New Delhi, As India looks to expand its renewable energy capacity, a new report from IEEFA on Thursday found that Rajasthan can play a key leadership role in the country's transition to a low-cost, low-emission, profitable electricity system.

Rajasthan's installed renewable energy capacity reached 9.6 gigawatts (GW) at the end of fiscal 2019-20.

It also added more solar power capacity (1.7GW) in 2019-20 than any other Indian state, ahead of Karnataka (1.4GW), the state with the highest installed solar capacity, and Tamil Nadu (1.3GW).

"Rajasthan has a bright future as a renewable energy leader in India," report's author Kashish Shah, Research Analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), told IANS.

"But its power distribution companies (discoms) are among the worst performing in India."

Expensive coal-fired capacity tariffs coupled with huge aggregate technical and commercial losses led to the Rajasthan discoms booking a loss of Rs 6,355 crore ($900m) in 2019-20 after accounting for state government subsidies.

"A shift to cheaper renewable capacity could help alleviate the discoms' financial liquidity and cash flow issues," said Shah.

Rajasthan has high solar radiation and wind speeds and an abundance of barren land that make it suitable for utility-scale solar parks.

And it is already home to the world's largest solar park -- the 2.25 GW Bhadla Solar Park, located in Jodhpur district.

"These factors make Rajasthan an attractive destination for domestic and foreign investors looking for opportunities in renewable energy, electricity grid infrastructure and associated manufacturing," said Shah.

Currently, Rajasthan depends on electricity imported from other states given a power deficit during peak daytime hours.

With an increase in renewable energy investment the state could become a net exporter of electricity in the coming decade, according to the report.

"It makes sense for Rajasthan to export electricity to other states. Yet we estimate it imported 10.9 terawatt hours (TWh) in 2019-20," said Shah.

"The state government should be taking proactive measures to fully utilise Rajasthan's renewable energy potential and build capacity to transmit power to states with energy deficits.

"Revenues from the interstate export of power would help sustainably grow GDP and improve India's energy security and load balancing capacity."

Today renewable energy sources form 43.5 per cent of Rajasthan's operational installed capacity and produce 17.6 per cent of its total on-grid generation.

Meanwhile, the state's 9.8 GW of coal-fired capacity makes up 45 per cent of total installed capacity and produces 56.5 per cent of total on-grid generation.

But Rajasthan's electricity sector could look very different by the end of this decade, IEEFA's modelling suggests.

If Rajasthan fulfils its solar power potential, it could be one of the largest contributors to India's target of 450 GW of renewable energy by 2030.

"We forecast that the composition of the electricity sector will shift dramatically, with renewables forming 74 per cent of capacity and 63 per cent of total generation by 2029-30," said Shah.

"Our model forecasts a total of 22.6 GW of renewable energy to be added to Rajasthan's grid. This will consist of 18 GW of new solar capacity, of which 3 GW is forecast to be distributed solar capacity.

"We estimate solar will supply 98 per cent of the incremental electricity demand by 2029-30; and that 4 GW of new onshore wind power capacity will serve 45 per cent of the incremental demand.

"As the discoms look to cater to their incremental demand through cheaper, deflationary renewables, coal-fired plants will progressively lose out on market share to about 28 per cent or 13TWh by 2029-30."

The modelling in the report takes into account India's economic slowdown and the Covid-19 pandemic which has led to falling electricity demand.

IEEFA projects Rajasthan's electricity requirements to grow by only 42 per cent over the next decade -- from 81 TWh in 2019-20 to 115 TWh in 2029-30 -- a growth well below any forecasts set even two years ago.

The report predicts the state will gradually retire its highly polluting, outdated and end-of-life coal-fired power plants. It models a net reduction in coal capacity of 0.7 GW by 2030.