Project delays are hampering India’s progress towards its ambitious target of generating 500 GW electricity from non-fossil fuel sources by 2030.
A report by the Central Electricity Authority (CEA) on renewable energy (RE) projects under construction/ development as of September 2024 shows that, of the 174 GW renewable capacity in the pipeline, 25 GW is delayed.
The CEA report shows an average delay of 16 months in commissioning utility-scale projects, with solar and hybrid ventures getting delayed by 16 months, and wind projects by 19. In extreme cases, delays have stretched to 43 months, with several projects even facing termination.
There are multiple reasons for the delays. Regulatory issues such as slow power purchase agreements (PPAs), and state approvals and clearances delayed 59% of the projects, reveals a review of 27 petitions pertaining to delayed projects. Further, external factors such as Covid-19 stalled 48% of the projects, while 30% were delayed due to the grid not being ready and land acquisition challenges delayed another 15%.
Figure: Reason and extent of delays in project commissioning
Note:
i. The above represents data from 27 orders issued by respective regulatory authorities in 2023 and 2024 related to the delays in RE project commissioning, aggregating to 4.2 GW.
ii. This does not include petitions for which orders are yet to be issued.
Source: State Electricity Regulatory Commissions (SERCs), Central Electricity Regulatory Commission (CERC)
A significant factor in these delays is the procedural bottleneck in signing PPAs, the backbone of project viability. Debt-laden electricity distribution companies (discoms) are hesitant to sign new PPAs, especially when coming at tariffs which would not be in alignment with their cost expectations at times realized at a later stage.
Even when the project does get constructed, evacuating power is another matter. Right-of-way disputes ecological clearances, and complex geography, slow down the construction of transmission infrastructure, stalling projects for months. Without evacuation lines, the plants become financial liabilities. The transmission infrastructure required to realise the capacity in the pipeline is likely to become operational only over the next 3-5 years.
To tackle right-of way delays caused due to compensation disputes, the government has increased transmission infrastructure compensation, from 85% to 200% of the land value for tower base area, whereas corridor compensation has been revised from 15% of the land value to 30%, 45% and 60% for rural, urban and metropolitan areas. This could accelerate power evacuation infrastructure development, bridging the mismatch between project capacity and available transmission lines.
Challenges pertaining to land acquisition, along with fragmented state-level laws, delayed approvals and disputes over land use stall projects for years. Though some state governments have eased the process with pre-allotted lands for renewable projects, lack of streamlined policy has made the overall process cumbersome.
Further, the government’s aggressive push to release 50 GW of bids annually from fiscal 2024 to 2028 has outpaced demand and readiness of discoms and developers. This has exacerbated the delay and resulted in projects with limited offtake.
Delays also lead to inflated costs. Land acquisition costs, idle labour, and penalties erode returns. Meanwhile, the reluctance among discoms to sign PPAs force developers to sit on equity or risk-sunk costs. Developers are forced to juggle between administrative formalities, ecological clearances and community pushback, costing them time and money.
India’s RE surge needs to be addressed through a multi-pronged approach starting with harmonising state land acquisition laws, providing fast-track approvals, and expanding pre-allotted land parcels for such projects.
The focus should first be on setting up transmission lines and then completing the project. Central agencies must prioritise development of power evacuation infrastructure, especially in RE-rich states.
Additionally, streamlining the clearance process, especially related to regulatory matters, can expedite project development. Enforcing renewable purchase obligation norms could prompt discoms to sign PPAs, thereby boosting execution.
The ambitious target of 500 GW is achievable, but only if the bottlenecks are dismantled.
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