The Hindu : Tamil Nadu News : At renewable energy meet, more takers for performance-based incentives

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Friday, Jun 13, 2008
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Tamil Nadu

At renewable energy meet, more takers for performance-based incentives

Special Correspondent

“Capital-based subsidies don’t offer investors any incentive”

— Photo: R.Shivaji Rao

CHOOSING THE OPTION: (From right) T.N. Thakur, Chairman and Managing Director, PTC India, V.Subramanian, Secretary, Union Ministry of New and Renewable Energy, and K. Vasudevan, Chairman, Green Business Forum, CII–Godrej GBC, at the inaugural session of Green Power 2008 in Chennai on Thursday.

CHENNAI: Should the government subsidise people investing capital to start a renewable energy project or reward them for actually producing power from such a project?

Going by the views expressed at Green Power 2008, that debate is being won by those who prefer performance-based incentives to capital-based incentives for the renewable energy sector.

“Outlay-based subsidies are out. Outcome-based subsidies are in,” announced Kirit Parikh, Planning Commission Member with responsibility for energy. He said the current capital-based subsidies did not offer investors any incentive to actually run or maintain their projects. After all, they only received subsidies for the initial investment. Similarly, there was no incentive to keep the cost down, since there was a threshold limit for capital subsidies, and investors actually received a higher subsidy for a higher capital investment.

“We aren’t against subsidies as such. We realise there needs to be support for renewable energy projects in the early stages, but it needs to be done in a way that increases quality and effectiveness, and reduces costs,” he said.

New policy guidelines offering a Rs. 12 incentive for every unit of grid-interactive solar power that is generated are the first step in the shift toward performance-based incentives. Dr. Parikh hoped the next move would be a similar step in wind energy subsidies by the end of the year. V. Subramanian, Secretary, Union Ministry of New and Renewable Energy, which is responsible for the new solar power guidelines, agrees with the shift. In fact, he feels that developing a viable business model would attract more private investment than subsidies.

“The renewable energy sector has suffered mainly because we have always said that it will help the poor, it’s for rural areas without access to conventional energy. So it has been driven by government subsidies,” Mr. Subramanian said. “If we can promote renewable energy with a viable business model in which you can invest, it will reach them anyway.”

For proof, he points to the IT and telecom sectors where compelling business models have made services accessible to the poor and rural areas. “Even in remote villages without electricity, there are cell phones…In fact, the most significant jump in solar photovoltaic in the last few years has come from the solar-powered telecom towers in rural areas without electricity, not from any government programmes.”

Tamil Nadu Electricity Board Chairman S. Machendranathan backed capital-based incentives, pointing out that they had spurred Tamil Nadu to its leadership position in wind energy.

He also announced that the State would now make a big push in the co-generation sector.

The TNEB has tied up Rs.1,200 crore in funding to set up 17 small plants in sugar mills, which could soon add 200 MW to the State’s generation capacity.

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