|Project Rationale and Linkage to Country/Regional Strategy
? Cognizant of pivotal roles of the power sector development for economic growth and poverty reduction, the government of India has confirmed its mission to provide electricity to all households at an affordable price by 2012. This goal of 'Power for All by 2012' has been elaborated into subsector-wise policies in National Electricity Policy, which was prepared in February 2005 in accordance with the Electricity Act, 2003. The magnitude of investment needs for achieving the goal is vast. Net capacity addition of 100,000MW will be required under the 10th and 11th Plan periods, out of which about 61,000MW will be needed during the 11th Plan period. As its development can have the considerable impact on the global, regional, and national environment and energy security, the Government set out Integrated Energy Policy (IEP) in August 2006 with a vision to reliably meet the demand for energy services of all sectors with safe, clean and convenient energy in a technically efficient, economically viable and environmentally sustainable manner. IEP provides specific measures including optimizing power supply mix through greater use of indigenous hydropower resources and renewable energy.
? India is blessed with an abundance of renewable energy sources. In the 11th New and Renewable Energy five-year plan, the Government forecasts the renewable energy market in India will reach an estimated $19 billion from 2008-2012. Investments of $15 billion will be required in order to add the approximately 15,000 megawatts (MW) of renewable energy to the present installed capacity. The Government has set specific targets for renewable energy: by 2012 it expects renewable energy to contribute 10% of total power generation capacity and have a 4-5% share in the electricity mix.
? From 2002 to 2007, there was 3,075 MW of renewable grid-tied power planned, but the actual capacity addition exceeded 6,000 MW by 2006. A large share of this was the result of exceptional growth of wind energy in India. Wind energy is expected to add more than 10,000 MW of additional capacity by 2012, followed by small hydro (1,400 MW), co-generation (1,200 MW) and biomass (500 MW). Thus, the Government's current focus is on commercialization of solar energy development through the cutting-edge technology transfer. Grid-connected solar-photovoltaic (SPV) sector has experienced a scale up, with new technologies and manufacturing capacity in India. With the success of grid-tied solar electricity in other countries, and new state-level initiatives for feed-in tariffs, the outlook for this segment is now positive. The government has set aside US $50 million to subsidize solar power when its costs match those of small hydro.
? However, there exist various challenges for development of renewable energy (RE) projects. The challenges include (i) lack of large-scale project because of the size of each RE project, (ii) weak credibility of incentive mechanism, (iii) marginal commercial viability, (iv) undeveloped energy service companies (ESCO) industry, (v) lack of marketing mechanisms and (vi) easy availability of conventional energy with established networking arrangements.
? To overcome the issues, the Ministry of New and Renewable Energy plans to conduct three types of solar energy pilot projects (the Pilot Projects) taking a innovative public-private partnership (PPP) approach, i.e., (i) 25 MW Solar Thermal Power Plants, (ii) 25 MW Solar Photovoltaic (SPV) Power Plants, and (iii) Bundled small grid-connected roof-top SPV projects at government building.
? ADB's public sector operation, complementary to private sector operation each other with a great synergy, will catalyze the private-sector-driven RE development effectively because (i) government involvements will enhance the credibility and accountability to private sector participants, (ii) concessional resources for gap-financing will be strategically and effectively allocated to various RE areas and projects,