Can India Juggle Climate Targets and Power Consumption Demands?

India has pledged “net zero” carbon emissions by 2070 – but the searing summer has seen India's coal imports rise in the past month.

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Kochi: India has pledged “net zero” carbon emissions by 2070, which can be achieved through climate action such as decreased fossil fuel use, carbon sequestration and so on. One crucial part of this is increasing renewable energy capacity to 500 gigawatts (GW) by 2030, a pledge India made last year at COP26.

This particular climate target, however, may be out of reach unless we support our renewable energy sector better. According to a recent report, government subsidies for renewable energy projects have decreased by almost 60% since 2017. There is still huge support for fossil fuels.

Experts have suggested shifting public finances to renewable energy and diversifying public-sector undertakings to invest in the sector if India wants to attain this climate target. The current deficiency in renewable energy also puts more pressure on the country’s coal production while increasing reliance on imports.

Renewable energy versus fossil fuels

Government support through subsidies, such as price support through regulations, and other means are important to further India’s climate goals. Researchers at the International Institute for Sustainable Development (IISD) and Council on Energy, Environment and Water (CEEW) assessed the public resources that support fossil fuels, renewables and electric vehicles. They also quantified trends in support levels across recent years. Their report, released on May 31, found that government subsidies for renewable energy had decreased by 59% since 2017. This is due to a decrease in installations and because grid-scale solar PV and wind are reaching cost parity, it said.

Subsidies for fossil fuels have also decreased over the years. However, subsidies for coal, oil and gas were still nine times higher than that of renewable energy in 2021. There’s good news for electric vehicles, though subsidies have increased by 205% since 2017.

The researchers also identified areas where budgeting can be better aligned with stated policy objectives. They found that India would need to shift support away from fossil fuels and towards renewable energy to achieve the target of 500 GW of renewable energy by 2030. Interestingly, as of August 2021, only 100 GW has been installed. The government would also have to diversify public sector undertakings (PSUs); public finance too would need to shift from backing fossil fuels to cleaner sources of energy.

Indeed, investment in renewable energy so far has largely been private sector-driven, and Indian banks and PSUs need to diversify their portfolio and invest in clean energy sources, agreed energy economist Vibhuti Garg, Lead India, Institute for Energy Economics and Financial Analysis.

“We have seen [that] companies with more clean energy portfolios are witnessing better share price performance. So unless these PSUs diversify, there will be erosion of their shareholder value,” she told The Wire.

The Indian government needs to “extend financial and policy support” to build the entire renewable energy ecosystem, said Garg. This includes investing in flexible sources like battery storage, expanding transmission and distribution networks, modernizing and digitalising the grid, and manufacturing inputs like modules, cells, wafers, electrolysers etc. domestically, she added.

Also read: Despite Available Potential, Why Are Fewer Solar Rooftop Panels Being Installed in India?

The mounting bill of coal imports

Amid a searing Indian summer, elevated renewable energy capabilities could have stepped in to ease an escalating coal and power production crisis that the Indian government finds itself in. Instead, the government is boxed into a corner and forced to import coal from overseas at prices that have skyrocketed in the backwash of the Russia-Ukraine war.

In fact, the mismanagement of the coal crisis by the Indian government has only piled more pressure onto domestic power utilities. In early May, the Union government asked state governments and private power companies to import coal up to 19 million tonnes by the end of June, in a bid to avert recurrent power outages. This year alone the Union government has directed state-run and private power utilities to import over 22 million tonnes (mt) and 15.94 mt of coal.

Currently, as per data emerging from the Central Electricity Authority (CEA), 173 power plants that fall under the aegis of the CEA hold only 35% of the required coal inventory. A total of 84 plants out of the 173 had less than 25% of the required coal stocks and nine were running critical coal inventory. Considering the dismal condition in which domestic coal production finds itself, the central government, reportedly, will kick-start negotiations with Russia, Australia, South Africa and Indonesia on discounted coal imports in hopes that India can tide over a fuel shortage that could devolve into another power crisis in the June-to-September period.