Book summary by Preeti Ahluwalia, Research Intern, EECC
Prospects and pitfalls for India’s race to renewables
Energy use and economic growth are inextricably linked. The global climate challenge cannot be addressed without moving from “coal” to “clean” energy. Sumant Sinha, founder of India’s biggest renewable energy company, ReNew Power, provides an optimistic yet grounded picture of India’s renewable energy scenario. He also discusses the challenges and opportunities for the Indian renewable energy sector in the future.
The first and second Industrial Revolutions are the cause of our collective prosperity as well as today’s climate crisis. This prosperity was achieved by burning fossil fuels such as coal and oil to meet our basic needs. Right from the way we live to the way we move, we emit some form of greenhouse gases (GHGs) into the atmosphere. This has led to rise in global average temperature by about 1.1 degrees Celsius. The world is already feeling the adverse effects of global warming. Extreme weather events – such as erratic monsoons, droughts, floods and cyclones, along with biodiversity losses – affect our food security, public health, productivity and our overall well-being.
The author goes over the history and causes of the climate crisis, the breakthroughs in multilateral negotiations, what emerging economies like India have committed to do and where they stand today. Although the developed countries are largely responsible for the present climate crisis, developing countries such as India must take the lead in dealing with the challenge and providing solutions that can be used in similar contexts.
India has been at the forefront of dealing with this challenge. India’s renewable energy contribution – solar, wind, nuclear and hydro power – has grown exponentially in the past decade and has reached 40 per cent as of 2022. This was possible due to rapidly changing technologies as well as government support that includes incentives like ‘Appreciated Depreciation’, where, for a certain period of time, the asset cost can be shown as expense, thus saving on tax money; generation-based incentives; a competitive bidding process introduced by MNRE (Ministry of New and Renewable Energy); and government programmes like the National Solar Mission, introduced in 2010 as a part of India’s National Action Plan on Climate Change (NAPCC).
Thus, the evolution of renewable technologies as well as supportive government policies have made it possible for renewable energy to compete with polluting fossil fuel-dependent energy sources. Notably, solar and wind tariffs have reduced to anything between ₹2.44 and ₹3. Today, India has the fourth largest installed capacity for renewable energy in the world.
Despite this, various challenges remain. The author addresses them at length in the book. Solar manufacturing has not really taken off in India and we depend on the imports of solar modules from China. This is because of the complex process of setting up and operating factories and the consequent delays and high costs. Identification of land and its acquisition is also a tough process.
The financial health of electricity distribution companies (DISCOMs) and policy ambiguity are major factors that add to the risks for investors, deterring them from making large-scale investments in expanding capacity. The stability and reliability of renewable energy grids needs to be worked upon.
Furthermore, as India will need more than $500 billion for the transition away from fossil fuels by 2030, capital costs and long-term financing sources are needed. There is a need to push for further innovations and build a green energy ecosystem within the country.
India’s per capita energy use is still one-third of the world average and will grow to 70 per cent by 2050. This means energy demand will keep increasing, driving global energy growth. Global coal capacity is also peaking. The author views this as an opportunity to create a “green” future that provides long-term value for all, through:
• Creating new employment opportunities
• Lesser carbon emissions
• A healthy population
Ambitious policy targets, capital cost subsidies that help reduce risks for investors, decentralised smart grids, creation of an electric vehicles ecosystem, and strong renewable energy and pollution standards have spurred growth in the renewables market. The government needs to support innovations in battery and storage capacity to solve the grid stability problem of renewable sources. Reforms to restore the financial health of DISCOMs and thus reduce risks for investors are long overdue. Various financing options like debt and equity need to be explored to tap into long-term sources of finance.
The choices India makes today will have an impact on how the world deals with the climate challenge. A “greener” world inevitably calls for changes in technologies, business models and, mainly, mindsets.