India faces a significant challenge in achieving its ambitious goal of installing 500 gigawatts (GW) of renewable energy capacity by 2030, according to a new study by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research.
The report outlines a series of recommendations to accelerate renewable energy deployment and bridge the gap between current progress and the 2030 target.
One key recommendation is a reduction in the Goods and Services Tax (GST) on renewable energy projects. The report proposes lowering the GST on hydropower components from the current range of 18-28% to 12% and reducing the GST on wind projects from 12% to 5%. It urges the government to maintain a low GST rate (below 5%) for the energy storage sector for the next five years. This includes Battery Energy Storage Systems (BESS) and their components.
India added only 18 GW of renewable energy capacity in the 2023-24 fiscal year, falling short of the required pace. Investments in the sector have also dipped slightly, from $11.7 billion in 2022-23 to $11.4 billion in 2023-24.
“To achieve the 2030 target,” the report warns, “India must significantly accelerate its efforts. This requires annual installations exceeding 2.5 times what was achieved in the previous year.”
Beyond tax breaks, the report proposes a range of other measures:
* Extending the current 100% exemption on interstate transmission system (ISTS) charges until 2030.
* Eliminating reverse auctions for wind energy tenders.
* Exploring innovative financing structures such as Infrastructure Investment Trusts (InvITs) to address challenges related to financing open-access renewable energy projects.
* Piloting a power exchange-based Contract for Difference (CfD) project for a small renewable energy capacity to revitalize the underutilized power exchange market.
The report also emphasizes the need to streamline visa approvals for skilled technicians, particularly from China, who are crucial for Indian manufacturers’ expansion plans in solar panel production. Delays due to ongoing political tensions could hinder progress.
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