By Ajay Shankar
India joined the Paris Agreement on Climate Change and committed to 40% of its total electricity generation capacity from renewable energy sources. At the time, many experts were of the opinion that this goal would be far too challenging. India is now well on the way to far more than fulfilling its Paris commitments. The far more ambitious target of 450,000 MW renewable capacity has been set, while total generation capacity in India is now 375,000 MW.
What is remarkable about India’s achievements to date is that capacity for renewable energies is created through private investments and no explicit state subsidies are required. India has developed a competitive industry structure by repeating tariff-based offers for the supply of solar energy. As a result, we have been able to take full advantage of the extraordinary global advances in reducing the cost of manufacturing solar panels and falling prices. The first tenders for the supply of renewable energy along with storage were submitted earlier this year and the results have been quite encouraging. The complete transition from fossil fuels would require storage for supplies when the sun is not shining and the wind is not blowing.
India can accelerate its energy transition by applying for a feed-in tariff for the supply of solar energy in the Kw range (under 1 MW) from rural India. At a price set by the Electricity Regulatory Commission, distribution companies could offer to buy solar energy based on the absorption capacity in a village. Assuming a solar power procurement of 1 MW from one village, there is the potential to obtain 600,000 MW of solar power from our 6 lakh villages. DISCOMS would save about 3 rupees per unit as the current cost of supplying rural areas is over 7 rupees per unit while they would buy solar energy for about 4 rupees
per unit. Distribution companies could provide farmers with electricity for irrigation during the day. The farmers would welcome that. It would be easier to provide reliable, high-quality power 24/7. Farmers whose land is used to generate solar energy would earn higher incomes. This is foreseen in this year’s budget speech by the finance minister.
Going forward, the biggest challenge is to ensure that distributors continue to pay in full and on time for the renewable electricity they buy. The extent of private investment and its financing would have to multiply. Confidence in paying on time is vital and needs to be maintained to sustain the transition with private investments. It is imperative that the financial health of the sales companies recover at the earliest. This is state specific. This can be done with a little intervention from the central government. A mix of better governance, private sector involvement and tariff increases would work.
Given the trend we’re evolving on, it is time to start a discussion on making India net carbon neutral. Can we be among the first to do this? Should it be worth it to achieve net carbon neutrality by 2047, the centenary of our independence? What would this mean for technology development and deployment? What regulatory and policy measures could be applied? Assuming that there is likely to be no significant budget for the foreseeable future, what could be considered for the next 10 to 15 years?
Given the surplus of power generation capacity and the not increasing demand, we could consider a moratorium on starting new thermal power projects. We can reconsider the decision as the economic recovery and demand growth gain momentum. We should submit a number of tariff-based offers for storage so that we can take full advantage of global technological developments and cost reductions. The day when storage costs fall and are comparable to fossil fuel generation costs may not be far off. We could get power distribution companies to build the EV charging infrastructure so they can compete on a level playing field in the market. If they were cheaper to operate, they would quickly gain market share. We should be running pilots to prepare for a carbon-free hydrogen economy and be ready to scale up quickly as costs drop and become affordable.
[Ajay Shankar is a Distinguished Fellow at TERI and a former secretary at the Department of Industrial Policy and Promotion (DIPP), GoI]
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