In 2015-16, India added 3,019 MW of solar and 3,300 MW wind energy capacity, beating the target of 2,000 MW and 2,400 MW respectively. With tendering completed for an additional 21,000 MW of solar, India is poised to cross 20 GW, a target earlier set for 2022. The cost of new solar power is touted to come down below new coal power, resulting in growing optimism on India’s new renewable energy (RE) target for 2022 and its potential to transform the energy mix. The current government is simultaneously committed to ensure 24×7 power access for all by 2019 by creating cost-effective and sustainable infrastructure, inclusive of clean energy solutions.
The virtuous goal of universal access to electricity has been set by successive governments. The current target to ensure affordable, quality and round-the-clock supply is ambitious for a country with the highest energy poverty, but not unattainable. However, it would require major transformations in the way electricity is produced, consumed and marketed in the country.
By extending electricity connection to a billion-plus people, India appears to be an exemplary success story of electrification. In terms of physical capacity, the sector has grown from a grim 1.36 GW installed capacity at the time of independence to 303 GW at present. Starting with only 1,500 (0.25%) electrified villages in few pockets, the country has pulled electricity wires to 5,86,506 (98.1%) villages. Recently, the power minister Piyush Goyal claimed that all remaining villages will be electrified by 2017 – a year ahead of the current deadline.
However, the darker side remains as big as it was six-and-a-half decades ago. While one-fifth of all households (a larger share of population) are yet to be connected – by far the highest share in any country – many of those connected do not have access to quality and timely supply. Alongside, two-third of all households still depend on traditional biomass to meet their energy needs for cooking. Despite such a poor state of access, energy accounts for 77% of national GHG emission. Subsequently, carbon intensity of Indian electricity is estimated to be the highest among the top 10 electricity-producing countries.
Propelled by demographic and economic expansion, India is set to account for a quarter of the growth in global energy demand in the decades ahead. The country is expected to see a major shift towards manufacturing-led and energy-intensive growth, large scale migration to cities and related infrastructure development. These embryonic shifts carry enormous implications for the Indian power system, which is expected to quadruple by 2040.
Despite the global surge on reducing energy demand, India has a legitimate need for more power. Yet, the country needs to be cautious in increasing reliance on fossil fuel. Given the import dependency, India is already exposed to international price volatility, emergent carbon taxes and other geopolitical risks. Such a situation calls for a ‘new deal’ for electrical expansion, building on sustainable production and consumption, which must avoid a lock-in to a high carbon development path.
The government recognises the need and urgency, as reflected in domestic policy agenda. In its Intended Nationally Determined Contributions (INDC), India has set a target to achieve 40% cumulative installed capacity from fossil-fuel-free energy resources by 2030. In an earlier move, the government has committed to achieve 175GW of renewable energy capacity by 2022. Both the targets, backed by recent legislative initiatives, show India’s commitment to the promotion of renewables and reduction of their reliance on fossil fuel. Undoubtedly, renewable energy holds good promises for meeting India’s energy needs, in a sustainable manner.
Yet, are these renewable energy targets based on sound ground realities? If India achieves 175GW renewable energy target by 2022, it will likely overachieve the INDC target for the next six years. In this scenario, it will have to front-load the renewable capacity, while renewable energy technology and price would still be evolving. Actual production from these additional capacities is unclear due to uncertainties in the capacity utilisation factor in renewable energy.
As pointed out by many analysts, capital funding required for such renewable energy capacity expansion remains a big challenge. A recent expert group report provides a comprehensive analysis of these challenges as well as providing constructive recommendations for financial incentives to reduce procurement tariff of renewable energy. The report recognised the need for reforms at the ecosystem level to achieve the renewable energy target, without which any financial incentive will not work.
However, generation is just a part of the power system, which depends on the efficiency of the other segments of the system. India’s power system needs a major transformation across all segments. While the policy and regulatory framework for the promotion of renewable energy is in place, there is need to consolidate the institutional structure to ensure timely and effective execution of policy targets. This is also critical to ensure effective private sector participation, and thus promote a competitive electricity market that provides a level playing field to all sorts of generators and suppliers. While adding up sustainable production capacities, India needs to optimise sustainable consumption practices, tapping the demand-side management and energy conservation opportunities. Financial revival of the ailing distribution utilities, which requires bridging the revenue gap, will be vital for achieving the transformation measures.
India certainly has clear and ambitious targets. What it needs is a clear strategy roadmap, integrated planning and a whole-of-system approach, factoring in domestic developmental and environmental considerations.
Finally, the roadmap to achieve the energy transformation must have a political mandate and social legitimacy. In this regard, it is critical to engage the public and other stakeholders in the planning and execution process. Simultaneously, there is a need to seek a mandate across political lines for the roadmap. So far, much of the clean energy promotion has come from the Centre and often adopted by states through political delegation. If India is to achieve its global commitment on energy transformation, it needs to promote bottom up planning and execution, at least at the subnational level.
Ashwini K. Swain is the director and Ira Sharma a research associate at the Centre for Energy, Environment & Resources, New Delhi.