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[Burning Issue] Energy Transition & Challenges

Context

  • India has set ambitious targets towards the achievement of the dual goals of climate action and sustainable development through its nationally determined contributions and energy access commitments.
  • As India starts a new decade of energy transition, it is an opportune time to assess where India stands in achieving its targets as well as to identify the key challenges being faced during this transition.

What is Energy Transition?

  • Energy transition refers to the global energy sector’s shift from fossil-based systems of energy production and consumption — including oil, natural gas and coal — to renewable energy sources like wind and solar, as well as lithium-ion batteries.
  • The increasing penetration of renewable energy into the energy supply mix, the onset of electrification and improvements in energy storage are all key drivers of the energy transition.
  • Regulation and commitment to decarbonization has been mixed, but the energy transition will continue to increase in importance as investors prioritize environmental, social and governance (ESG) factors.

Ongoing Energy Trends

  • Global oil production has been basically static: Some areas are in an irreversible productive decline (e.g., the North Sea) while others, mainly the continental US, are experiencing a true renaissance in the production of petroleum liquids owing to the exploitation of oil shales.
  • Worldwide mineral production is generally static: The mining industry is facing the problem of diminishing ore grades for most minerals and the consequence is the need of more energy to maintain the same levels of production.
  • Agriculture is facing an energy problem: Agriculture is heavily dependent on fossil fuels for powering agricultural machinery, for the supply of fertilizers, pesticides, and irrigation. The increasing prices of fossil fuels are being reflected in higher prices for all agricultural products.
  • Nuclear energy faces considerable difficulties: The past decade had seen a minor renaissance in the start of the construction of new plants, although still in numbers insufficient to replace the old plants being retired.  
  • Renewable energy is seeing an explosive growth worldwide:  The energy produced by the new renewables is still a minor fraction of the total of the world primary energy production, but it has been growing at exponential rates that, so far, show no sign of abating.
  • Focus on energy efficiency: We see an evident trend towards higher efficiency in both production and end uses of energy. It is a trend particularly evident in the residential sector, with buildings that reduce energy consumption by means of better insulation, high efficiency lighting, and more.  
  • Crunches for Fossil Fuels: We are facing more and more difficult times in maintaining the current system based on fossil fuels. The combined effects of depletion and of climate change are pushing humankind in undue energy anxiety.

India’s Energy Transition: Context- Setting

(1) Ambitious Target

  • India’s energy transition is characterized by its ambitious targets.  By the year 2022,
  • India seeks to provide all households in the country 24×7 power.
  • By 2022, India also seeks to install 175 GW of new renewable energy (RE) in the country.

(2) NDC Commitments

  • India in its Nationally Determined Contributions (NDCs) committed to three targets, which are to be achieved by the year 2030.
  • First, by 2030, 40% of India’s cumulative electric power installed capacity will come from non-fossil fuel-based energy sources.
  • Second, India will reduce the emission intensity of its gross domestic product (GDP) by 33–35% (vis-à-vis 2005 levels).
  • Third, India will create an additional carbon sink of 2.5–3 billion tonnes of CO2 equivalent (through additional forest and tree cover).

(3) Current RE Capacity

  • India is world’s 3rd largest consumer of electricity and world’s 3rd largest renewable energy producer with 38% of energy capacity installed in the year 2020 (136 GW of 373 GW) coming from renewable sources.
  • Many states are still at early stages of developing their renewable energy capacity.
  • This is important to consider as India seeks to add more RE capacity in the coming months and years.

() Leadership

  • India is also showing global clean energy leadership through initiatives such as the International Solar Alliance, which has more than 70 member countries.
  • This is yet to materialize in its full capacity.

Various challenges

(1) Slowdown in the RE Tendering Process

  • India’s RE growth was at the slowest pace in the past 4 years.
  • There were several reasons for this, including the trends seen during the process of auctioning RE capacity.

 (2) Renewable Purchase Obligations as a Ceiling

  • One of the mechanisms for promoting the installation of RE capacity in India has been the stipulation of targets for a mandatory minimum purchase of a certain percentage of RE by utilities.
  • This is known as a Renewable Purchase Obligation (RPO).
  • Many states has been asked by its regulator to curtail further procurement of solar energy from large-scale projects.

(3) Financial crunches  

  • When DISCOMs face cash flow issues, this results in RE producers also facing a liquidity crisis. Public sector banks are hesitant to grant loans to RE projects.
  • Not many private sector banks are forthcoming with loans.
  • Additionally, the interest rate of existing loans to RE companies has also witnessed a rise in recent months.

(4) Policy Uncertainty

  • Experts emphasize the importance of policy certainty for the enforcement of contracts and for the rule of law.
  • The value of the certainty of contracts and the importance of consistency and stability in rules and policy cannot be overstated in the energy sector in India.
  • Similar concerns have been raised by RE companies over the uncertainty over import duties, particularly for solar cells.

(5) Burden of demands

  • Much like China, India is finding itself in a precarious position.
  • To meet its high electricity demands, India has had to increase its reliance on fossil fuels while still developing its national grid to cope with expected surges in power demand.

(6) Others

  • High initial cost: While the coal-based power plants require an initial investment of about Rs. 4 crores per MW, the investments for solar and wind energy is far higher.  
  • Weather-dependency: Renewable energy sources like solar, wind, tide, etc., are dependent on weather conditions. If the favourable weather conditions are not available, it becomes inefficient and unfeasible.
  • Topographic barriers: Most renewable energy plants occupy large areas of space. This brings in the issue of the cost of the vast land area and other issues related to land acquisition.  
  • Threats to ecosystem: The turbines have caused noise pollution and are also killing birds while functioning. Ex. Decline in bustard population in Rajasthan.

Various govt. initiatives

  • Separate ministry: India is the first country in the world to have an exclusive ministry that is involved in the promotion and development of renewables – the Ministry of New and Renewable Energy (MNRE).
  • Nation Green Corridor Programme: This project aims at synchronizing energy that is produced from renewable energy sources with conventional stations.
  • National Clean Energy Fund: It is the fund created using the carbon tax for backing research and development of innovative eco-friendly technologies.
  • Draft National Wind-Solar Hybrid Policy: Through this policy, the government seeks to promote new renewable energy projects and hybridization of the existing ones.  
  • National Offshore Wind Energy Policy: This involves the utilization of India’s Exclusive Economic Zone (EEZ) for the development of offshore wind farms up to 200 Nautical Miles from the baseline.
  • Grid Connected Solar Rooftop programme: It involves the installation of solar panel at the rooftops of the residential, commercial, industrial, and institutional buildings.
  • Small Hydropower Programme:  The potential of this programme is about 20,000 MW and it is mostly in the Himalayan States where the rivers are abundant and in States which have sufficient irrigation canals.
  • National Solar Mission: It is a part of the National Action Plan on Climate Change. It is an initiative to promote solar power in India.  .
  • Pradhan Mantri- Kisan Urja Suraksha evam Utthaan Mahabhiyan: PM- KUSUM aims at providing financial and water security to farmers by means of utilizing solar energy capacities of 25,750 MW by 2022.

Way forward

  • Ensure equity: It must be ensured that the opportunities of India’s transition are shared fairly throughout society — and workers and communities are not left to face the challenges alone.
  • Make it people-centric: To achieve the trifecta of jobs, growth and sustainability, India must strive to put people at the centre of its energy transformation.
  • Provisions for coal-dependent regions: New jobs would need to be found over time for the coal miners affected by the changes, as well as for people who work in the fossil fuel power plants that will close down.
  • Transition funds: Policymakers must earmark special“transition funds” to help coal-dependent regions, some of which are among India’s poorest.
  • Increase investment by rationalizing energy subsidies: Energy subsidies must be rationalized and directed towards those who need them most.
  • Finance mobilization: Fiscal resources freed up through subsidy reform should then be invested in clean energy solutions, especially in underdeveloped regions and marginalised communities.
  • Community participation: While India’s energy transition will create many new jobs, the limited participation of women in the growing green workforce must be addressed.
  • Engage youth: Engaging the youth is critical to ensure that the energy transition is sustainable, inclusive and enduring.

Conclusion

  • There is no doubt that ambitious RE and climate targets have pushed India well on its way to a clean energy future.
  • However, more needs to be done to help India achieve its potential.

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