India Backs Renewables Over Coal Amid Covid-19 Curbs

India is taking special steps to support renewable energy projects during the extended Covid-19 lockdown in a bid to stick to the country's broader goal of trimming its reliance on coal.

The government has targeted a generation capacity of 175GW from renewable sources by 2022, a substantial increase from about 87GW at present. The bulk of the growth is expected to come from new solar and wind projects.

The coronavirus pandemic may be denting this ambitious goal already, as the supply chain to procure equipment for renewable projects has faltered amid the outbreak and lockdown in several countries. Construction activities for renewable projects in India have come to a near halt since late March after India announced a 21-day nationwide lockdown, which has now been extended until 3 May.

The government has included the construction of renewable energy projects in a list of economic activities that can be permitted to resume from next week during the extended lockdown. It has also asked electricity distributors to ensure steady payments to renewable energy generators for electricity they procure even though there is a three-month moratorium on such payments to coal-fired plants and other non-renewable utilities.

These steps come weeks after the Indian government allowed renewable energy companies to invoke force majeure to cover themselves against penalties for potential delays in commissioning the projects won in government auctions. These measures are in line with the government's aim of cutting its reliance on coal and thermal energy, as well reducing its coal imports.

Thermal power generation capacity — which includes coal, natural gas, lignite and diesel-fired power plants — is projected to make up just 50pc of the total installed power generation mix by March 2025, according to a government panel. Thermal power at present accounts for 62.4pc of the country's installed capacity, which is dominated by coal.

"The government has definitely been proactive," said Vinay Rustagi, managing director at renewable energy research firm Bridge to India. But developers are still grappling with several challenges, such as the sharp depreciation of the Indian currency in recent weeks against the US dollar, delays in getting paid by distribution companies and working capital issues. "But the good thing is that the government is listening," Rustagi said.

Rustagi's concerns underscore wider uncertainty facing the overall economy, which the IMF forecasts to grow by just 1.9pc in the fiscal year to 31 March 2021, down from an estimated 4.2pc in 2019-20. Faltering industrial activity has affected power consumption and production, as India's coal-fired generation in March dropped by about 11TWh on the year to 77.19TWh.

The Solar Power Developers Association, an industry body, said some construction should pick up quickly once approvals are in place, but it may take at least a month for activities to pick up as more than 75pc of workers have left construction sites.

The government needs to iron out issues on the implementation front to ensure that relaxing the lockdown has the desired results, said the association's president, Vineet Mittal, who is also the chairman of Avaada Group, one of the biggest renewable energy companies in India.

The renewable energy companies should be given a "blanket moratorium" over delays in the commissioning of projects if necessary, Mittal said. Among other issues, the government should work towards ensuring the safe movement of workers to project construction sites, smooth out supply chain disruptions and provide timely and economical funding from banks, he said.