Home 2019 India’s Energy Policy and Ambitions

India’s Energy Policy and Ambitions

by Shruti Mahajan Deorah
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Energy consumption and air pollution are inexorably linked in today’s fossil-dominated world. This nexus is hard to break, though not impossible. For all those who’ve breathed in Delhi air during winters, it may not come as a surprise that health impacts of air pollution are significant. In fact, air pollution led to ~1·24 million deaths in India in 2017, making it #3 risk factor for deaths and disability combined, ahead of high blood pressure, tobacco and alcohol use. It is a public health emergency, and no longer an issue India can afford to postpone action on.

This brings us to the critical questions of the next decade: How does a developing country like India meet growing energy demands to lift millions out of poverty while managing increasing environmental concerns? How do we drill through the Environmental Kuznet’s curve [1] – invent a new ‘sustainable’ model of development [2]?

As we say in Indian English, ‘good luck is on our side’ on this one. Technology disruptions offer us the opportunity of leapfrogging. And the good news is that the Government of India (GoI) realizes this, for the most part. Whether as a nation we’re able to seize this opportunity or we miss the bus, policy and market evolution over the next decade shall reveal.

First things first. Per unit cost of electricity from new solar and wind is already lower than that from new coal plants. Plus it is fixed in nominal terms for a 25-year period! Take modest inflation applicable for fuel costs in a coal plant, and this gap will continue to grow.

India has exceeded 80 GW of grid-connected renewable capacity, which is a big leap ahead. Even though we are still far from GoI’s stated goal of ‘175 GW of installed renewables capacity by 2022’, the ecosystem is moving in the right direction for increasing the share of renewable energy (RE)in the energy mix. In fact, the target announced by Ministry of New & Renewable Energy (MNRE) and now incorporated in the official National Electricity Plan document is 275 GW of RE installed capacity by 2027 [3]. This would imply ~25% of total power supply from renewable sources.

GoI has demonstrated further initiative and leadership by co-launching the International Solar Alliance along with the French Government [4].An alliance of over 120 countries, it aims to encourage innovative and affordable applications of solar technologies.

Coal enthusiasts will point out that solar and wind are not at your beck and call. Hence, India will have to build new coal plants for meeting the evening demand from households. However, with the advent of and sharp decline in prices of Li-ion storage, this is no more the case. Now one can generate all we want when the sun shines, store it for a few hours and supply this power to the households during the evening ‘peak demand’ hours. One could do that at a household level in off-grid systems and be competitive with diesel-based generation over the last few years. Now, one can do this on grid-scale (hundreds of MW), and solar-plus-storage systems with signed contracts in the US to be built by 2020-21 will be cheaper than coal already. This is game-changing, to put it mildly. Especially for countries such as India, that are expected to be heavily dependent on dirty coal for meeting the growth in energy demand over the next two decades. India could significantly reduce the environmental price it pays as it increases per capita consumption of electricity, which is still less than half of global average.

There are always conflicting interests at play in industry transitions, and that’s the tricky tightrope the Governments have to walk. In India, it is the purported conflict between the coal ecosystem (coal mining, transportation through railways, coal power plants & machinery suppliers, and associated revenues & jobs) and the new solar/wind ecosystem. In 2016, coal accounted for 38% of electricity generation the world over, while in India that number was closer to 75%. Nevertheless, there are several coal plants stranded due to high fuel costs, fuel shortages/unavailability or other financial issues. One opinion is that India need not build any more coal plants, and can meet its growth in energy demand via renewables [5]. It seems technically feasible, though it remains to be seen whether pace of new green jobs can outgrow potential black jobs that would be replaced in such a scenario. And if the ecosystem can re-skill people to make this transition as equitable as possible.

The other inflection point in the energy landscape is the impending transition to electric mobility.

Energy security of India has been under pressure from oil imports, accounting for 84% of our total consumption of oil, while domestic production continues to fall. The repercussions on our exchange rate and the economy are far reaching. Road transport is also one of the major sources of air pollution, especially in urban centers[6].

Recently announced 2nd phase of the electric-vehicle (EV) ‘FAME’ [7] policy has a subsidy budget of Rs.10,000 crores, or ~$1.4 Billion. While the number of 2&3-wheelers that could potentially get subsidy (10lacs&5 lacs respectively) might be eye-catching, a salient feature is that subsidy is given per kWh of battery capacity. This ensures that vehicles with larger range get more subsidy, and the market pivots to better models. Additionally, buses and trucks account for 60-70% of India’s oil consumption, making it imperative that the EV policy is focused on this category of vehicles. Electrification of small passenger vehicles could be largely market driven, but ecosystem intervention (on financing and charging infrastructure) will be needed to get the ball rolling on bus/truck electrification. It is heartening to note that the policy allocates 40% of subsidy budgetfor buses. And allocates another INR 1000 crores for charging infrastructure. High speed chargers could be deployed at bus depots or along highways [8].

The Central Government has announced National Mission on Transformative Mobility and Battery Storage which will focus on Make-in-India for batteries and EVs. We need to go into ‘mission mode’ and act fast as China is already dominating in manufacturing of batteries and EVs. This is crucial as automotive industry currently contributes ~7% of India’s GDP and employs over 30 Million people directly and indirectly. Plus a transition from oil-imports to battery-imports will be self-defeating.

While new technologies could help us leapfrog to cleaner sources to fuel India’s economic growth, the vision of 24×7 power can be realized only if critical legacy issues plaguing the sector are resolved, viz., Discom health, AT&C losses[9] and political interference on tariffs. GoI’s seminal scheme UjwalDiscom Assurance Yojana (UDAY) launched in 2015 was designed to address many of these issues. However, the performance of many States has been lackluster, as they have failed to contain losses. It is to be seen if a second term of this Government can help tame this wild elephant in the room (sector).

[1] https://www.intelligenteconomist.com/environmental-kuznets-curve/

[2] If any of you readers are wondering why this article doesn’t look through a ‘climate change’ lens, that’s because India is on track to meet its ‘2°C compatible’ Nationally Determined Contributions (NDCs) under the Paris Agreement: https://climateactiontracker.org/countries/india/

[3] http://www.cea.nic.in/reports/committee/nep/nep_jan_2018.pdf

[4] https://unfccc.int/news/international-solar-alliance

[5] Very much controversial; see converse here: https://www.forbes.com/sites/tilakdoshi/2019/06/07/in-coal-we-trust-the-need-for-coal-power-in-asia/#6a5e36e21222

[6] Studies trying to determine sources of pollution in NCR conclude that vehicular exhaust is responsible for up to 30% of annual average PM2.5 concentrations

[7]Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles

[8] Ministry of Power issued guidelines for charging infrastructure, including technical specifications and placement, in December 2018

[9] Aggregate Technical & Commercial (AT&C) losses in India are very high- at over 20%

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