The study, “Potential of Renewable Energy in India” states that “Developing indigenous renewable energy sources, which have low marginal costs of generation, are more economically viable in the long run.”

India’s electricity demand is expected to grow at an average annual rate of 7.4% during the next 25 years. Generation capacity will have to increase five fold to keep pace with the growth of demand. The installed capacity of the country stands at about 170GW from all sources of energy.

The report also suggested that renewable energy development can be an important tool for regional economic development within the country. The states of Himachal Pradesh, Jammu and Kashmir and Uttarakhand have 65% of India’s small hydropower resources. Much of the economically attractive wind potential in Orissa or the biomass potential in Madhya Pradesh also lies largely undeveloped.

The report emphasised that coal, gas and oil have shown considerable price volatility in recent years, and renewables are the only free hedging mechanism against price volatility of fossil fuels.

It said that the risk adjusted cost of renewable energy is lower than that of fossil-based fuels and their use enhances the price certainty of the portfolio and increases energy security.

Small hydropower in the country is largely untapped, although its generation costs are comparable with thermal generation sources, and the generation costs of biomass are comparable to those of wind.

The government has set an ambitious target of installing at least 40,000MW of additional renewables capacity in the next 10 years.