The Make in India week, was a good mix of the best of Indian industry and culture. The events of the week were filled with a right blend of professionalism, enthusiasm and optimism which is important when global headwinds are blowing north. The initiative has seen positive change in the few months after its formalization. FDI was 48% higher in the period of October 2014 to April 2015, as compared to the same period of the previous year. I am glad that the renewable sector has also witnessed positive change, especially on investments, thanks to the sector being made more attractive by government policies. We have already seen the sector do better in this financial year and expect that the total increase in installed wind energy capacity will be 30% by the end of March.
Renewable energy: Key for Make in India
Renewable energy, unsurprisingly, played an important role at the Make in India week. The fact is that renewable energy is imperative to the success of the initiative and the country because of three key reasons.
First, the industry facilitates the growth of other industries. By reducing the cost of power, a critical input of every industry, Indian companies can become more competitive and gain a stronger foothold in the global market. Companies can hedge their energy costs for the next 25 years by investing in wind or solar. This lower energy cost makes them more competitive and furthers their manufacture and export capability. In fact, a strong and large scale renewable energy base can drive the development of a strong manufacturing and export base with global competitiveness.
The second benefit of renewable energy to the Make in India initiative is a more direct one – that of renewable energy industry growth. India has the potential and capability to indigenize technology and the manufacture of components. In fact, by securing the supply chain for wind, solar and other renewable technologies, India can become the global hub for renewable energy technology. Furthermore, there also exists the environmental benefit of reduced carbon emissions as we strive to fight the risks of climate change. In fact, renewable energy is key to the government target of 30% to 35% reduced carbon emission by 2030.
The third effect is that of economic development brought about by the development of the renewable and other industries. Every MW of installed wind energy capacity creates approximately 20 jobs. We require 35GW of wind energy to meet the target of 60GW (we already have 25GW). This translates into approximately 7,00,000 jobs by 2022, which is an average of one lakh job per year. That is a huge boost to the growth of the economy.
Role of technology in renewable energy: The Suzlon opinion
Suzlon is continuing its focus on technology as we strive to reduce the cost of energy and provide higher generation even in low wind conditions. Our S97 and S111 have proved that technology innovation can make even low wind sites possible. Our newest blade science center in Vejle, Denmark, established with the aim to further evolve our blades and achieve technology advancement, is another addition to manufacturing and research facilities spread around the globe. These locations are carefully chosen for their talent pool, furthering our technology strength.
International Financing for Renewable Energy and Manufacturing
India has the potential to be the global hub for renewable energy and to support this, the industry and government needs to look into innovation not only in technology, but also in finance. The renewable energy sector needs more financing than it currently receives and it needs this in a timely and inexpensive manner. The session on International Financing for Renewable Energy and Manufacturing in which I participated at the Make in India week, industry and government leaders shared their thoughts on this topic.
Mr. Piyush Goyal, in his inaugural speech, shared his thoughts on how, with appropriate financing India can become the most inexpensive manufacturer of renewable technology, globally. He also spoke about the plans that will lead to the target of 175GW by 2022, including the decided plans of 25 new solar parks and work on drafting a policy that makes India a complete solar technology manufacturer, producing an end-to-end range of products. The discussion from other panelists brought out the fact that the target requires financing of $150 to $200 billion. And added to this were some of my recommendations on how we can obtain the desired finance at the necessary rate, as described below:
- Promote SME investment through tax rebates such as the TUF scheme in the textile industry
- Follow the Brazilian policy of FINAME registration where the projects can avail cheaper finance, with an eligibility condition of 70% local content
- Establish an FIT mechanism to boost domestic production of solar technology and aid in establishment of manufacturing units
- In spite of EXIM addressing the essentials regarding Indian exports, forex risk involvement is making inexpensive finance difficult to obtain. The Government of India should come with a policy for sharing hedging risk for borrowings happening in the renewable energy sector (manufacturing and projects), and thereby reduce the cost of energy and make renewables more competitive and acceptable to utilities
It was good to see that so many leaders from varied industries, especially renewable and finance, had similar thoughts on the session topic. It depicted a clear idea of what the industry needed and awareness on the part of the people and the government. With such a clear understanding of the needs of the renewable energy industry and its impact on the success of Make in India, I am confident that the recommendations offered will be incorporated to provide an environment that is extremely conducive for increased investment in renewables.