1. Role of carbon finance in promoting renewable
energy development in India
Pallav Purohit
International Institute for Applied Systems Analysis (IIASA), Austria
International workshop on “The private sector and climate change: opportunities and challenges in emerging economies”
18th January 2011
ORF, New Delhi

2. Contents
 Why renewable energy (RE)?
 Overview of Indian power sector
 Status and potential of RE in India
 Clean Development Mechanism (CDM)
 Status of Indian RE projects under CDM
 The way forward

3. Why renewable energy?
• Energy security
– Limited amount of fossil-fuel resources (India imports more than 70% of its
crude oil requirements
• Ever increasing demand for energy
– Supply regularly being over stripped by demand (≥ 10% peak power
shortage between April to December 2010.
• Climate change
– To reduce the emission intensity of its GDP by 20-25% by 2020 through
domestic mitigation actions
• Increased financing options
– Govt. incentives/legislations (financial/fiscal
incentives, GBI, RPO, etc.), carbon finance (CDM, GEF, MDI’s, etc.)

4. Macro-economic development and energy use in India
800% 80
700% 70
600% 60
500% 50
Exajoules/year
Relative to 2005
40
400%
30
300%
20
200%
10
100%
0
0% 1990 1995 2000 2005 2010 2015 2020 2025 2030
1990 2000 2010 2020 2030
GDP Total energy consumption Coal Oil Gas Renewables
GDP/capita Population Hydro Nuclear Biomass
Source: GAINS/IIASA

5. Overview of Indian power sector
Thermal Hydro Renewable Nuclear Total
108,363 MW 37,367 MW 16,787 MW 4,560 MW 167,077 MW
As on 30th November 2010
Source: Ministry of Power

6. Installed capacity of renewables in India
- until 30th June 2010
Grid-interactive renewable power Off-Grid/Distributed Renewable Power
(17174 MW) (including Captive/CHP Plants)
(420 MW)
Source: Ministry of New and Renewable Energy (MNRE)

7. Status of renewables in India
- until 30th June 2010
Annual global (total + diffuse)
radiation varies from 1600 to 2200
kWh/m2. The equivalent energy
potential is about 6,000 million
GWh of energy per year.
Source: Ministry of New and Renewable Energy (MNRE)

8. Clean Development Mechanism
CDM: a development tool or a market mechanism?

9. CDM projects by expected CER volume until 2012
• More than 5600 projects
(2.7 billion CERs until
2012) in the pipeline of
which 2742 were
registered and 72 were
requesting registration.
• 22% registered projects
(with 47 million annual
average CERS) are
located in India (2nd
after China).
• More than 60% RE
based CDM projects
contribute to 34% of
CER supply.
• The carbon market is
forecasted to touch 408
billion by 2012 and $2.1
Source: Fenhann (2011) trillion by 2020.

10. Investment in registered CDM projects
Investment in renewable energy projects
Investment in registered CDM projects
- (requested registration)
70 30000
61.7
60
Investment (million Euro)
25000
Investment (billion Euro)
50
20000
40
15000
30
10000
20 14.1
9.0 5000
10 5.7
3.6 2.0 0.5 0
0
2005 2006 2007 2008 2009 2010
China India Latin America Rest of Asia Africa Middle-East Europe and
Central Asia
Biomass energy Geothermal Hydro Solar Tidal Wind
• The estimated investment in registered CDM projects is more than 96
billion until December 2010 in which China accounts for more than 63%
($61.7 billion) of the total investment and India accounts for 15% ($14
billion) in CDM projects.

11. Status of CDM projects approved by Indian DNA
978 renewable energy
projects were in the pipeline
until December 2010.
Source: Fenhann (2011)

12. Wind energy in India - Potential
• Current Scenario
– 5th largest producer of wind
energy in the world with a
capacity of >11 GW
– Tamil
Nadu, Gujarat, Maharashtra and
Karnataka are the leaders in
wind capacity.
Sea coast + Desert • Key Issues
Areas (Av. PLF
of 18-20%) – Short construction period and
low O&M cost make it an
attractive proposition
Forest & Mountainous – Some regulatory /institutional
region (Av. PLF hurdles exist for wheeling
of 18-30%)
• Future Potential
Mountainous, Sea – 22% CAGR over the last 10
coast areas (Av.
PLF of 25-30%) years
– 5000 MW annual market by 2015
(WISE)
– Reassessment of true wind
potential of India. (C-WET: 48
Source: C-WET GW, IWTMA: 65-70 GW, WISE:

13. Wind energy in India - Installed capacity
468 (out of 545) projects with an
installed capacity of more than 7200
MW are still in the pipeline in which
153 projects of 3130 MW were
registered by CDM EB until December
2010.
Source: MNRE Annual Reports

14. Wind energy in Indian states
- potential and installed capacity
>88%
>45%
<2%
Source: MNRE Annual Reports

15. Wind energy projects under CDM
• More than 30% of Indian CDM projects belongs to the wind sector.
• 153 (3129 MW) wind power projects were registered by CDM EB until Dec 2010.
• 468 projects with an installed capacity of 7220 MW were in the CDM pipeline until
December 2010 (discounting RE/WD/VT/VN).

16. Solar energy in India – Resource availability
No. 1 along with US in terms of
solar energy yield as per survey
conducted by McKinsey & Co.
(1700 to 1900 kWh/kWp/yr.)
Among the top 5 in terms of • Natural availability
overall country attractiveness for
– Many parts of India have 300~330
RE as per E&Y’s report (Ranking
based on regulatory environment, sunny days in a year
fiscal support, unexploited
resources, suitability to
• Current potential
technologies etc.) – Daily solar radiation 4 - 7 kWh per sq.
m. which translates into a potential for
600 GW
• Potential to meet future demand
– 5000 trillion kWh solar radiation
incident in a year which is a thousand
times greater than the likely demand in
electricity in the year 2015
• Jawaharlal Nehru National Solar Mission
– Increasing solar capacity to 20GW by
2020, 100GW by 2030 and 200GW by
2050
– Solar power cost reduction to reach grid
parity by 2020
– Solar power cost reduction to reach
parity with coal based thermal
Source: MNRE generation by 2030

17. Status of Indian solar energy projects under CDM
Status of solar energy projects under CDM Type of solar energy projects under CDM

18. Status of Indian biomass energy projects under CDM
• 118 bagasse power projects with an installed capacity of 2135 MW out of 326 biomass
energy projects were in the pipeline until Dec 2010.
• 38 (605 MW) bagasse power projects were registered by CDM EB out of 167 registered
biomass energy projects.

19. Status of Indian hydro power projects under CDM
• 168 hydro power projects with an installed capacity of >6800 MW were in the
pipeline until Dec 2010.
• 72 (20 large and 52 small scale) hydro power projects with an installed capacity
of >1100 MW are registered by CDM EB.
• 5 states (Himachal Pradesh, Jammu and Kashmir, Karnataka, Sikkim Tamil
Nadu and Uttarakhand) consists of 70% hydro power projects (6250 MW
installed capacity) in the CDM pipeline.

20. Summary
• Carbon finance through CDM can provide substantial value for RE businesses
and support the development of new and renewable energy technologies.
• Large share of unilateral CDM projects: CDM project developed by Indian
stakeholders without the involvement (finance/technology) of Annex-I countries.
– More than 75% Indian CDM projects until December 2010 in the CDM pipeline were
unilateral.
• Quality of Indian CDM projects: 24% of the CDM projects rejected by the CDM
EB worldwide originate from India giving rise to concerns over the quality of
Indian CDM projects as well as about the effectiveness or willingness of the
Indian DNA to screen poor quality projects before they reach the EB.
• For the large-scale acceptance of RE technologies in rural areas of the country
– A more credible roadmap towards post 2012 scenario will help instill more confidence
among project developers.
– The provisions of the Programme of Activities (PoA) CDM or Programmatic CDM is
critical for promotion of RE in rural areas (flexibility in terms of implementation
schedules, sectoral spread of the individual activities, transaction costs of the CDM
project cycle, etc).

21. Thank you!
For further information:
purohit@iiasa.ac.at