Thermal power constitutes about two thirds of India's installed power capacity. But due to significant scarcity of key input coal, India has been facing severe power shortages. Power theft and transmission losses further magnify the problems. Despite these issues, India is turning blind eye to alternative sources of energy like solar power. True, that the solar power capacity has jumped fourfold since last year but it still just accounts for 0.5% of India's total power consumption.
There are basically three problems for the slow pick up of green energy (solar power, wind power, biomass power etc which are environmental friendly) in India. One is the weak currency which makes import of equipments expensive. Second is lack of adequate incentives. For instance, in March 2012 government did not extend the incentives applicable to accelerated depreciation of wind power turbines. This might impact the new installations this year as tax benefits are no longer applicable. While both currency and taxation issues are temporary in nature and can be ironed out soon it is the third issue which is hurting the most. It relates to the ill health of the power distribution companies across India.
It may be noted that solar and wind power producers basically sell their power to distribution companies (discoms). But as these discoms are saddened with huge losses getting project finance becomes a difficult task. Let us explain that with an example. Say, for instance, you are a green energy producer. Since you are bound to sell your power to discoms which are virtually defunc, getting your money on time is at risk. Thus, banks would be unwilling to lend to such risky ventures which impacts the future offtake of such projects.
Also, after the recent black out, the government has emphasized more on addressing current power woes which have been difficult to handle rather than looking at it as an opportunity to promote green energy. Thus, it seems that the government, in that pretext, is still pushing for thermal power. May be, going green appears a distant dream than a reality.