One of the major highlights of the UN Climate Change Conference of the Parties (COP26) in Glasgow was India’s visible commitment to reducing its CO2 emissions. On November 1st, Prime Minister Narendra Modi aired India’s 5-point agenda, or “Panchamrit”, to reaffirm the country’s intentions to measurably combat global warming and climate change. These pledges are bold but auspicious when the devastating effects of climate change are felt around the world.
With a strong focus on clean energy sources, India has set itself ambitious goals and in some ways made the world follow suit. India has a long way to go to achieve 500 GW of installed non-fossil fuel power generation capacity by 2030 from its current installed renewable energy capacity of 150 GW.
The above promises must now be accompanied by a reform agenda in the electricity sector with a special focus on renewable energies. However, there are certain obstacles to be overcome.
First, the construction of large solar and wind energy projects requires the availability of huge land masses. Land requirements calculations for India’s latest non-fossil fuel energy commitment have not yet been performed. However, to meet a net zero target by 2050, India would need 50,000 to 75,000 square kilometers of land for solar panels, according to a recently published report entitled “Renewable Energy and Land Use in India by Mid-Century,” while wind farms could occupy an additional 15,000 -20,000 km². Hence, robust land acquisitions and a change in land use policy by the government are required. Care must be taken that there is no unreasonable regional concentration of renewable energy sources.
For the above purposes, the Ministry of New and Renewable Energy can conduct a one-time assessment of potential solar and wind energy locations. The assessment should not only include the energy generation potential of the site, but also consider various ecological, economic (availability of infrastructure and other things) and social costs of the site. For example, the transmission lines built for renewable energies in the states of Rajasthan and Gujarat lead to a high mortality rate for the great bustard, which is already threatened with extinction, from collisions with power lines that fall into their trajectory. It is therefore. It is imperative to also look at the country selection process from an ecological point of view.
Second, governments must also incentivize solar rooftop projects. Institutions with large buildings, including those owned by the government, need to be encouraged to lease companies that want to build solar projects. Alternative models such as floating solar projects and offshore wind projects should be promoted and appropriately promoted in equal measure. Floating solar projects are being considered as an alternative to solar open space projects due to several advantages such as independence from large plots of land, the improvement of energy yields through the cooling effect of water, the reduction in water evaporation, among other things. The technology is still in its infancy, however, and some concerns remain about the investment costs involved – although this has been falling over the past two years due to the technology’s increased adoption of the technology in the country – and the floating solar photovoltaic projects (FSPV) impact on the local environment and aquatic biodiversity.
Third, the energy generated from renewable sources is inconsistent and unreliable. This fact could have been less critical if the non-fossil fuel plan had not been so ambitious. However, since the country gets 50% of its energy from non-fossil fuels, it is a significant deterrent to the growth of this sector. Therefore, without a suitable storage system, this electricity can neither be used as a base load source, nor can it meet the increased demand over the long term. This means that the chances of success for this model are difficult without the integration of lithium batteries in the network. Since India’s political and trade ties with China, one of the largest lithium reserve holders in the world, are currently not the best, the country must seek supplies from other lithium owners in the world, particularly Africa. In an effort to manufacture photovoltaic cells in its own country, India seeks and forges alliances in the global lithium market, but it can be very late to enter the lithium value chain. Securing the supply from these international lithium reserves for the local production of battery cells is now the top priority in India.
Fourth, as mentioned earlier, the states that produce solar and wind power in India do not have the demand estimates for all production, making the transportation and storage of energy a very critical issue in the supply chain. To this end, the Indian government must consider accelerating the implementation of the creation of green corridors for evacuation of the excess electricity generated. Given the projected increase in electricity consumption over the next decade and the rapid installation of solar and wind projects, India’s transmission and distribution infrastructure needs significant expansion.
By supporting electricity companies, the government should invest in research and development to create different models of low-cost smart grids. Similar research should be incorporated into support for India’s electricity storage and transmission infrastructure.
Ultimately, electricity from all sorts of sources is distributed through Distribution Companies (DISCOMs) who, as far as anyone can remember, are less efficient players in the Indian electricity sector. The inability to compensate electricity producers in a timely manner and reduce their own financial losses has been a burden on the electricity sector for far too long. The central government has continuously and ineffectively pumped funds to make these DISCOMs financially viable. The DISCOMs are paralyzed by, among other things, low billing and revenue collection, high costs of electricity procurement, insufficient tariff increases, delays in the payment of subsidies. The tariffs are one of the most important reasons for the below-average performance of DISCOMs. Because tariffs are calculated differently for different categories, they are often lower than the actual cost of generating electricity. Very robust reforms, including a revision and regulation of tariffs, are needed immediately in the electricity sector. As long as the power distribution bottleneck is not resolved, the sector will continue to contribute to the Indian banking sector’s NPAs.
India’s power shift
India has become one of the fastest growing renewable energy markets in the world. 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,” according to a report by the World Economic Forum. With the government’s push towards independence and domestic production of high-efficiency PV modules via the Production-Linked Incentive (PLI) program, the renewable energy sector in India is to become more innovative and less dependent on imports. In addition to creating jobs, this should also give a major boost to the expansion of renewable energy capacities in the country.
India has the potential to become the world capital of renewable energy. The road to net zero is long and the desired goal can only be achieved through a structured institutional framework and robust reforms in the electricity sector.
(The author is the managing director of Primus Partners)