In the world of venture capital, market share matters more than profits because scaling-up builds investor expectations. By this metric, renewable energy is already the future.
India’s renewables share in total generation doubled from 5.6 to 11 percent over the past six years since 2015. A share of 25 percent is targeted by 2030 primarily from growth in wind and solar energy, where barely 9 percent of the potential has been utilised. Meanwhile, domestic solar tariff (without storage) reached INR 2 (US cents 2.7 cents) per kWh in December 2020, making solar competitive versus both natural gas and coal—even including penal carbon levies.
So, are all the challenges behind us? Far from it. Two key challenges persist. First, creating an enabling international eco-system, incentivising development and dispersion of efficiency-enhancing RE and storage technology; and second, interim, supportive regulatory mechanisms to make renewables competitive versus fossil fuels.
A supportive global eco-system
Back in 1992, the Rio Earth Summit recognised the link between economic development, environment sustainability and reduced dependence on fossil fuels. But climate change seemed distant.
Today, with disturbed weather patterns felt keenly, the “tipping point” is uncomfortably closer. Can the pace of global action be intensified to contain the environmental degradation, which delay engenders?
Consider that the first Earth Summit was held in Stockholm in 1972. But it took the UN sixteen years to direct the UNEP (United Nations Environment Programme) and the WMO (World Meteorological Organisation) to review and recommend actions to delay, limit or mitigate the impact of climate change. The Kyoto Protocol was adopted only in 1997 requiring industrialised countries to cut back carbon emissions to 5 percent below 1990 levels by 2012. Between the realisation in 1972 and institutionalized action in 1997, more than two decades had passed.
The good news: Global red flags hasten the transition to cleaner fuels
Nevertheless, global recognition of a collective action problem mattered. The share of non-carbon emitting energy sources (old and new renewables and nuclear) increased globally from 16 to 22 percent over the two- and one-half decades from 1990 to 2015. Of the incremental energy used during this period, 30 percent was carbon neutral, albeit not enough to offset growth in the volume of fossil fuels and associated carbon emissions.
Natural gas—a “greener” fossil fuel—was the beneficiary, accounting for one third of the incremental growth in fossil fuel use. Both coal and gas enhanced shares at the expense of oil consumption. This points to a positive trend, as transportation and mobility get electrified or switch to blue, purple or eventually green Hydrogen.
Kyoto hit the “sweet spot” – Preserve growth with climate change mitigation
Kyoto was practical and equitable in putting the burden of carbon remission on the rich world comprising just 15 percent of global population but accounting for over 80 percent of the carbon emissions. After all, only they, almost exclusively, had the technological wherewithal to develop cleaner technologies.
Kyoto recognised that the poor—three fourths of the global population—could never subscribe to sustainable development principles unless they first escaped poverty. Simply cutting back on the use of fossil fuels to contain carbon emissions could trap the poor in a low-level equilibrium.
The Kyoto strategy worked. The share of population in low-income economies declined from 56.3 percent in 1994 to 9.3 percent by 2019—thanks to China (2000) and India (2008) becoming lower middle-income. China graduated to middle income status (2010) reducing the population share of lower middle- and low-income countries to 49 percent.
Kyoto recognized that the poor—three fourths of the global population—could never subscribe to sustainable development principles unless they first escaped poverty.
By 2030, with India and some other economies becoming upper-middle-income, the share of population in the lower-middle- and low-income segments (per capita GNI less than US $4045 -2019 Atlas method) could decline to around 25 percent. Put another way, by 2030, three fourths of the global population could “afford” clean energy with supportive domestic policies.
Green energy in India
With carbon dioxide emissions at a low of 1.9 tons per capita, equal to emissions in the United States in 1867, less than a third of China and less than one half of the world average in 2019, India is not pressured by climate responsibility guilt to enhance renewable energy use.
Environmental concerns have been a dominant theme in India’s growth narrative, including to improve domestic urban air quality. India carved out institutional arrangements for promotion of renewable energy, as early as 1982.
A diligently researched book on renewable energy in India authored by Pramod Deo, ex-Chairperson of India’s national electricity regulator; Sushanta K. Chatterjee, Head Economics in the Central Electricity Regulatory Commission; and Shrikant Modak, an energy academic; traces the evolution of renewable energy regulations and institutional innovations to promote sustainable growth.
In 1997, India’s had a 12 percent share in global installed capacity of wind energy—more than 8X of India’s share in global GDP. But scaling up of wind energy faltered. By 2014, our share had decreased to 7 percent of enhanced global capacity of 350 GW. China’s share increased to 37 percent.
Wind energy development
India’s wind energy potential is concentrated in the western and southern states. The lack of regulatory support for plug-and-play power evacuation from project sites, low state and regional grid capacity to balance intermittency and the withdrawal of performance linked incentive from 2017 slowed capacity addition.
The delay in developing 70 GW of offshore wind potential could have negative consequences on maritime security, particularly with Sri Lankan plans to expand Chinese owned projects off the coast of Tamil Nadu. Only a “forward offshore wind stance” can secure India’s maritime interests.
The delay in developing 70 GW of offshore wind potential could have negative consequences on maritime security, particularly with Sri Lankan plans to expand Chinese owned projects off the coast of Tamil Nadu.
Wind and solar power can balance each other’s intermittency of supply. It is windy at night and calm during the day when solar incidence is highest. Hybrid (combined solar and wind) projects are now being promoted for “round the clock” supply.
Solar energy development
Despite an early start in distributed solar applications, India had a marginal share of 1 percent in global solar capacity of 172 GW in 2014. Prime Minister Modi’s election in 2014 boosted solar power. Previously the Chief Minister of Gujarat – a progressive state on the western seaboard with high shares in both wind and solar potential—he elevated India’s commitment to renewables in the 2015 Paris meet. India committed a share of 40 percent for renewables in total power capacity by 2030 and a tangible target of 175 GW by 2022 with 100 GW from solar energy. Installed solar capacity by 2020 is 40 GW—6 percent of installed global solar capacity of 707 GW—more than 2X of India’s share in global GDP.
Installed capacity in new renewables increased from 39.6 GW (14 percent of installed power capacity) in fiscal 2015 to 92; 5 GW (25 percent) by mid-fiscal 2021 whilst share in total electricity generated increased from 5.6 percent to 11 percent.
Regulatory support for renewables
India has institutionalised “go-arounds” to structural constraints. Renewable projects are “green fenced” against irregular payments from cash-strapped distribution utilities, by intermediating the sale through public entities like the Solar Energy Corporation of India. Renewables access the national grid for free, enjoy accelerated depreciation benefits and avail bank loans for up to 70 percent of project investment.
Grid scheduling regulations despatch renewables in preference to fossil energy, regardless of the financial cost of supply. The capacity to better forecast availability is being supported. The scheduling period for day-ahead supply of renewables is lower, to avoid attracting penalty on unscheduled interchange. Solar power enjoys a subsidy of 40 percent of the capital cost.
But barriers persist. Despite investment in “green transmission corridors” for easy evacuation of green power, local and regional grids are still being upgraded to support the integration of larger shares of renewable power in the grid. Work is expected to complete by 2022. Grid operators still lack contracted reserve capacity to provide back-up supply or ancillary power and make-do with demand management measures to maintain grid stability.
Renewable projects are “green fenced” against irregular payments from cash-strapped distribution utilities, by intermediating the sale through public entities like the Solar Energy Corporation of India.
Online auctions to contract renewable power purchase have enhanced transparency and progressively reduced the cost of contracted renewable power, though tweaks to the auction methodology are needed to extract more efficient outcomes.
There is something wholesome about a regulatory system which evolves organically – making and rectifying errors, crossing the river by feeling the stones. Growing India’s renewable energy generation to 275 GW by 2040 would still only utilise around one fourth of its potential. So, optimism is well advised.
Can Glasgow combine climate ambition with the “differentiated demise” of fossil fuel?
Over the foreseeable future, only massive advances in renewable technology and storage options can reverse the tide of carbon emissions from the incremental economic growth needed to lift one half of the global population trapped in low and lower middle-income status in 2019.
Fossil fuel exporting industrial conglomerates and countries could manoeuvre to stall renewable technology development. Reigning in fossil fuel elites needs global commitments, as in Kyoto, along climate equity principles—differential commitments for the low and lower middle-income economies. Can Glasgow better Kyoto, in allocating climate responsibility per the capacity of countries, to drive time-bound carbon remissions globally?
Extracted from the author’s piece at https://www.orfonline.org/expert-speak/renewing-our-future-at-glasgow/