Indian government needs to adopt a holistic approach towards promoting clean energy rather than being overly focused on achieving higher targets
Despite setting a highly ambitious target to reach 175 GW of clean energy capacity by March 2022, India’s renewable energy sector continues to be plagued by a plethora of challenges, primarily due to flaws in government policymaking as well as the existing regulatory frameworks that are largely inadequate and ill-equipped to deal with such a sudden increase in Renewable Energy’s (RE) share in the power generation mix. As on March 31, 2018, India’s total installed RE capacity stood at 69,784 MW, of which, wind accounted for the highest share with 34,145 MW. The other RE sources included solar (21,651 MW), small hydropower (4,486 MW) and biomass (9,502 MW). The aggregate RE capacity installed in 2016-17 and 2017-18 was 11,322 MW and 11,887 MW respectively. In order to achieve the balance target by 2022, the investment requirement has been estimated at $ 76 billion at present capital cost.
Global credit ratings agency Moody’s Investors Service said in September this year that the share of fossil fuel-based generation capacity in India was likely to fall to 50-55 per cent by 2022 from the current 67 per cent, while at the same time, RE’s share of the power generation mix was likely to increase to around 18 per cent over the same period from close to 7.8 per cent as on March 2018. As part of the commitments made by India through Nationally Determined Contributions under the Paris Agreement, which was adopted by 195 participating countries at the 21st session of the Conference of the Parties of the United Nations Framework Convention on Climate Change in 2015, about 40 per cent of the country’s cumulative electric power installed capacity needs to be from non-fossil based energy sources by 2030. As of June 2018, India’s total non-fossil fuel based power generation capacity, including nuclear, stood at 35 per cent. With considerable time still left for achieving the target, the government is hoping to surpass it well before the deadline.
A recently released report titled ‘Climatescope Emerging Markets Outlook 2018 – Energy transition in the world’s fastest-growing economies’ by Bloomberg NEF ranked India second in its survey for the country’s ambitious clean energy policies and extremely competitive RE market. Chile with its strong government policies, demonstrated a track record of clean energy investment and commitment to decarbonisation despite grid constraints, topped the survey. The report had surveyed a total of 103 countries, relying upon approximately 165 data indicators. The report highlighted that the Indian market was home to the largest and most competitive auctions in the world and had contracted over 10.5 GW from wind and solar in 2017 alone. It pointed out that the government’s aim to reach the target of 175 GW of clean energy capacity by March 2022, of which solar would account for 100 GW, wind 60 GW and other sources 15 GW, was one of the world’s most ambitious RE targets. The country’s solar market almost doubled in size in 2017 with annual PV installations touching 8 GW, the report said.
The Bloomberg NEF report provided some interesting facts with regard to the role of developing nations in driving the energy transition that the world is witnessing at present. A majority of the world’s new zero-carbon power capacity in 2017 was built in developing countries. During the same period, developing countries added 186 GW to their grids with wind and solar alone accounting for 94 GW. Developing countries had not only been seeing the fastest growing clean energy deployment but also a sharp fall in coal build. More importantly, these countries have been driving down clean energy costs making such technologies more competitive with fossil generation. In terms of deployment of clean energy investment in developing nations, there had been a significant increase as compared to a decade back. As of year-end 2017, around 54 developing countries had recorded investment in at least one utility-scale wind farm and 76 countries received financing for solar projects. New clean energy financings in emerging markets totalled $ 143 billion in 2017.
While there is no doubt that India’s efforts at leading the journey to the next level of clean energy are being applauded across the globe, it needs to be understood that the path to this transition is fraught with challenges at every step. The big question here is if the country is ready yet for such a giant leap? A recently released paper titled ‘Working to turn ambition into reality – The politics and economics of India’s turn to renewable power’ by Rahul Tongia and Samantha Gross, both fellows at Brookings, and part of the Cross-Brookings Initiative on Energy and Climate, said that India’s ambitious plan to quadruple its RE capacity between late 2014 to 2022 to 175 GW had several political and economic contradictions.
It cited two facts that were at the core of these contradictions. First, though the RE business had grown considerably and the private sector was central to building most of the new capacity, foreign capital had not come into the country owing to costly foreign currency hedging and doubts over securing contracts and payments. And second, the sector faced a host of challenges, many of which were unique to India. Drawing attention to some of these challenges, the paper said that RE in the country was not yet in a position to compete with most of the existing coal-fired power generation plants. Besides, the country’s grid and utilities were weak and not equipped to handle the increase in RE’s share of power generation. Integration of RE into the power grid continues to be a major challenge. The paper stressed that there was growing evidence of how India did not need to meet the RE targets in order to achieve its goals under the Paris Climate Agreement.
The paper opined that while the Centre viewed RE as a vehicle for building industries, rewiring investments in the power grid, and creating a pro-business environment in the country, consumers were largely indifferent to it and concerned more with costs and reliability. States too, the paper said, lacked the enthusiasm of the Centre for rapid RE growth due to various reasons, adding that coal still retained the political power in the country since it was the dominant supply source for power plants.
There is no denying that India, at present, is rushing at a breakneck speed to achieve its RE goals but without adequate preparedness. The country’s existing policies, regulatory framework and the prevailing political conditions certainly don’t support such a rapid growth. Perhaps, it is time for the government to step back a little, in the process scaling down the ambition to become the world leader in RE deployment. The objective, instead, should be to make energy available at the right time and place with minimum disruption. (The views expressed are strictly personal)