Last month, Farooq Abdullah, India’s Union Minister for New and Renewable Energy, announced that the planned Delhi-Mumbai Industrial Corridor (DMIC) would be “totally green”. The corridor is aimed at strengthening the region’s infrastructure to attract foreign and real estate investment and jump-start local commerce. Minister Abdullah’s commitment to making the project environmentally sustainable is a positive sign for India’s development path given the potential boom in industry, commercial activity, and power production if the corridor is successful.
The DMIC is a US$90 billion infrastructure project funded by the governments of India and Japan to connect the political and financial capitals of India through freight rail, roads, and new power facilities. Plans to implement the massive DMIC project have been underway since a 2006 Memorandum of Understanding between India and Japan, but progress to date has been slow. Recent large infrastructure projects have a mixed record in the country, with bureaucratic roadblocks, multiple permitting requirements, and in some cases corruption and bribery, sometimes blocking plans.
Many of the barriers to general infrastructure development are the same barriers that stand in the way of renewable energy projects, despite a strong demonstrated political will to promote investment in renewables. Just this October, reports emerged that one of India’s largest solar power projects, the 125 megawatt (MW) Shivajinagar Sakri solar plant being implemented by the Maharashtra State Power Generation Company, has been blocked by the Forest Department of Maharashtra, which has laid claim to 180 of the total 350 hectares set aside for the project. This major administrative hurdle demonstrates the lack of coordination between agencies responsible for approving renewable energy projects, especially at this late stage of project development when major certifications and loans for the project have already been granted.
The future of renewable energy in India, including its role in the DMIC, will depend largely on the ability of the country’s policy and regulatory infrastructure to streamline administrative procedures and create a welcoming environment for new investments. India’s federal government and several state governments have established a multitude of laws and regulations to promote renewable energy, including feed-in tariffs (FiTs), renewable purchase obligations (RPOs), generation-based incentives, capital subsidies, accelerated depreciation, and tax incentives. Renewable energy capacity in India has grown rapidly in recent years, due in part to these measures. India ranks fifth in the world in installed wind capacity, with around 15 GW of wind capacity in August 2011. Installed solar capacity is growing rapidly and is expected to reach 200 MW by the beginning of 2012, with an ambitious national target of 20 GW of solar capacity by 2022.
Major policy barriers still need to be overcome in order to take full advantage of India’s renewable energy potential. Currently, multiple agencies (including the federal Ministry for New and Renewable Energy, Ministry of Power, Department of Environment and Forests, Department of Rural Development, as well as corresponding agencies in each state) oversee overlapping and uncoordinated aspects of approving and implementing renewable energy projects. Even renewable energy incentives developed at the federal level are usually implemented through state agencies and regulations, further adding to the complexity of the regulatory structure. State governments also often have limited capabilities for administering these programs.
In 2009, the Government of India took important steps to address some of these complexities and barriers. The Central Electricity Regulatory Commission published methodologies to help facilitate coordination of FiTs and renewable energy certificate trading to meet RPOs across states. The effectiveness of these measures remains to be seen, and further regulatory streamlining will still be necessary to coordinate state policies and establish clear administrative procedures.