Publication • Case Study • August 12, 2016

Political Economy of Renewable Energy Deployment in India: Case Study of Karnataka

Over the past few years, India has paid considerable attention to the development of its Renewable Energy (RE) capacity. This can be attributed to the country’s energy security concerns, necessity to provide reliable electricity to its citizens and the global need to mitigate climate change. India’s ambitious targets project that by 2020, 10 per cent of its power shall come from renewable sources and by 2022 there will be 165 GW of RE capacity installed. Of this target capacity, there will be a 100 GW of installed solar capacity, 60 MW from wind and 5 MW from other sources such as small hydro and bioenergy (Vashishtha 2014). This implies that within the next five years, India has to undertake the mammoth task of almost doubling its RE contribution to the energy mix from the current 6 per cent. The solar sector faces the largest challenge of scaling up its capacity by almost 20 times in six years, from the current 4.7 GW (MNRE 2016).

Such tremendous growth can only be accomplished through an effective policy and regulatory framework, which is essential to incentivise the deployment of RE. Pegels and Lütkenhorst (2014) state that government intervention is particularly necessary for energy policy because market mechanisms such as falling prices alone are not sufficient to ensure the development of long-term sustainable infrastructure. They further say that as a nation’s energy policy determines the future of the basic public services, it is important to have a holistic view from the political, socio-economic and technological aspects.

In India however, RE policy interventions have not taken such a holistic approach. Current national policies such as preferential-grid access, Feed in Tariffs (FiT), Renewable Purchase Obligations (RPO) on utilities, tax holidays, RE Certificate (REC) trading and Accelerated Depreciation (AD) only address techno-economic barriers. While these are surely important incentives, in the past they haven’t been sufficient for Indian states to meet their RE targets. Further, it appears unlikely that India will manage to meet its FY 16 targets in the next few months looking at the large gap between target and achievement (Figure 1). does India need to do to ensure that it’s RE aspirations do not remain a pipedream?

As Sreekumar and Chitnis (2014) point out, in order to have a complete idea of the electricity sector, in addition to techno-economic considerations, a political perspective is also imperative. Hence, this article attempts to answer the question posed above by providing insights into the political economy of the RE sector in India. Key observations from an extensive stakeholder consultation (n=20) conducted in the Indian state of Karnataka have been used in this study (CSTEP 2014).

This case study revealed that despite high targets and two comprehensive RE policies (GoK 2014; GoK 2010) the deployment of RE technologies has faced significant barriers in Karnataka during the past five years. The state was unable to meet its targets for RE capacity installation in all renewable sources (biomass, wind, solar, small-hydro) that were laid down in the Karnataka 2009-2014 RE policy. Although the state did have an impressive 10 per cent of its electricity from RE sources in Financial Year (FY) ‘13, there was an unmet peak demand of 1.4 GW and electricity deficit of 14 per cent (CSTEP 2013).