Accelerating India’s Sustainable Energy Transition
Industrialization over the past 200 years by the transition to a carbon-based economy has liberated many economies from Malthusian constraints and ushered in dramatic improvements in productivity and quality of life. However, this rapid expansion of a few economies in the western world with a smaller share of the global population has placed several barriers for economies with larger populations that seek to industrialize and improve the quality of life of their citizens.
This is further compounded by growing evidence of changing climate and their vulnerability. India, among a few nations, however, is treading an alternative sustainable path while maintaining its developmental imperatives. The International Energy Agency (IEA), in its recent energy policy review, commended India’s energy sector reforms that have enabled increased access to clean and affordable energy, thus raising the living standards of all segments of the population[1].
Key focus for sustainable energy transitions
Although India is making great strides in shifting away from fossil fuels, to mitigate the effects of the impending climate crisis and its costs, the energy system must undergo a profound transformation that is renewable energy based, enhances efficiency, and pursues extensive electrification while increasing system flexibility[2]. It is estimated that to be in line with the global temperature reduction target, switch to renewables, improved energy efficiency, and increased electrification can translate to a reduction of about 60 % in energy-related carbon dioxide emissions, of which 75% can be attribute to increased use of renewables and electrification alone[3]. This transition in India’s energy system should be driven by a) redirecting fossil fuel subsidies, b) technological innovation coupled with policy imperatives both at the national and sub-national level in line with the United Nations (UN) Sustainable Development Goals (SDGs) and c) variable renewable energy integration.
Redirecting fossil fuel subsidies
India’s progress over the last decade reinforces its commitment towards sustainable energy transitions, primarily with the national goal to increase its fossil-free electricity capacity to 40% by 2030 and with actions to reform perverse subsidies for fossil fuels. However, greater impetus needs to be provided to shift public resources away from fossil fuels towards renewable energy. While subsidies to RE and Electric vehicles (EVs) segments in 2019 increased by three times to INR 11,640 Cr since 2014, subsidies to fossil fuel energy sectors amounted to about INR 83,134 Cr[4]. The introduction of the Goods and Services Tax (GST) regime in 2018 has also made coal thermal power generation cheaper and RE more expensive, with the concessional tax rate of 5% for coal against 18% for most other minerals.
Technology innovation driven by policy imperatives
In India, clean electricity could be the principal source of power combined with the deployment of digital technologies (such as smart meters and chargers) that enhance the supply of renewable power efficiently. Digitization with ambitious climate policies leads to the electrification of energy services, often breaking the technology lock-in with the use of fossil fuels like in automobiles (transition to EVs from IC engine vehicles) and manufacturing industry (Steel production using electric arc furnaces). This unlocks synergies in the RE power generation and a potential increase in the use of electricity across crucial sectors such as buildings, transport, and industries. This also helps in unlocking the synergies between national energy and climate policy goals and broader national priorities such as ‘Self-reliant India’ and ‘Make in India’.
Variable renewable energy integration
With an enhanced installed capacity target of 227 GW RE by 2022, India is one of the world leaders in RE deployment. By April 2020, it has already added about 80 GW RE to the national grid totaling to a share of about 23% of the total installed capacity[5]. However, this increase in RE capacity has little contribution towards catering to peak energy demand due to a variable demand profile now as well as in the future. Albeit it contributes to overall energy generation. Hence, India’s transition towards a high renewable energy system should entail the management of changing demand patterns with interventions on both the supply as well as the demand side.
Challenges
Transforming a complex energy system as India, dominated by inflexible coal power plants to one dominated by renewable energy, is nestled with challenges as an increased share of RE increases the system requirements for balancing the supply and demand and the inflexibility of electricity demand itself. It is also increasingly challenging and vital for utilities to understand how they can reliably integrate large amounts of RE into system operations and develop capabilities that enable RE plants to provide the much-needed frequency and voltage support to improve the reliability and resilience of the grid.
On the demand side, while ample technology and system concepts exist to create flexibility in demand by staggered usage/operations as is being done in certain industries and states, implementation in buildings and transport sector (with varying demand) is a significant challenge facing energy transitions in India. On the policy front, the entrenched regulations, taxes and subsidies, and mounting losses for the electricity utilities create the biggest hurdles for sustainable energy transitions even when there is a considerable political will to alter the status quo.
Opportunities
Due to the highly integrated and complex nature of energy systems, the inertia for its transition is higher. However, owing to enhanced policy push from the government and the cost of fossil fuels only rising, renewables look attractive even without considering the subsidies or costs of externalities in terms of pollution and Green House Gas emissions. Hence integration of RE into the grid is more attractive today than ever. This provides India with opportunities to deploy technologies like smart grids to make demand more flexible and opening up possibilities for consumers to gain direct access to the energy markets. Meanwhile, the deployment of energy storage systems at scale are enabling enhanced grid flexibility. Additionally, with RE reaching price competitiveness with grid electricity, subsidies can be directed towards emerging technologies and enhancing grid flexibility and balancing.
Though, India is on a firm path towards sustainable energy transitions due to strong and ambitious policy vision by the government, the price competitiveness of renewables alone cannot determine the pace of this transition. It is rather very much dependent on the rate at which innovative technologies are deployed to improve access to clean energy and to enhance flexibility in the electricity system and more importantly the scale of reallocating public resources away from fossil fuels to sustainable energy sources.
[1] https://webstore.iea.org/download/direct/2933?fileName=India_2020-Policy_Energy_Review.pdf
[2] https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/Jun/IRENA_G20_grid_integration_2019.pdf
[3] https://themasites.pbl.nl/commit/wp-content/uploads/COMMIT-Fact-Sheet-India-Decarbonisation-Pathways-Options-and-Implications-1.pdf
[4] https://www.iisd.org/sites/default/files/publications/india-energy-transition-2020-summary.pdf
[5] http://www.cea.nic.in/reports/monthly/installedcapacity/2020/installed_capacity-04.pdf
