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1. Does your jurisdiction have an established renewable energy industry? What are the main types and sizes of current and planned renewable energy projects? What are the current production levels?
India’s renewable energy industry is well established and diverse. With a total installed capacity (inclusive of large hydro) of 191.67 GW as of April 2024, globally India ranks 4th in renewable energy installed capacity (inclusive of large hydro), 4th in wind power installed capacity and 5th in solar power installed capacity as of end of 2023.
The total installed capacity of renewable energy sources is also well distributed. Wind power constitutes 46 GW of total installed capacity while solar power constitutes 82.6 GW. Large and small hydro contribute 46.9 GW and 5 GW respectively to the total installed capacity. Newer sources such as biomass bagasse cogeneration form 9.4 GW of installed capacity, while biomass non-bagasse cogeneration contributes 0.92 GW to the total installed capacity. Other contributors include waste to power (0.24 GW installed capacity) and off-grid waste to energy (0.34 GW installed capacity).
Solar, wind, and large hydro are among the primary sources of renewable energy in India. In line with the Government of India’s announcement at 26th Conference of Parties of UNFCCC (COP26), the Ministry of New and Renewable Energy (MNRE) is working towards achieving 500 GW of non-fossil based electricity generation capacity by 2030. Additionally, India has also enacted policies to enable production of 5 million tonnes of green hydrogen by 2030, and to have solar parks with an aggregate capacity of 40 GW by 2025-26. The Government of India has also identified sites for setting up of 30 GW off-shore wind projects by 2030.
The total generation from renewable energy sources for the financial year 2023-24 was 359,888.74 million kWh. The energy generated from wind power constituted 83,385.35 million kWh, and solar power constituted 115,975.11 million kWh. Small and large hydrogenerated 9,485.04 million kWh and 134,053.92 million kWh respectively. Further, generation from biomass constituted 3,417.19 million kWh, and from bagasse 10,825.59 million kWh. Other sources of renewable energy constituted 2,746.55 million kWh of the total energy generation mix.
2. What are your country's net zero/carbon reduction targets? Are they law or an aspiration?
India’s net zero/carbon reduction targets are not codified in law. However, India has been pro-active in setting for itself targets for net zero and decarbonization. Under the Paris Agreement, 2015 (Paris Agreement), India submitted its nationally determined contributions (NDCs), which were both quantitative and qualitative in nature. The quantitative targets were: (a) reduction of emission intensity of the gross domestic product by 33% - 35% by 2030 from 2005 level; (b) achieving about 40% cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030; and (c) creating an additional carbon sink of 2.5 to 3 billion tonnes of CO2e through additional forest and tree cover by 2030.
While not codified, India has consistently been on track to meet its targets. At the COP26, India set forth its updated targets, aiming to intensify its climate action. The updated NDCs, referred commonly to as ‘Panchamrit’ are set forth below:
To achieve the said targets, India has been overhauling its policies in the renewable energy sector and its regulatory framework governing the electricity sector. Steps such as introduction of framework for carbon credit trading, energy conservation codes, penalty for non-conformity with the energy consumption standards through an amendment to the Energy Conservation Act, 2001 (EC Act) in 2022 outline India’s efforts in this direction. The EC Act also provides for establishment of statutory authority by the name of Bureau of Energy Eficiency (BEE) and confers upon the Central Government, State Governments and the BEE certain powers to enforce the measures for eficient use of energy and its conservation.
Despite not being codified in a specific legislation per se, India’s NDCs permeate the entire fabric of policy making. Some of these policy initiatives have been outlined in the subsequent questions in this guide.
3. Is there a legal definition of 'renewable energy' in your jurisdiction?
Under the Electricity Rules, 2005, the term renewable energy has been defined as electricity generated from renewable energy sources. Further, the term ‘renewable energy sources’ has been defined to mean hydro, wind, solar, bio-mass, bio-fuel, bio-gas, waste including municipal and solid waste, geothermal, tidal, forms of oceanic energy, or combination thereof, with or without storage, and such other sources as may be notified by the Government of India from time to time.
The concept of renewable energy has further evolved in India to ‘green energy’ which has been defined under the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022, to mean the electrical energy from renewable sources of energy including hydro and storage (if the storage uses renewable energy) or any other technology as may be notified by the Government of India from time to time and also includes any mechanism that utilizes green energy to replace fossil fuels, including production of green hydrogen or green ammonia.
4. Who are the key political and regulatory influencers for renewables industry in your jurisdiction and who are the key private sector players that are driving the green renewable energy transition in your jurisdiction?
The Constitution of India distributes the legislative powers by dividing the heads of legislations between the Union and the States into three lists: the Union list (includes matters on which the Union has the exclusive power to legislate); the State list (includes matters on which the States have the exclusive power to legislate); and the Concurrent list (includes matters on which, both the Union and the States can legislate). In the event of confiict between Union and State legislations, the legislation enacted by the Union prevails over the State legislations.
‘Electricity’ is included in the Concurrent list, and therefore both the Union Parliament and State legislatures are competent to enact laws on this subject. Consequently, the power to legislate on electricity (including renewable energy) is also shared between the Union and the respective States.
The Electricity Act, 2003 (Electricity Act), enacted by the Union Parliament, read with its rules, lays down the end to end framework for regulation of all aspects of energy (including renewable energy) i.e., from generation, transmission, distribution, trading, to the use of electricity. Pursuant to the Electricity Act, regulatory commissions have been established. Section 76 of the Electricity Act provides for constitution of the Central Electricity Regulatory Commission (CERC), while Section 82 provides for constitution of the State Electricity Regulatory Commissions (SERCs). These commissions are responsible for regulating electricity procurement, setting tariffs, and resolving disputes. CERC, by virtue of section 79 of the Electricity Act regulates, inter alia, issues relating to inter-state transmission of power and determination of tariff and the SERCs pursuant to section 86 of Electricity Act regulate issues relating to intra-state transmission of power and determination of tariff.
The Ministry of Power (MoP) is primarily responsible for the development of electrical energy in the country. The MoP is concerned with perspective planning, policy formulation, processing of projects for investment decision, monitoring of the implementation of power projects, training and manpower development and the administration of the legislations in regard to thermal, hydro power generation, transmission, and distribution.
The MNRE is the nodal ministry of the Government of India for all matters relating to new and renewable energy, for both grid-connected and off-grid projects. The broad aim of MNRE is to develop and deploy new and renewable energy to supplement the energy requirements of the country. It facilitates research, design, development, manufacture, and deployment of new and renewable energy systems/devices for transportation, portable, and stationary applications in rural, urban, industrial, and commercial sectors.
At the state level, the schemes of MNRE are implemented in coordination with nodal agencies and renewable energy departments of the respective States such as, Gujarat Energy Development Agency in Gujarat and Maharashtra Energy Development Agency in Maharashtra etc.
The electricity sector has witnessed participation from private players across verticals. Investment funds, financing institutions, developers and original equipment manufacturers have penetrated across the value chain including in generation, transmission, distribution, storage, and trading of electricity. In addition, the private players have also worked in tandem with the public sector for the development of the sector.
5. What are the approaches businesses are taking to access renewable energy? Are some solutions easier to implement than others?
India’s commercial and industrial (C&I) enterprises are crucial to the energy landscape, forming 52% of the country’s total installed capacity, as of December 31, 2023. Some of the key approaches adopted by businesses to access renewable energy in India are as follows:
6. Has the business approach noticeably changed in the last year in its engagement with renewable energy? If it has why is this (e.g. because of ESG, Paris Agreement, price spikes, political or regulatory change)?
Indeed, the approach of businesses towards renewable energy development has evolved over the past year. Corporates have shown greater consciousness in reducing their carbon emissions. There is greater amenability towards either: setting up renewable energy plants; or fulfilling the energy needs by sourcing it from clean energy sources. Multiple Indian companies have set for themselves 100% renewable electricity consumption targets by undertaking active participation in RE-100 initiative, a joint initiative by the Climate Group and the CDP.
The evolving approach has been fueled by the multiple events including:
7. How visible and mature are discussions in business around reducing carbon emissions; and how much support is being given from a political and regulatory perspective to this area (including energy eficiency)?
There have been demonstrably ambitious steps taken by businesses in the areas of sustainability including that of carbon emission reduction. Businesses have participated by way of trading of energy certificates, complying with renewable purchase obligations, investing in emerging technologies such as CCUS (carbon capture, utilisation, and storage) and energy storage systems.
The politico-regulatory nudge to support the decarbonisation efforts is evident from the multitude of steps undertaken by the Union and State Governments, some of which have been set out in brief below:
The politico-regulatory nudge for decarbonisation efforts has been undertaken with a multi-pronged approach, aiming to holistically assist the corporates and businesses by tackling the bottlenecks at different levels in the supply chain.
8. How are rights to explore/set up or transfer renewable energy projects, such as solar or wind farms, granted? How do these differ based on the source of energy,i.e. solar, wind (on and offshore), nuclear, carbon capture, hydrogen, CHP, hydropower, geothermal and biomass?
In India, power generation is a delicensed activity under the Electricity Act. There are different modes of implementation available to any interested party to set up solar or wind power. Mentioned herein are some of the modes:
The project development is generally dependent on the source of the renewable energy. However, generally, it commences with acquisition of the land and execution of various agreements to secure the financing and supply of equipment. The developer also has to obtain various consents and approvals including:
While there are no restrictions on transfer of a project under the Electricity Act, the transfer may be restricted, or a prior permission may be required under the: (a) approvals obtained for the project; (b) PPAs and financing agreements executed for the project; and (c) depending on the nature of renewable energy source, the specific policy or regulatory measures governing the project.
Further, under the Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar PV Power Projects, 2023 the concessionaire is required to ensure that its shareholding in the special purpose vehicle/project company executing the PPA does not fall below 51% (in case of consortium held projects the shareholding of the consortium cannot fall below 51%) at any time prior to 1 (one) year from the scheduled date of commencement of supply, except with the prior approval of the tendering authority. Change in shareholding after completion of 1 (one) year from the scheduled date of commencement of supply can be made upon intimation to the tendering authority.
Additionally, if the transfer of the project is from a person resident outside India to a person resident in India or vice versa, the transfer will also be subject to the restrictions prescribed under India’s foreign direct investment policies.
In addition to the aforementioned framework, other sources such as nuclear projects in India are strictly regulated under the Atomic Energy Act, 1962, and the setting up, operation and transfer of such projects is regulated by the Government of India.
9. Is the government directly involved with the renewables industry? Is there a government-owned renewables company or are there plans for one?
Government of India is directly involved with renewables industry as discussed in our response to Question 4 above. MoP and MNRE are engaged in the policy formulation and administration of legislations. Further, CERC and SERCs, depending on their respective jurisdiction, have been designated with the responsibility to regulate the sector.
While generation of electricity in India is a de-licensed activity under the Electricity Act, the transmission, distribution, and trading of electricity are licensed activities under section 14 of the Electricity Act. The Government is involved across all verticals, such as generation, transmission, and distribution of electricity. In case of generation, there are dedicated entities involved for renewable energy, however for transmission and distribution, by virtue of the nature of such activities, the Government entities are involved in renewable as well as non-renewable energy. Some of the examples include:
There are various state owned enterprises like Solar Energy Corporation of India Limited , NTPC Limited, NHPC Limited, SJVN Limited which undertake renewable energy project development either by themselves or by engaging private parties through competitive bidding process.
10. What are the government’s plans and strategies in terms of the renewables industry? Please also provide a brief overview of key legislation and regulation in the renewable energy sector, including any anticipated legislative proposals?
As discussed in our response to Question 2 above, the Government of India as part of its updated NDCs, has set for itself a target of: (a) achieving 500 GW of renewable energy capacity by 2030; and (b) to meet 50% of the total energy requirement from renewable sources by 2030.
In pursuance of these targets, the Government of India has implemented multiple schemes and policies for development of renewable energy in India. Some of the key schemes include:
Additionally, certain schemes such as Scheme for Development of Solar Parks and Ultra-mega Solar Power Projects, and Green Energy Corridors have been discussed in the response to Question 11.
Further, certain pre-existing policies like National Wind- Solar Hybrid Policy, 2018, National Offshore Wind Energy Policy, 2015, regulations on renewable purchase obligations and renewable energy certificates provide the roadmap for development of renewable energy sector in India. To complement the policies of the Union Government, various States have come up with solar and wind policies to incentivize development of renewable energy projects.
The strategies set out above find their sanction in the legal framework established for regulation of electricity and specifically those for renewable energy. The Electricity Act is the parent legislation governing the electricity sector in India (other than nuclear energy which is governed by the Atomic Energy Act, 1962).
From a regulatory perspective, as discussed above in response to Question 4, while the Electricity Act is the overarching law, the laws governing inter-state supply of power is regulated by CERC, and the intrastate supply of power is regulated by SERCs.
Considering this, the regulatory framework differ from State to State and also on the type of the project.
However, both the State Governments and the Union Government have generally introduced renewable energy source specific policies governing the development of the renewable energy projects.
Generally, the development of a project follows the process set out in our response to Question 8. However, some of the pertinent regulations by the Union Government, regulating the renewable energy sector are:
11. Are there any government incentive schemes promoting renewable energy (direct or indirect)? For example, are there any special tax deductions or subsidies offered? Equally, are there any disincentives?
In addition to the incentive schemes mentioned under response to Question 7 and Question 10, there are also incentive schemes for promotion of renewable energy:
12. Has your Government had to continue to help with the basic cost of energy over the last year and has that led to any discussion about de-linking the gas price and renewables prices?
Pricing of energy for the final consumer is determined by the Government. The State Governments have ought to reduce the energy prices by way of following steps:
On a longer timeline, steps such as mandating energy eficiency ratings and increasing support from Government through various schemes for renewable energy are likely to reduce the cost of energy generation and consequently reduce the cost of energy for the consumers.
Rising price of gas, along with other conventional energy sources due to reasons such as instability in supply chain, has propelled the conversation in the direction of self-reliance in energy. Ethanol blending and focus on ramping up renewable capacity are some of the major steps in this direction.
13. If there was one emerging example of how businesses are engaging in renewable energy, what would that be? For example, purchasing green power from a supplier, direct corporate PPAs or use of assets like roofs to generate solar or wind?
Over the course of past years, there has been a growing impetus of businesses engaging with renewable energy. The engagement is contingent upon factors such as: (a) nature of business; (b) quantum of energy required by the business; and (c) area of operation of the entity.
One of the dominant mechanisms for C&I users is entering into captive arrangements. The total installed capacity of captive power plants has grown from 587.85 MW in 1950, to a resounding 76,732.43 MW at the end of the financial year 2022-23.
The push for captive arrangements is arising out of fiexibility in setting price, which is generally lesser compared to sourcing electricity from the distribution utilities, owing to subsidies in the form of exemptions from surcharges. Further, captive arrangements also provide flexibility in structuring the transfer of renewable energy certificates.
14. What are the significant barriers that impede both the renewables industry and businesses' access to renewable energy? For example, permitting, grid delays, credit worthiness of counterparties, restrictions on foreign investment.
India has made significant strides in renewable energy, however, there are several impediments to the development of the sector. Some of these impediments stem from:
15. What are the key contracts you typically expect to see in a new-build renewable energy project?
Multiple entities are involved across the life cycle of a newly built project. In order to regulate the relationship of all such entities, there is a web of contracts forming part of any newly built renewable project. Broadly, these can be segregated into three stages, i.e., pre-development stage, development stage, and post-development and operations stage.
During the pre-development stage of a renewable energy project the key contracts include financing agreements with the lenders, land acquisition agreements (sale deed, lease deed, right to use etc.) with the landholders, connectivity agreements with the utilities/regulators for access to transmission system executed pursuant to connectivity approvals.
In the development phase of the project, the key contracts executed include engineering procurement and construction agreement for the development of the project and the open access agreement for grant of open access.
Post development of the renewable energy project, major contracts include operation and maintenance agreement and wheeling and banking agreement.
Further, in addition to the aforementioned agreements, the developer is also required to enter into PPAs, which may be entered into at any point in the life cycle of the project depending on the contemplated transaction. In the event the project is contemplated as a captive arrangement, there is also a requirement arising out of Electricity Act to enter into a shareholders’ agreement with the offtaker.
16. Are there any restrictions on the export of renewable energy, local content obligations or domestic supply obligations?
Certain restrictions have been imposed in the renewable energy sector, some of which have been set out below:
17. Has deployment of renewables been impacted in the last year by any non- country specific factors: For example, financing costs, supply chain or taxes or subsidies (like the US's Inflation Reduction Act)?
Multiple issues plaguing the world economy have impacted the deployment of renewable energy sources in India. Some of these have been set out below:
The aforementioned are some of the challenges that have hurt the progress of deployment of renewable energy by causing delays in project implementation and increasing the tariffs.
18. Could you provide a brief overview of the major projects that are currently happening in your jurisdiction?
There are a variety of large capacity projects, both qualitatively and quantitatively under development. Some of them have been captured hereinbelow:
19. How confident are you that your jurisdiction can become a leader in newer areas like offshore wind or hydrogen?
India is poised to become one of the global leaders in developing accessible renewable energy solutions. MNRE is the dedicated institution focusing on the emerging renewable energy technologies.
India has a coastline of approximately 7,600 km and a large maritime zone. The policy focus on offshore wind commenced as early as 2015 with the promulgation of National Offshore Wind Policy, 2015. Recently, India has announced a tender for a 4 GW (4*1GW) offshore wind projects off the coast of Tamil Nadu, through international competitive bidding. Aiming at becoming energy independent by 2047 and achieving net zero status by 2070, India has recognized the critical role of green hydrogen in the energy mix.
Introduction of measures such as compliance monitoring, competitive bidding for procurement framework, data backed review of pilot programmes, phased approach towards implementation are encouraging steps towards propelling the development of green hydrogen supply chain. The National Green Hydrogen Mission is a stepping-stone in developing an integrated green hydrogen value chain with not only domestic demand but also export potential.
20. How are renewable projects commonly financed in your jurisdiction?
In India, renewable energy project companies are incorporated and constituted as special purpose vehicles (SPVs) for undertaking the implementation of a project. All the assets, rights, and interests in the project are held by the SPV. Broadly, these SPVs may be financed by equity, debt, or most commonly, a combination of both. These sources include both domestic financing and overseas financing, since 100% of foreign direct investment is permitted in the renewable energy space in India.
The sources available for equity financing include, private equity funds, venture capital, or in some cases, self-financing. The sources for debt financing include either commercial banks or financing institutions such as IREDA, PFC, REC, SIDBI, Exim Bank. Further, multilateral development agencies such as World Bank, ADB, kfW, etc. are also active in this area. In recent times, financing by way of issuance of ‘green bonds’ has also been preferred by some developers.
Green bonds are a type of debt instrument focused on financing projects which have a positive impact on the environment. The Government of India has also chosen this route for funding of renewable energy projects. In the 2022-2023 financial year, a total of USD 1.8 billion (approximately) was issued, out of which USD 730 million (approximately) were dedicated for renewable energy.
This chapter has been written by Rachika A. Sahay (Partner), Siddhant Satapathy (Principal Associate) and Mrinal Mishra (Senior Associate). We would also like to thank Anamika Mishra (Associate) for her valuable inputs.
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