear. India’s commitments have been loud and clear, whether it lives up to it or not, the future will tell.

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Budget:

https://www.indiabudget.gov.in/doc/eb/sbe78.pdf (Ministry of Power, includes CERC)

https://www.indiabudget.gov.in/doc/eb/sbe70.pdf (MNRE)

https://www.niti.gov.in/documents/budget-papers/outcome-budget (NITI Aaayog)

Annex I: Governing Entities

Annex II: Details of Top-Down Approach

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