On August 8 2022, the Lok Sabha passed the energy conservation (amendment) bill, a move by the government to adopt a stronger stance on supporting renewables growth. Within the energy conservation (amendment) bill (the bill), are measures to regulate the consumption of electricity from non-fossil fuel sources and implement a carbon trading scheme. The bill seeks to cap fossil fuel-based power consumption and will be a key enabler to push for stronger growth in renewables. With a carbon trading scheme, the government will also be able to incentivise renewable electricity generation, increasing the attractiveness of the power type as renewable power generators will be able to sell carbon credit certificates on top of electricity sales. We highlight that the Lok Sabha’s approval is not the final step before the bill becomes official, as the next step will be a submission to the Rajya Sabha, India’s Upper House, for approval. Regardless, we expect this bill to be adopted as an effort to achieve 50% non-fossil fuel-based power in its installed capacity mix by 2030. Much earlier on August 3 2022, India’s federal cabinet approved its new Nationally Determined Contribution (NDC) to the UN, laying out a stronger reduction of its emissions intensity (from 35% to 45% when compared to its 2016 NDC) and an aim to have 50% of its installed power capacity to be non-fossil fuel-based (which includes nuclear and hydropower), both by 2030. In comparison to the latter target for non-fossil fuel-based capacity, we believe India's non-fossil fuel-based capacity will grow to 48% in 2030 from 41% at the end of 2021, falling marginally short of the 50% target.
As for India's renewables capacity target of 175GW by 2022, we maintain our view that India will fall well short of it, and the bill is meant to spur greater commitment by the government to mandate renewables uptake. We previously highlighted in an earlier article that India will fall well short of its 175GW non-hydropower renewables capacity target by end-2022, due to protectionism policies for solar equipment manufacturing. Additionally, the Secretary of the Ministry of New and Renewable Energy announced in August 2022 that India will not be able to meet its 60GW wind power installed capacity target by end-2022 and its overall renewable energy target (175GW by 2022). As a result, we believe the Bill is an effort to accelerate renewables growth over the coming years as it will mandate the consumption of electricity generated from non-fossil fuel sources, increasing renewables adoption. However, we still maintain our growth forecasts for India’s non-hydropower renewables growth, as the amendment proposal does not state any mandated percentage of renewable electricity consumption. The market’s non-hydropower renewables will grow at an annual average of 9.3%, from 100GW at end-2021 to 242GW in 2031.
When compared to its regional peers, India’s non-hydropower renewables growth is considered robust, as the uptake of renewable power projects increases, with strong upside risks for its domestic renewable equipment manufacturing. Non-hydropower renewables growth will be supported by a strong pipeline of non-hydropower renewable projects through auctions offered by ministries and state-owned enterprises throughout the various states and union territories. In our Key Projects Database, India has Asia’s second-largest non-hydropower renewables projects pipeline in terms of power capacity, at 71GW. We highlight that this project pipeline largely excludes rooftop solar, which does not usually have a nameplate capacity, such as large-scale power projects, though we expect it to be a key factor for the sector’s growth.