According to the Institute for Energy Economics and Financial Analysis (IEEFA), the states of Rajasthan and Gujarat in India require a “focused endeavor” to uphold their pivotal positions in the nation’s energy transition.
The Institute for Energy Economics and Financial Analysis (IEEFA) noted that these two states are at the forefront of India’s energy transition, especially in the realm of solar PV advancement. Rajasthan, with its extensive desert, and Gujarat, with its expansive coastline, offer ideal conditions for the development of solar PV and wind power, respectively.
Even though Rajasthan and Gujarat have the highest installed renewable energy capacities in India, standing at 29.9GW and 29.5GW respectively, the Institute for Energy Economics and Financial Analysis (IEEFA) suggests that they could enhance their leadership and sustain India’s renewable energy expansion by implementing “corrective measures in their policies.”
According to the IEEFA’s analysis of the states’ policies, Rajasthan has the capacity to harness over 428GW of renewable energy, constituting approximately 21% of India’s total potential capacity. Meanwhile, Gujarat has the potential to accommodate around 220GW of renewable energy capacity.
The IEEFA noted that the adoption of green energy policies in these states has facilitated the expansion of renewable energy. Rajasthan, for instance, has set ambitious targets, with a goal to achieve 90GW of deployed capacity by the end of FY2030.
Nonetheless, the IEEFA highlighted concerns regarding inadequate grid infrastructure and the financial challenges faced by India’s distribution companies (DISCOMs), which have led to a decline in investor confidence. These factors pose risks to the ongoing expansion of renewable energy installations in Rajasthan and Gujarat.
Policy recommendations
IEEFA analyst Tanya Rana suggested that the introduction of appropriately structured Green Tariffs in these states “could stimulate the demand for renewable energy, promoting additional investments in renewable energy infrastructure without imposing significant initial expenses on consumers.”
In India, Green Tariffs represent a strategy for procuring renewable energy at slightly elevated prices compared to market rates, guaranteeing that the electricity consumed by a company originates from renewable sources. The IEEFA emphasized that Green Tariffs provide a “versatile, low-risk approach to acquiring environmentally friendly electricity from DISCOMs, bypassing the intricacies of open access and project financing.”
According to the IEEFA, the implementation of a Green Tariff system in Rajasthan, where one is currently absent, has the potential to boost the demand for renewable energy and encourage investments in innovative sustainable infrastructure. Furthermore, the organization highlighted that Green Tariffs could serve as an additional revenue source for DISCOMs by attracting commercial and industrial (C&I) consumers with sustainability goals.
At present, Gujarat boasts the highest Green Tariff among all Indian states. However, the IEEFA pointed out that this high tariff could dissuade potential customers, as the advantages may not justify the associated costs. The organization recommended that Gujarat could continue to lead the way in promoting the transition to renewable energy by striking a balance between affordability and flexibility.
It is essential for both states to focus on the expansion of distributed renewable energy, especially rooftop solar systems. Currently, about 7% and 15% of Rajasthan and Gujarat’s solar capacities, respectively, are dedicated to distributed solar installations. The IEEFA emphasized that this percentage signifies significant untapped potential for further growth in this sector.
However, the adoption of distributed energy resources significantly amplifies the requirement for additional grid connections and transmission capacity, a deficiency present in both states. The IEEFA stressed the importance of grid modernization as essential for improving power system reliability and expanding renewable energy capabilities. The organization underscored the significance of investing in battery energy storage systems (BESS) as a critical advancement for enhancing the grid systems of both states.
With India experiencing significant growth in population, GDP per capita, and urbanization, the country’s energy needs are also increasing substantially. Currently, India stands as one of the leading producers of fossil fuel-related emissions globally. Rajasthan and Gujarat are positioned to play a crucial role as the driving force behind India’s shift towards renewable energy amidst this growth.
