India’s Energy Transformation, Reorienting India’s trade policy, Current Affairs 14th June, 2017

India’s Energy Transformation, Reorienting India’s trade policy, Current Affairs 14th June, 2017

India’s Energy Transformation

India has gained global attention for its ambitious clean energy targets. India is now expected to play a major role in global energy transformation, by maintaining its own pledges, holding to account the developed world and thus, building global confidence.

India has become a frontrunner in energy transformation:

  • India added more renewable energy (RE) capacity than conventional generation capacity in 2016-17.
  • RE tariff in the country dropped to a level that is cost competitive with coal-fired generation.
  • According to EY’s renewable energy country attractiveness index, India pipped the US to become the second most attractive country for RE investments.
  • According to government data, the share of renewable energy in the total installed capacity was 13% at the end of financial year 2016. But it is expected to increase significantly in the coming years, with solar a big driver.

Ambitious targets:

  • In 2014, the domestic RE target was revised to 175 GW of installed capacity by 2022.
  • In 2015, in its Intended Nationally Determined Contributions (INDC), India made a global pledge to achieve 40% cumulative installed capacity from fossil-fuel-free resources by 2030.
  • The country already has 33% fossil-fuel-free generation capacity, and as predicted by Central Electricity Authority, it may achieve the INDC target sooner.

Issues:
1) Domestic target versus global pledge

  • No sync between the domestic target and global pledge: Several analyses have pointed out that if India achieves the 2022 target, it will likely overachieve the INDC target for next five years.
  • As many of the distribution companies (discoms) are struggling with surplus capacity and storage capacities are yet to be developed, RE will add to power scheduling and balancing woes.

2) Mismatch between RE capacity and energy generated:

  • Actual generation from proposed RE capacity is unclear due to uncertainties in capacity utilization factor. In 2016-17, with 17.52% share of generation capacity, RE contributed only 6.59% of energy generated. Part of this is blamed on reluctant evacuation by unwilling discoms, who have already contracted for higher amount of conventional power than their existing demand.
  • Similarly, 33% fossil fuel-free capacity contributed less than 20% of the energy generated. Even if India achieves its INDC target, given its reliance on RE, the share of fossil fuel-free energy generated will not change much.

 

3) Focus on building a domestic reform coalition is inadequate:

  • Past experiences in India suggest Centre-pushed reforms have failed to sustain, owing to poor sub-national adoption.
  • Sustaining the desired energy transformation needs alignment of interests and building a reform coalition between the Centre, states, utilities, regulators and private players, among others.
  • On the deployment front, while there is good progress in reaching the 60 GW utility scale solar capacity, rooftop solar is lagging behind. As of April, only 1.5 GW capacity has been installed against a target of 40 GW by 2022.

4) Conventional power suppliers will be affected:

  • The rise in cheap supply from renewable sources would affect the demand from conventional power suppliers in India. A hit in revenue will hurt the ability of thermal power companies to repay loans, which would mean more trouble for the banking sector.
  • The fall in tariffs(solar power) may make adjustments difficult for conventional power producers

5) MNRE’s singular focus on solar energy in the renewables mission:

India is the fourth largest producer of wind energy in the world, with a total installed capacity of 27GW. Since wind power dominated the field of renewables for the longest time, the thrust for solar energy is understandable.

  • However, the goal of 60GW by 2022 undermines its actual growth potential. According to National Institute of Wind Energy, India has the capacity to install and generate 302GW of wind power, as well as increase its production to 67GW by 2020 itself with the right push.

More takers of RE:

  • Some states seem to be aligning with the domestic narrative of using RE for energy security and economic development, though with varying objective and approach. While states like Madhya Pradesh and Andhra Pradesh have added RE to their industrial thrust, building on the economic development narrative, states like Odisha have taken up RE to bridge energy access gap.
  • Simultaneously, there is an emerging political mandate for RE. Many members of Parliament and legislative assemblies across party lines have taken up RE installation as a key part of their local area development. During recent state assembly elections, RE development featured in manifestos of many political parties.
  • Government departments are being encouraged to adopt RE deployment in their activities.
  • RE is allowed as a legitimate item under CSR (corporate social responsibility) spending.

Way ahead:

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