NEW DELHI: Investment in renewable energy should be made in a calibrated manner as social costs are high in promoting green energy, the Economic Survey has observed.
The mid-year Survey, introduced for the first time, has also taken a cautious stand on the impact of encouraging green energy on the banking sector which is struggling to deal with bad loans in stranded power sector projects.
“While investments in renewable energy is crucial for India to meet its climate change goals, such investments be made at a calibrated pace looking into the total cost accrued to the society,” said the Survey tabled in Parliament on Friday.
It found that social costs of renewables was around 3 times of coal at Rs 11 per KWh.
It said, “The social cost of RE generation as well as the gap between RE and coal reduces as we progress towards 2030. This is because private costs of generation as well as the stranded assets in coal, which account for around 30 per cent of the total social cost of renewables currently, falls to around 2.4 per cent of the total social costs of RE in the year 2030. Overall, cost of stranded assets account for a large portion of discounted social costs for renewables between 2017 and 2030.”
However, it said that since the first goal for India is to provide 100 per cent energy access to its population and bridge the ‘development deficit gap’, all cleaner energy sources needed to be tapped.
According to the document, a shift to renewables is likely to render a part of the assets in conventional energy generation plants idle or result in them being used at a much lower level than their maximum technically feasible level given their capacities.
The investments in these plants being sunk, it is no longer possible to recover any returns from them although their useful life is still not over.
It estimated that these stranded assets are estimated as the lost revenues due to the suboptimal utilisation of coal based power generation assets as a result of shift to renewables.
It pointed out that the stranded assets can have implications for the banking system depending on their exposure to the sector.
It said that in a situation where the banking system is already facing a stressed assets problem, stranding of assets could have a considerable impact.
The NPA (non-performing assets or bad loans) ratio pertaining to electricity generation was around 5.9 per cent from total advances (outstanding) of Rs 4,73,815 crore. The total advances to coal sector were Rs 5,732 crore with a NPA ratio of 19.8 per cent.