A proposed carbon tax waiver for coal by the government of India may put renewable energy growth at risk in the country, according to data and analytics company GlobalData.
GlobalData said a waiver of Rs400 (€5.1) a tonne on the production and import of coal in India has been proposed.
“The waiver would help project proponents of coal-fired plants to install pollution curbing equipment that would cut the emissions of sulphur dioxides,” the company said.
GlobalData project manager Mohit Prasad said: “The power sector in India is mainly driven by non-renewable energy sector with coal contributing more than 55% of the country’s installed capacity.
“The waiver in carbon tax is likely to have a negative impact on the growth of renewable energy.
“The coal-based power sector, which had witnessed cancellations of projects and competitions from renewable sources after the cost of renewables in India fell below that of coal and gas-based power will now regain momentum.”
GlobalData said a dip in installations of coal-fired plants started in 2016 and continued till 2018.
During the same period, however, solar PV installations have increased significantly, mainly driven by competitive auctions, it said.
Prasad added: “The proposed waiver has been announced at a time when most of the renewable energy auctions in India are getting undersubscribed.
“The fall in tariffs under the auction mechanism has been putting pressure on the margins of project developers, thereby reducing the economic feasibility of project pipeline in renewable energy sector.
“This is manifesting itself in the under-subscription of the auctions seen in recent times.”
GlobalData said a technical challenge with renewable energy is intermittency, resulting in low utilisation of transmission infrastructure.
In response, the country’s Ministry of New and Renewable Energy of India has issued a draft policy for the supply of round-the-clock power from renewable energy projects complemented with thermal power projects, it said.
“To address this low utilisation of transmission infrastructure, ‘reverse bundling’ would be done wherein high cost thermal power is bundled with low cost renewable energy in order to provide RTC power to discoms,” Prasad said.
“The two measures are together expected to reverse the declining trend in coal-based capacity additions.”