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How did India’s Renewable Energy Sector Perform During the Year of COVID-19 Lockdown?
This is the second part of our blog series reflecting on the major challenges and opportunities for India’s power sector

Disha Agarwal, Gagan Sidhu
07 April 2021

Solar and wind power have made significant inroads into India’s energy mix. They constituted 8.4% of the total generation in FY211,2, up from 7.1% in FY19. But how has our renewable energy (RE) sector fared since the nationwide COVID-19 lockdown was imposed a year ago? Let’s keep in mind that the shutdown severely impacted economic activity, and caused electricity demand to fall by 28%, as we discussed in Part 1 of the series, before eventually recovering when restrictions were eased several months later. How did we manage the renewable integration challenges? And what lies ahead?

In this blog, the second of an ongoing series, we set out to find answers to these questions.

Share of solar power in the grid grew despite adverse conditions

Solar power capacity additions during FY21 fell by 36% as compared to FY203. This can largely be attributed to disruptions in supply chains, construction delays and logistical restrictions because of the lockdown. But despite these roadblocks, India’s aggregate solar capacity in February 2021 surpassed its total wind capacity. We also saw that between April 2020 and February 2021, solar generation was almost 8% higher (Figure 1) than in the previous fiscal, and that its share in the total supply was consistently higher. This signifies that the must-run status of RE, reinforced during the lockdown, did have an effect.

 

Wind sector was hit by weather anomalies

Unfortunately, 2020 was not just the year of the pandemic; it also produced a flurry of anomalous weather events. This was not good news for the wind sector. Despite an increase in installed capacity, India witnessed a sharp and unexpected 24% drop in wind power generation in the peak wind season (June-September) compared with the same period in 20194. The primary reason was a drastic and unusual drop in wind speeds (Figure 2).

 

The Western region, which houses 40% of India’s total wind capacity, countered the drop through a 12% increase in hydro power generation between June and August 2020 relative to same period in the previous year (Figure 3). The share of coal power also increased by 4% in June and July 2020 relative to the previous two months. By December 2020, wind speeds did recover to partially compensate for the hit. But worryingly, the increased frequency of weather anomalies could make wind resources more unpredictable.

 

Hydro power stepped in as a balancer

The contribution of large hydro (> 25 MW) was 22% higher in June and July 2020 than in the same period in 20195. This indicates that hydro power filled in for the reduced wind power generation during these months. Hydro also emerged as a flexible resource during the nationwide “lights off” event on April 5, 2020, when hydro capacity ramped down by 66% in just 25 minutes (20:45 to 21:10)6.

But just like solar and wind energy, hydro power is not immune to the effects of nature. On 7 February 2021, flash floods in the Chamoli district of Uttarakhand damaged two hydroelectricity projects, highlighting the risk that hydro faces from natural disasters.

RE in India: Encouraging signs, and the challenges ahead

Even as the electricity demand fell drastically during the lockdown, there were several positive market developments that signalled the attractiveness of the RE sector. Auctions continued, record low solar tariffs were discovered, new market entrants won bids, commissioning deadlines were extended, must-run status was ensured, and investors generally showed a strong interest in the shares of RE companies. Additionally, Indian RE companies raised billions of dollars of debt from overseas sources as FY21 drew to a close7,8,9,10. However, the one dark cloud that remains is the significant amount of auctioned capacity, mostly solar, which has not yet found buyers. This is perhaps a sign of how RE has become a victim of its own success.

As India now chases higher RE targets, there are three key challenges that must be solved. The first is grid integration. Solar-wind hybrids and the new market platforms can help until, and even after, grid-scale storage becomes affordable. The second challenge comes from overhangs of unsold capacity. Dynamic tariffs which share the benefit of future declines with discoms could be the answer. The third is raising the huge amount of capital to meet the targets. Tapping additional sources of capital is imperative, and mechanisms such as subsidised credit enhancement that open up the domestic bond market to RE can prove to be invaluable.

In our next blog, we examine how discoms adapted to the volatile demand and supply situation over the year. Stay tuned.

Disha Agarwal is a Programme Lead and Gagan Sidhu is the Director - CEEW CEF at The Council. Send your comments to disha.agarwal@ceew.in.

Read Part 1: Breaking Down India’s Power Demand Recovery after Lockdown


1FY21 in this blog implies April 2020 to Feb 2021 (excludes March 2021)/span>

2Authors' analysis based on data from POSOCO

3Author’s analysis based on reports published by MOSPI and CEA

4As per an upcoming CEEW study

5 Authors’ analysis based on data published by POSOCO

6Authors’ analysis based on data published by MERIT India

7 Dhanjal, S. S. (2021, February 9). ReNew raises $460 million through dollar bond issuance. Retrieved from livemint.com: https://www.livemint.com/companies/news/renew-power-raises-460-mn-through-dollar-bonds-to-refinance-debt-11612878533014.html

8Moneycontrol News. (2021, March 19). Retrieved from moneycontrol.com: https://www.moneycontrol.com/news/business/hero-future-energies-first-green-bond-issuance-in-overseas-market-fetches-orders-worth-3-billion-6668441.html

9 Bhaskar, U. (2021, March 22). Greenko raises $940 million through latest bond issue. Retrieved from livemint.com: https://www.livemint.com/companies/news/greenko-raises-940-million-through-latest-bond-issue-11616432939924.html

10Dhanjal, S. S. (2021, March 19). Adani Green raises $1.35 bn in debt funding from foreign banks. Retrieved from livemint.com: https://www.livemint.com/companies/news/adani-green-raises-1-4-bn-from-12-foreign-banks-for-under-construction-projects-11616055538954.html

 

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