One of the significant highlights of the UN Climate Change Conference of the Parties (COP26) in Glasgow has been India’s visible commitment to reduce its carbon emissions. On November 1, PM Narendra Modi delivered India’s 5-point agenda or ‘Panchamrit’ to reiterate the country's intentions to fight global warming and climate change in measurable terms. These commitments are bold but are opportune when devastating impacts of climate change are being felt globally.
By placing tremendous focus on clean sources of energy, India has laid out ambitious targets for itself and, in a way, catalysed the world to follow suit. To achieve 500 GW of non-fossil fuel installed power generation capacity by 2030 from the current installed renewable energy capacity of 150 GW, India has a long way to go.
The above promises must now be accompanied with a reforms agenda in the power sector with a special focus on renewables. However, there are certain impediments to overcome.
Firstly, setting up large-scale solar and wind energy projects will require the availability of massive land masses. Land requirement calculations for India’s latest non-fossil fuel energy commitment have not been made yet. However, as per a recent report titled ‘Renewable energy and land use in India by mid-century’, to achieve a net zero target by 2050, India would require 50,000-75,000 square kilometres of land for solar, whereas wind energy farms could occupy an additional 15,000-20,000 sq km. Thus, there is a need for robust land acquisition and a change in land use policies by the government. In doing so, it is necessary to ensure that there is no unreasonable regional concentration of renewable energy sources.
For the above purposes, The Ministry of New & Renewable Energy may carry a one-time assessment of potential sites for both solar and wind energy. The assessment should not just include the energy generation potential of the site but should also take into consideration various environmental, economic (availability of infrastructure and other things) and social costs of the site. For instance, the transmission lines set up for renewable energy in the states of Rajasthan and Gujarat are resulting in high mortality of the already critically endangered Great Indian Bustard due to collision with power lines that fall in their flying path. It is, therefore. imperative to look at the land selection process from an ecological angle, too.
Secondly, governments must also incentivise setting up of rooftop solar projects. Institutions with large buildings, including the ones belonging to the government, need to be encouraged to get into leasing agreements with companies looking at setting up solar projects. Alternate models such as floating solar projects and offshore wind projects should be equally encouraged and adequately incentivised. Floating solar projects are being considered as an alternative to solar ground mount projects due to multiple advantages like non-reliance on large land parcels, improvement in energy yields due to the cooling effect of water, reduction in water evaporation, among others. However, the technology is still at a nascent stage and some concerns remain regarding the associated investment cost—though this has decreased in the last two years due to increased uptake of the technology in the country—and the floating solar photovoltaic (FSPV) projects’ impacts on the local environment and aquatic biodiversity.
Thirdly, the energy generated through renewable sources is inconsistent and non-reliable. This fact could have been less critical had the plan of non-fossil fuel energy been not as ambitious. But as the country is targeting 50% of energy through non-fossil fuel energy sources, it is a significant deterrent to growth of this sector. Therefore, without a proper storage system, this kind of power can neither be relied on as a source of base load nor can it be tasked to fulfill increased demand on a consistent basis. Which means, without incorporating lithium batteries onto the grid, the chances of success for this model are difficult. As India's political and trade relations with China, one of the largest owners of lithium reserves in the world, are not the best at the moment, the country has to look for securing supplies from other owners of lithium in the world, especially Africa. In the quest to manufacture photovoltaic cells indigenously, India is looking and fixing alliances in the global lithium market but it may be very late for it to enter the lithium value chain. Securing supplies from these international lithium reserves to manufacture storage batteries cells locally is India’s utmost priority now.
Fourthly, as has been seen, the states producing solar and wind energy in India do not have the demand estimates for entire production, making energy transportation and storage a very critical issue in the supply chain. For these purposes, the Indian government must look at accelerating implementation of creation of green corridors for evacuation of the surplus power generated. Given the predicted spike in power consumption over the next decade and the fast installation of solar and wind projects, India's transmission and distribution infrastructure will require major expansion.
Through the assistance of power companies, the government should look at investing into R&D for creating various models of low-cost smart grids. Similar research should also go into supporting India’s electricity storage and transmission infrastructure.
Lastly, power generated through all kinds of sources is ultimately distributed through distribution companies (DISCOMs), which, for as far as one can remember, have been less than efficient stakeholders in India’s power sector. Inability to compensate power generators in time and reduce their own financial losses have been burdening the power sector for way too long now. The central government has continuously and ineffectively been pumping funds to make these DISCOMs financially viable. The DISCOMs are crippled with low billing and revenue collections, high cost of power purchased, inadequate tariff hikes, delay in disbursement of subsidies, among other reasons. The tariffs, in this case, are one of the most important reasons for below-average performance of the DISCOMs. As tariffs are charged differently for different categories, they are often lesser than the actual cost of power generation. Very robust reforms, including revision and regulation of tariffs, are needed in the power sector on an immediate basis. Unless the power distribution bottleneck is resolved, the sector will continue to contribute to the NPAs of the Indian banking sector.
India’s Power Shift
India has emerged as one of the fastest-growing renewable energy markets globally. According to a report by the World Economic Forum, India’s transition to a green economy has the potential to ‘create over 50 million jobs and contribute over $1 trillion in economic impact by 2030’. With the government’s thrust on self-reliance and domestic manufacturing of high-efficiency solar PV modules via the Production-Linked Incentive (PLI) scheme, the renewable energy sector in India is envisaged to become more innovative and less dependent on imports. This is also expected to give a major boost to the renewable energy capacity addition in the country besides generating employment opportunities.
India has the potential to become the renewable energy capital of the world. The road to net-zero is long and the desired target can only be achieved through a structured institutional framework and robust reforms in the power sector.
(The author is the managing director of Primus Partners)