General Studies IIIEnvironment and Ecology

Indian Renewable Energy Development Agency (IREDA)


Recently, the Union Cabinet approved the infusion of Rs 1,500 crore in the Indian Renewable Energy Development Agency (IREDA).

About IREDA:

  • IREDA is a Public Limited Government Company established as a Non-Banking Financial Institution in 1987.
  • IREDA’s corporate and registered office housed in New Delhi.
  • The Agency, a Mini Ratna (Category– I) Government of India Enterprise under the administrative control of Ministry of New and Renewable Energy (MNRE) already has two branch offices in Chennai and Hyderabad.
  • It is engaged in promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy and energy efficiency/conservation with the motto: “ENERGY FOR EVER”.

A Brief Background:

  • IREDA has been notified as a “Public Financial Institution” under section 4 ‘A’ of the Companies Act, 1956 and registered as Non-Banking Financial Company (NFBC) with Reserve Bank of India (RBI)
  • In 2015, it was awarded the status of “Mini Ratna” (Category-I) by the Ministry of New and Renewable Energy (MNRE)
  • The organisation is committed to providing innovative financing in Renewable Energy & Energy Efficiency/Conservation and Environmental Technologies
  • IREDA headquarters are located in New Delhi, and the Chairman and Managing Director (as of May 2021) is Pradip Kumar Das

Objectives of IREDA

Given below are the key roles and objectives of the IREDA:

  • To provide financial assistance to schemes and projects generating energy or electricity through renewable sources and conserving energy through efficient usage
  • Maintaining its position as the leading organisation for efficient and effective financing of renewable energy conservation projects
  • Promoting means of innovative financing to increase IREDA shares in the energy sector
  • Improving the system, process and resources to increase the efficiency of services
  • To strive to be a competitive institution through customer satisfaction

Significance of the Funds allotted by cabinet:

  • This equity infusion will help in employment generation of approximately 10200 jobs-year and CO2 equivalent emission reduction of approximately 7.49 Million Tonnes CO2/year.
  • Additional equity infusion of Rs.1500 crore by Government of India will enable IREDA:
    • To lend Rs.12000 crore approximately to the Renewable Energy (RE) sector, thus facilitating the debt requirement of RE of additional capacity of approximately 3500-4000 MW.
    • To enhance its networth which will help it in additional RE financing, thus contributing better to the Government of India targets for RE.
    • To improve the Capital-to-Risk weighted Assets Ratio (CRAR) to facilitate its lending and borrowing operations.
      • CRAR, also known as CAR (Capital Adequacy Ratio) is critical to ensure that financial organisations have enough cushion to absorb a reasonable amount of losses before they become insolvent.

Renewable energy in India:

  • India is world’s 3rd largest consumer of electricity and world’s 3rd largest renewable energy producer with 38% (136 GW out of 373 GW) of total installed energy capacity in 2020 from renewable sources.
  • Ernst & Young’s (EY) 2021 Renewable Energy Country Attractiveness Index (RECAI) ranked India 3rd behind USA and China.
  • In 2016, Paris Agreement’s Intended Nationally Determined Contributions targets, India made commitment of producing 50% of its total electricity from non-fossil fuel sources by 2030.
    • In 2018, India’s Central Electricity Authority set a target of producing 50% of the total electricity from non-fossil fuels sources by 2030.
    • India has also set a target of producing 175 GW by 2022 and 500 GW by 2030 from renewable energy.
    • As of September 2020, 89.22 GW solar energy is already operational, projects of 48.21 GW are at various stages of implementation and projects of 25.64 GW capacity are under various stages of bidding.
  • In 2020, 3 of the world’s top 5 largest solar parks were in India
    • Including world’s largest 2255 MW Bhadla Solar Park in Rajasthan and
    • world’s second-largest solar park of 2000 MW Pavgada solar Park Tumkur in Karnataka and
    • 100MW Kurnool in Andhra Pradesh.
  • Wind power in India has a strong manufacturing base with 20 manufactures of 53 different wind turbine models of international quality up to 3 MW in size with exports to Europe, the United States and other countries.
  • India is the 5th globally for installed hydroelectric power capacity. As of 31 March 2020, India’s installed utility-scale hydroelectric capacity was 45,699 MW, or 12.35% of its total utility power generation capacity
  • As of November 2020, India had 10 nuclear reactors under-construction with a combined capacity of 8 GW and 23 existing nuclear reactors in operation in 7 nuclear power plants with a total installed capacity of 7.4 GW (3.11% of total power generation in India). Nuclear power is the fifth-largest source of electricity in India after coal, gas, hydroelectricity and wind power.
  • India imports 85% of petrol products with import cost of $55 billion in 2020-21, India has set a target of blending 20% ethanol in petrol by 2025 resulting in import substitution saving of US$4 billion or INR30,000 crore, and India provides financial assistance for manufacturing ethanol from rice, wheat, barley, corn, sorghum, sugarcane, sugar beet, etc.Ethanol market penetration reached its highest figure of a 3.3% blend rate in India in 2016.
    • Ethanol is produced from sugarcane molasses and partly from grains and can be blended with gasoline. Sugarcane or sugarcane juice may not be used for the production of ethanol in India. Government is also encouraging 2G ethanol commercial production using biomass as feed stock.
  • India initiative the International Solar Alliance (ISA) is now an alliance of 121 countries. India was world’s first country to set up a ministry of non-conventional energy resources (Ministry of New and Renewable Energy (MNRE) in early 1980s) . Solar Energy Corporation of India (SECI), a public sector undertaking, is responsible for the development of solar energy industry in India. Hydroelectricity is administered separately by the Ministry of Power and not included in MNRE targets.
  • The government has announced that no new coal-based capacity addition is required beyond the 50 GW under different stages of construction likely to come online between 2017 and 2022. As fossil fuels are depleting and creating more pollution causing global warming, and also since energy demand is increasing day by day, energy production from renewable energy resources becomes the best solution in present condition as renewable energy resources are not exhaustible, clean, and green energy.
    • Future targets

Target yearRenewable energy capacity target (GW)Comments
2030450Includes nuclear and large hydro power.
Set in 2019 at United Nations Climate Change conference,with 15 times solar and 2 times wind power capacity increase compared to April 2016 installed capacity.
2022175Excludes nuclear and large hydro power.
Includes 100 GW solar, 60 GW wind, 5 small hydro, 10 GW Biomass power, and 0.168 GW Waste-to-Power.

Benefits of renewable energy:

  • Opportunity for the private sector: PM indicated the possibility of a business of around $20 billion per year in the renewable energy sector. A target of setting up 450 GW of renewable energy sources by 2030 means that we need to augment the renewable energy capacity by almost 25-30 GW per year. This can be harnessed as a high return on investment opportunity by the private sector.
  • Low maintenance cost: As compared to the traditional sources of energy like coal-based or oil-based thermal power plants, solar energy has the advantage of almost no requirement of procurement of fuel as well as lesser wear and tear due to lack of movement of parts. Therefore, return on investment is higher in the long run.
  • Government incentives: Solar energy is a sustainable source of energy. Therefore, unlike thermal energy where the government policy is to penalise the usage, renewable energy will always be incentivised to invest additional resources and create more energy capacity.
  • Sustainability: Renewable energy is a cleaner source of pollution, thus, benefitting the environment in general and reducing pollution and the associated diseases in particular.
  • Atmanirbhar Bharat: Investment by the private sector in renewable energy would also be helpful in fulfilling the Government’s objective of self-reliance. It will also create employment opportunities in the country.
  • Last-mile connectivity: As renewable energy can also be decentralised, therefore, it is better placed to extend last-mile connectivity in remote areas, where it might not be financially feasible to stretch the main grid.  This is also economical for the government and households as decentralised connectivity decreases the Transmission and distribution losses.

Challenges of Renewable Energy in India:

  • Reliability: By their very nature, solar and wind energy are variable in availability both spatially as well as geographically. They are not available on-demand, unlike thermal or nuclear energy. Therefore they have to be supplemented with other sources of energy, to maintain the base load.
  • Creation of storage infrastructure: To overcome the variable nature of renewable sources of energy, it is vital to invest in affordable batteries of large capacity. This would require adequate commitment from the government side to inspire confidence in the private sector.
  • Funding: As already stated, renewable energy requires setting up large projects to harness the economies of scale. This requires a large initial investment, which can be a deterrent at the beginning of the project.
  • However, it has to be acknowledged that the newly set up projects have actually achieved and sometimes even overshot the per unit price parity in comparison to the thermal energy.
  • Building manufacturing capability: It is important to set up manufacturing capacity in India to decrease imports and promote Atmanirbhar Bharat. More manufacturing would also mean an increase in investments and additional employment generation in India.

Source: PIB

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