Chapter 2

2 Policy Evolution (2014-2024) - A Decade of Transformation in India's

Renewable Energy Sector

Over the past decade, India has made remarkable strides in transitioning toward
renewable energy (RE) as part of its broader efforts to combat climate change and promote
sustainable development. This chapter provides a detailed analysis of the major renewable
energy policies introduced between 2014 and 2024, focusing on their objectives,
implementation, and impact on the Indian power sector. By examining the evolution of key
policies such as the National Solar Mission, Renewable Purchase Obligations (RPOs), Solar
Park Policy, Ujwal DISCOM Assurance Yojana (UDAY), National Wind-Solar Hybrid Policy, and
the Electricity (Amendment) Bills, we will understand how these policies have shaped India’s
RE landscape.

2.1 National Solar Mission (2010): A Foundation for Growth

2.1.1 Background and Objectives
The National Solar Mission (NSM), launched in 2010 under the National Action Plan
on Climate Change (NAPCC), was a cornerstone policy aimed at promoting the development
and adoption of solar energy in India. Though the mission was introduced before the focus
period of this study, its relevance extended well into the 2014-2024 timeframe, making it
crucial for the analysis of the past decade. The primary goal of the NSM was to establish
India as a global leader in solar energy by promoting both grid-connected and off-grid solar
projects. The initial target was to achieve 20 GW of installed solar capacity by 2022, but this
target was revised to 100 GW in 2015, reflecting the growing importance of solar energy in
India's energy mix.

The NSM was structured in three phases:

i. Phase I (2010-2013) focused on setting up grid-connected solar power projects and
establishing a policy framework for the long-term growth of the sector.
ii. Phase II (2013-2017) was marked by the introduction of more ambitious targets,
with increased emphasis on large-scale solar parks, rooftop solar, and the promotion
of domestic manufacturing of solar components.
iii. Phase III (2017-2022) aimed at achieving grid parity and making solar energy
economically competitive with conventional power sources.

2.1.2 Key Policy Mechanisms

The mission used a variety of policy instruments to promote solar energy adoption:
i. Viability Gap Funding (VGF): To lower the initial costs of solar projects, the
government provided VGF, especially for large-scale solar parks.
 ii. Feed-in Tariffs and Competitive Bidding: Initially, feed-in tariffs were used to
provide guaranteed returns to solar developers, but later, competitive bidding was
introduced to ensure lower tariffs through market-driven price discovery.
iii. Domestic Content Requirement (DCR): In an effort to boost domestic
manufacturing, Phase II of the NSM included a DCR mandate, requiring certain solar
projects to source components like solar cells and modules from domestic
manufacturers.

2.1.3 Impact and Achievements

The National Solar Mission was transformative for India’s solar sector. By 2024, India
had achieved nearly 60 GW of installed solar capacity, making it one of the largest solar
markets in the world. The introduction of competitive bidding helped reduce solar tariffs
significantly, with prices falling from INR 17.91 per kWh in 2010 to as low as INR 2 per kWh
by 2022, making solar power cheaper than coal in some cases.

However, the mission also faced several challenges:

i. Land Acquisition: Large-scale solar projects often struggled with land acquisition
issues, particularly in states with dense populations.
ii. Grid Integration: As solar capacity grew, integrating intermittent solar power into
the grid posed challenges, necessitating improvements in grid infrastructure and
storage solutions.

Despite these challenges, the NSM laid a robust foundation for India’s solar sector,
contributing to its global leadership position in renewable energy.

2.2 Renewable Purchase Obligations (RPOs): Driving Renewable Energy Demand

2.2.1 Background and Objectives
The Renewable Purchase Obligations (RPO) policy was introduced in 2010 and
became a critical driver of renewable energy adoption in the following decade. RPOs are
regulatory mandates requiring discoms, open access consumers, and captive power
producers to procure a specified percentage of their total electricity consumption from
renewable sources. The RPO framework is a demand-side policy aimed at creating a stable
market for renewable energy in India.

The policy is divided into:

i. Solar RPO: A specific obligation to procure solar energy.
ii. Non-Solar RPO: Covering other renewable energy sources, such as wind, biomass,
and small hydropower.

2.2.2 Evolution of RPO Targets (2014-2024)

Over the decade, RPO targets were progressively increased to align with India’s
ambitious renewable energy goals. The government set a national mandate to achieve 21%
of total electricity consumption from renewable energy by 2022. The targets were
implemented at the state level, with State Electricity Regulatory Commissions (SERCs)
responsible for setting and enforcing RPO targets.

2.2.3 Policy Mechanisms

i. Renewable Energy Certificates (RECs): To facilitate RPO compliance, the government
introduced the REC mechanism. Entities unable to directly procure renewable energy
could buy RECs from the market to meet their RPO obligations.
ii. Penalties for Non-Compliance: SERCs were empowered to impose penalties on
entities that failed to meet their RPO targets, though in practice, enforcement has
been inconsistent.
iii. Long-Term Power Purchase Agreements (PPAs): Discoms were encouraged to enter
long-term PPAs with renewable energy developers to ensure a stable demand for
renewable energy.

2.2.4 Impact and Achievements

The RPO policy has played a significant role in driving demand for renewable energy,
particularly in states with high solar and wind potential, such as Gujarat, Tamil Nadu, and
Rajasthan. By 2024, the policy had helped India achieve over 150 GW of installed renewable
energy capacity, including solar, wind, and biomass.

However, the policy also faced several challenges:

i. Compliance Gaps: Compliance with RPO targets varied significantly across states.
While some states met or exceeded their targets, others lagged due to financial
constraints and weak enforcement mechanisms.
ii. REC Market Volatility: The REC market experienced periods of oversupply and price
volatility, which undermined its effectiveness as a compliance tool.

Despite these challenges, the RPO policy remains a crucial part of India’s renewable energy
strategy, contributing to the sustained growth of the sector.

2.3 Solar Park Policy (2014): Scaling Solar Infrastructure

2.3.1 Background and Objectives
The Solar Park Policy, introduced in 2014, was designed to overcome land and
infrastructure challenges associated with large-scale solar projects. Solar parks are large,
dedicated areas for solar power generation, where the government provides land,
transmission infrastructure, and other facilities to developers. The policy aimed to create an
enabling environment for rapid solar capacity addition by addressing the bottlenecks that
individual solar developers often face.

The Ministry of New and Renewable Energy (MNRE) set an ambitious target of establishing
40 GW of solar parks by 2022, with individual parks ranging from 500 MW to 1,000 MW.
2.3.2 Policy Mechanisms:
i. Viability Gap Funding (VGF): To attract investment in solar parks, the government
provided VGF to cover part of the project costs.
ii. Centralized Land Acquisition: The policy streamlined the land acquisition process by
designating specific areas for solar parks, reducing the burden on individual
developers.
iii. Transmission Infrastructure: The government ensured that transmission
infrastructure was built in parallel with solar park development, facilitating smooth
power evacuation.

2.3.3 Impact and Achievements

The Solar Park Policy was a game-changer for India’s solar sector. By 2024, several
large-scale solar parks had been established across the country, including the Bhadla Solar
Park in Rajasthan, which, with a capacity of 2.245 GW, became one of the largest solar
parks in the world. The policy helped reduce project development timelines, lower costs for
developers, and attract both domestic and foreign investments.

However, the policy also faced challenges:

i. Delays in Land Acquisition: While the policy aimed to simplify land acquisition,
delays in acquiring large tracts of land continued to pose challenges in some states.
ii. Grid Integration: The rapid expansion of solar parks created grid congestion in
certain regions, highlighting the need for further investment in transmission
infrastructure.

Overall, the Solar Park Policy was instrumental in scaling up solar power generation in India,
contributing significantly to the country’s renewable energy targets.

2.4 Ujwal DISCOM Assurance Yojana (UDAY): Addressing Financial Distress in the Power
Sector
2.4.1 Background and Objectives
The financial health of India’s discoms has been a persistent challenge, with many
discoms facing significant debt and operational inefficiencies. The Ujwal DISCOM Assurance
Yojana (UDAY), launched in 2015, aimed to address this issue by providing financial
restructuring for discoms and encouraging operational improvements.

The key objectives of UDAY were to:

i. Reduce Discom Debt: State governments took over 75% of the discoms’ debt,
allowing them to restructure their finances.
ii. Improve Operational Efficiency: Discoms were required to reduce technical and
commercial (AT&C) losses and improve billing efficiency.
iii. Increase Renewable Energy Procurement: UDAY also aimed to improve the financial
health of discoms, making them more capable of purchasing renewable energy.
2.4.2 Impact and Achievements
While UDAY succeeded in reducing the debt burden of discoms in the short term, its
long-term success in improving operational efficiency has been mixed. Many discoms
continued to face financial challenges, which affected their ability to procure renewable
energy.

2.5 National Wind-Solar Hybrid Policy (2018): Combining Renewable Resources

2.5.1 Background and Objectives
The National Wind-Solar Hybrid Policy (2018) was introduced to encourage the
simultaneous use of wind and solar energy resources to improve grid stability, enhance
energy yield, and optimize land and transmission infrastructure use. This hybrid approach
sought to tackle the intermittency challenges associated with renewable energy and
maximize the utilization of existing renewable energy infrastructure.

2.5.2 Objectives
i. Optimal Utilization of Transmission Infrastructure: By combining wind and solar
resources, the policy aimed to use the same transmission infrastructure for both,
reducing congestion and optimizing grid integration.
ii. Enhance Capacity Utilization: Wind and solar resources complement each other;
wind tends to be stronger during the night and monsoon seasons, while solar is more
productive during the day. Combining both allows for a higher capacity utilization
factor (CUF).
iii. Reduce Costs: Hybrid plants can share common infrastructure like land, transmission
lines, and maintenance services, reducing overall costs for renewable energy
developers.
iv. Viability Gap Funding (VGF) Support: The policy also provided VGF for projects
facing financial constraints, making hybrid projects more financially viable.

2.5.3 Impact and Achievements

The National Wind-Solar Hybrid Policy saw early success with a number of hybrid
projects initiated, particularly in wind-rich states such as Gujarat and Rajasthan. These
projects helped to stabilize renewable energy generation, enhance grid stability, and reduce
land acquisition challenges by using common infrastructure.

Challenges include the need for significant upfront investment, as hybrid projects often
require more advanced technological solutions for integration, such as energy storage.
However, the potential to optimize land use and reduce transmission bottlenecks makes the
policy highly promising for India's renewable energy future.

2.6 Electricity (Amendment) Bills and their implications

India's power sector has undergone significant transformations over the past decade,
driven by ambitious renewable energy targets and the need for reform in power generation,
transmission, and distribution. A major component of this reform agenda has been the
series of Electricity (Amendment) Bills introduced between 2014 and 2024. These
amendments aimed at improving efficiency, promoting competition, and facilitating the
integration of renewable energy (RE) into the grid. This chapter provides a comprehensive
analysis of the key provisions of the Electricity (Amendment) Bills and their implications for
the renewable energy sector, discoms (distribution companies), and consumers in India.

2.6.1 Evolution of the Electricity (Amendment) Bills (2014-2024)

The Electricity Act of 2003 laid the foundation for liberalizing India's power sector,
promoting competition, and enhancing private sector participation. However, with the rapid
growth of renewable energy and the changing dynamics of the power sector, several
amendments were introduced to address emerging challenges.

Key amendments were proposed and implemented through the following bills:
i. Electricity (Amendment) Bill, 2014
ii. Electricity (Amendment) Bill, 2020
iii. Electricity (Amendment) Bill, 2022

These amendments collectively aimed at addressing critical issues such as inefficiencies in

discoms, the integration of renewable energy, financial restructuring, and enhancing
consumer rights.

2.6.2 Electricity (Amendment) Bill, 2014: Fostering Renewable Energy Growth

The Electricity (Amendment) Bill, 2014 sought to address long-standing challenges in
India's power sector, such as the financial instability of discoms and the need for a more
robust regulatory framework to support renewable energy integration. Key provisions
included:
i. Separation of Content and Carriage: The bill proposed separating power supply
(content) from the distribution network (carriage), allowing consumers to choose
their electricity supplier. This measure was aimed at fostering competition and
improving the efficiency of power distribution.
ii. Promotion of Renewable Energy: The bill mandated that a Renewable Generation
Obligation (RGO) be imposed on conventional power generators. This required coal-
based thermal plants to generate or purchase a certain percentage of their energy
from renewable sources, providing a direct push toward renewable energy
integration.
iii. National Renewable Energy Policy: The bill also proposed the formulation of a
National Renewable Energy Policy to promote the development of renewable
energy sources and ensure that renewable energy targets were met in a coordinated
and systematic manner across the country.
2.6.2.1 Implications for the RE Sector

i. The RGO provision ensured that even conventional energy producers had a vested
interest in investing in or procuring renewable energy, thus providing an indirect
boost to the renewable sector.
ii. By encouraging open access and the separation of content and carriage, the bill
opened up the possibility for renewable energy suppliers to sell directly to
consumers, bypassing inefficient discoms. This increased market access for
renewable energy generators.
However, implementation challenges arose due to the lack of infrastructure for open access
and the financial weakness of discoms, which limited the practical impact of these
provisions in the early years.

2.6.3 Electricity (Amendment) Bill, 2020: Empowering Consumers and Promoting

Competition
The Electricity (Amendment) Bill, 2020 was introduced with the primary objective of
ensuring consumer empowerment and improving the financial health of discoms. The
provisions in this bill were more focused on structural reforms within the power sector,
along with the continued promotion of renewable energy.

i. Direct Benefit Transfer (DBT) for Subsidies: The bill proposed that electricity
subsidies be transferred directly to consumers through the Direct Benefit Transfer
(DBT) mechanism, eliminating the current system where subsidies are managed by
discoms. This increased transparency and encouraged financial discipline within
discoms.
ii. Renewable Purchase Obligations (RPOs): The bill further strengthened the
enforcement of RPOs, making it mandatory for states to comply with national
renewable energy targets. Non-compliance by states or discoms would result in
penalties, with the revenue collected being used to fund renewable energy projects.
iii. Privatization of Distribution: The bill emphasized the privatization of power
distribution, particularly in states where discoms were financially weak. This
measure aimed at improving efficiency and reducing technical and commercial
(AT&C) losses.
iv. National Renewable Energy Policy: The bill reiterated the need for a National
Renewable Energy Policy, highlighting its importance in ensuring that India's
renewable energy goals were met efficiently.

2.6.4 Implications for the RE Sector

i. By strengthening RPOs and ensuring strict penalties for non-compliance, the bill
provided a stronger framework for renewable energy growth, pushing states to
adopt and integrate renewable energy at a faster pace.
 ii. The push toward privatization of distribution networks created opportunities for
private renewable energy developers to directly engage with consumers through
open access mechanisms, though significant regulatory hurdles remained.

While the bill introduced several progressive measures, the financial instability of discoms
remained a significant bottleneck for renewable energy integration, as many discoms
struggled to pay renewable energy producers on time.

2.6.5 Electricity (Amendment) Bill, 2022: Focus on Sustainability and Consumer Rights
The Electricity (Amendment) Bill, 2022 represented one of the most comprehensive
reform attempts in India's power sector, with a strong emphasis on promoting renewable
energy and ensuring consumer rights.
i. Green Energy Open Access: A significant provision in the bill was the
introduction of Green Energy Open Access, allowing consumers to purchase
renewable energy directly from generators or through the market. This provision
was specifically aimed at large consumers (with demand greater than 100 kW)
and was designed to facilitate the consumption of green energy by industries and
commercial establishments.
ii. Time-bound Approvals: The bill proposed setting up a Centralized Authority for
Timely Approval of renewable energy projects. This would streamline the
process of obtaining necessary clearances and reduce delays in project
development.
iii. National Electricity Policy and National Renewable Energy Policy: The bill
proposed revising the National Electricity Policy to better align with the
country's long-term renewable energy goals. The focus was on increasing the
share of renewable energy in the energy mix and ensuring grid stability with
higher penetration of variable renewable energy sources.
iv. Penalty for RPO Non-compliance: The bill included stringent penalties for non-
compliance with RPOs. Discoms and other obligated entities failing to meet their
renewable energy obligations were subject to penalties proportional to the
shortfall, providing stronger incentives for RPO compliance.

2.6.6 Implications for the RE Sector

i. The Green Energy Open Access provision significantly benefited renewable energy
developers by creating a direct market for their power, bypassing financially unstable
discoms and reaching large commercial consumers.
ii. The focus on timely approvals and the establishment of a Centralized Authority
reduced bureaucratic hurdles, thereby accelerating the development of renewable
energy projects.
iii. The penalty for RPO non-compliance increased the accountability of discoms and
state regulators, leading to more consistent demand for renewable energy.
The Electricity (Amendment) Bill, 2022 demonstrated the government's commitment to
addressing the challenges faced by the renewable energy sector, particularly with respect to
open access, project delays, and grid integration.
2.7 Comparative Analysis of RE Policies: India vs. Global Trends

Renewable energy (RE) has been at the heart of global efforts to mitigate climate
change and transition towards a more sustainable energy future. Over the past decade,
from 2014 to 2024, countries around the world have enacted various policies aimed at
scaling renewable energy production and reducing dependency on fossil fuels. India, being
one of the largest energy markets globally, has also taken significant steps in transforming
its power sector, focusing on solar, wind, and other forms of renewable energy. This chapter
compares the evolution of India’s renewable energy policies with those of other major
players such as China, the United States, the European Union (EU), the United Kingdom
(UK), Germany, Norway, and global commitments under the Paris Agreement.

India’s renewable energy policy evolution reflects both its unique challenges and
opportunities, particularly regarding its large population, rapid industrialization, and urgent
need for energy security. By contrasting its policy initiatives with those of other nations, this
chapter will shed light on best practices, challenges, and the global context of renewable
energy development.

2.7.1 China: Rapid Scale and Government-led Transition

Policy Overview: China has become the global leader in renewable energy capacity,
particularly in solar and wind. The country’s Five-Year Plans have consistently
prioritized renewable energy development as part of its strategy to reduce air
pollution, improve energy security, and combat climate change. Key policies include:

i. Feed-in Tariffs (FiTs) for solar and wind power that offered guaranteed prices for
renewable energy producers, encouraging rapid scale-up.
ii. Renewable Portfolio Standards (RPS), which set mandatory targets for the share of
renewable energy in the electricity mix.
iii. Heavy investments in manufacturing capacity, making China the largest producer of
solar photovoltaic (PV) panels and wind turbines globally.

Comparison with India:

i. While India has focused on distributed solar power (such as rooftop solar projects),
China has built gigantic solar and wind farms in remote areas, connected to the grid
through ultra-high voltage (UHV) transmission lines.
ii. China’s centralized policy model, where decisions are made quickly at the top, has
enabled faster scaling of renewable energy compared to India’s more decentralized,
state-led approach.
iii. China’s investment in energy storage technologies has been more aggressive,
helping it tackle intermittency issues more effectively than India.
2.7.2 United States: A Market-driven and State-led Approach
Policy Overview: The United States' renewable energy policy is characterized by a
market-driven approach, with significant variation across states. The federal
government’s role has been more limited, providing tax incentives and setting general
goals, while individual states have taken the lead in policy innovation. Key policies
include:

i. Investment Tax Credit (ITC): This federal tax incentive has been instrumental in
promoting solar and wind energy projects by reducing upfront costs.
ii. Renewable Portfolio Standards (RPS): Similar to India’s RPOs, RPS mandates that
utilities source a percentage of their electricity from renewable sources. States like
California, New York, and Texas have been pioneers in adopting strong RPS targets.
iii. Clean Power Plan (CPP): Though introduced by the Obama administration to limit
carbon emissions from power plants, its implementation was paused during
subsequent administrations.

Comparison with India:

i. While India has adopted a more top-down approach with national targets and
mandates, the U.S. system is decentralized, with states driving the most aggressive
renewable energy initiatives.
ii. The U.S. has been more successful in mobilizing private sector investment through
tax incentives like the ITC and Production Tax Credit (PTC), while India’s policy
framework has relied more on public sector interventions.
iii. Grid management is a major concern in both countries, but the U.S. has invested
more in grid modernization and energy storage, particularly in states with high
renewable penetration like California.

2.7.3 European Union: The World’s Most Comprehensive Renewable Energy Strategy
Policy Overview: The European Union (EU) has been at the forefront of global
renewable energy policy, driven by its commitment to combating climate change and
transitioning to a low-carbon economy. The EU’s policy framework includes:

i. 2030 Climate and Energy Framework: This sets binding targets for a 40% reduction
in greenhouse gas emissions (from 1990 levels), a 32% share of renewable energy,
and a 32.5% improvement in energy efficiency by 2030.
ii. Renewable Energy Directive (RED): This directive set binding targets for renewable
energy deployment across member states, with a focus on promoting decentralized
energy and cross-border cooperation.
 iii. Emissions Trading System (ETS): The EU’s carbon market is one of the world’s
largest, putting a price on carbon emissions and incentivizing clean energy
investments.

Comparison with India:

i. The EU’s approach to renewable energy is more integrated and driven by its climate
goals, whereas India’s policies are focused on energy security and economic
development.
ii. The EU’s carbon pricing mechanism (ETS) has provided a strong market signal for
renewable energy investments, a tool that India has not yet adopted.
iii. Both the EU and India are leaders in solar energy, but Europe has focused more on
decentralized energy systems (such as rooftop solar) and cross-border energy
trading.

2.7.4 United Kingdom: Offshore Wind Leader and Decarbonization Goals

Policy Overview: The UK has emerged as a global leader in offshore wind energy, with
its policies focusing on expanding renewable energy capacity and achieving net-zero
emissions by 2050. Key initiatives include:

i. Contracts for Difference (CfD): This mechanism offers long-term contracts to

renewable energy developers, ensuring price certainty and reducing investment risk.
ii. Net Zero Strategy: The UK government’s commitment to achieving net-zero
emissions by 2050 has driven aggressive renewable energy deployment, particularly
in offshore wind.
iii. Renewable Heat Incentive (RHI): This scheme supports the use of renewable energy
for heating, a sector that is often overlooked in many renewable energy policies.

Comparison with India:

i. While India has focused on solar and onshore wind energy, the UK has become a
pioneer in offshore wind, leveraging its geographic advantage and technological
leadership in this field.
ii. The CfD mechanism in the UK has been more effective in ensuring long-term price
stability for renewable energy developers, whereas India’s renewable energy
auctions have been driven by aggressive cost reductions, leading to concerns about
the financial viability of some projects.

2.7.5 Germany: The Energiewende and Policy Consistency

Policy Overview: Germany’s Energiewende (energy transition) is one of the most
ambitious renewable energy policies globally, with a strong focus on reducing carbon
 emissions, phasing out nuclear power, and promoting renewable energy. Key policies
include:

i. Feed-in Tariffs (FiTs): Germany was one of the first countries to introduce FiTs,
offering fixed payments to renewable energy producers, which led to a rapid
increase in solar and wind capacity.
ii. Energiewende Goals: Germany aims to achieve 80% renewable electricity by 2050,
with a strong emphasis on decentralized energy production and energy efficiency.
iii. Phase-out of Nuclear Power: Following the Fukushima disaster, Germany committed
to phasing out all nuclear power by 2022, further intensifying its focus on renewable
energy.

Comparison with India:

i. Germany’s FiT mechanism provided long-term price certainty, similar to India’s

National Solar Mission, which also offered guaranteed tariffs for solar projects.
ii. Germany’s decentralized energy model (with many small producers feeding into the
grid) contrasts with India’s focus on large-scale utility projects.

Both countries have ambitious renewable energy targets, but Germany’s transition is more
holistic, encompassing energy efficiency, transport electrification, and deep
decarbonization.

2.7.6 Norway: Hydropower and Electric Mobility

Policy Overview: Norway’s energy policy is distinct due to its reliance on hydropower,
which provides over 90% of its electricity. Norway is also a global leader in electric
vehicle (EV) adoption, with policies aimed at reducing emissions in the transport
sector:

i. Hydropower Dominance: Norway has the largest installed hydropower capacity in

Europe, which ensures a low-carbon electricity grid.
ii. EV Subsidies: Generous subsidies, tax exemptions, and infrastructure development
have made Norway the global leader in EV market share.
iii. Renewable Transition Plan: Norway is committed to further decarbonization, despite
already having a predominantly renewable energy mix.

Comparison with India: India’s focus has been on solar and wind energy, while
Norway’s reliance on hydropower gives it a different profile. However, both countries
share a commitment to electric mobility, though Norway’s EV penetration is
significantly higher, driven by extensive policy support.