Global energy transition: Here’s how India can lead the way

In November, the latest Climate Change Performance Index (CCPI) recognised India as the best performer amongst the G20 in terms of both action and intent. This is indicative of the significant progress made to date in its energy transition journey.  

At COP27, India announced it would commit to reducing its emissions intensity by 45 per cent by 2030 from its 2005 levels. It also said it would supply 50 per cent of its power requirements using non-fossil fuel energy resources, up from the 40 per cent pledged in the Paris Agreement. India announced that it had submitted its Long-Term Growth Strategy indicating low carbon transmission pathways in key sectors. This comes a year after its COP26 commitment to achieving Net Zero Emissions by 2070. 

As per the Ministry of New and Renewable Energy, the solar power tariff has been reduced by more than 75 per cent using the plug-and-play model since 2017. Other encouraging efforts include FAME-II subsidies for the electrification of public transport; the Green Hydrogen Mission’s ambition to produce a minimum of 5 Million Metric Tonnes (MMT) per annum by 2030, translating to 125 GW of additional renewable energy capacity; the 2022 Amendment of the Energy Conservation Act, 2001 designed to enable the domestic carbon market; and an announcement by Indian Railways to go carbon-neutral by 2030.  

Each of these markers underlines India’s potential to demonstrate intent and scalable solutions to the world at large. However, despite these efforts, a sizable funding gap persists. The International Energy Agency (IEA) has estimated that for India to achieve its carbon-neutral targets by 2070, it will require an investment of over INR 13,000 billion per year until 2030. This amounts to three times the current investment volume. 

Coal, solid biomass and oil currently cater to 80 per cent of India’s energy needs. Electricity constitutes only 18-20 per cent of the national energy mix. Strengthening public utilities requires not only financial support but optimisation of their operations, most acutely in utility management; mass installation of smart metres; protection against theft; and incentives to upskill the workforce. The continued reliance on the traditional fuel mix not only has a direct bearing on levels of environmental pollution and air quality, but it can also affect the inflow of investments into the sector at large.  

Accelerating India’s renewable energy transition calls for five multi-pronged strategies:   

Inducing commercial and private capital  

While there has been a rise in the inflow of private capital in new capacity addition of renewable energy, some steps can be taken to make private investments favourable for the industry through risk instruments and interventions to improve information sharing. Private investments will open up opportunities, paving the way for the rapid modernisation of the sector, increasing both competitiveness and transparency. A great example of this can be seen in the influx of private investments into the smart meter bidding process with more than 50 million bids expected to bring in investments to the tune of INR 327 billion. In this particular scenario, the government stepped in as a market maker and a creator of demand. The success of this process should be replicated across the energy transition life cycle.  
Giving investment and ecosystem building a policy push 

The drafting of policies to catalyse energy transition can go a long way in strengthening both capacity building and performance within the sector. For example, policies like Production Linked Incentives (PLIs) have seen remarkable success in the electric vehicles space owing to their outcome-oriented focus. Replicating the PLI model in other sub-sectors could greatly accelerate energy transition efforts. The Amendment of the Energy Conservation Act, 2001 is also expected to strengthen the national carbon market with provisions for innovative market design and right carbon pricing.  

 Promoting the use of opex-type subsidies versus upfront capital 

Financial instruments tailored to maximise the return on investment and reduce the margin of risk are essential to the growth of the sector. Grants and budget allocations mitigate investment risks. Policies that bring together key stakeholders from the electricity, transportation, regulation, and the oil and gas sectors will prepare the ground for initiatives aimed at catalysing energy transition. The support of private investors is key to accelerate this transition.  

 Preparing national institutions to aggregate demand and streamline finances 

National entities like the Solar Energy Corporation of India (SECI) and Indian Renewable Energy Development Agency (IREDA) can adopt the role of aggregator of demand for the sector at large. They can also play a role in supporting the financial process by providing payment security or leading partnerships to enable the same. Forming alliances with important philanthropic bodies or industrial associations will help procure long-term capital for the transition process.  

Tackling discrepancies in open access for renewables 

Although open access above 100KW is expected to enhance capacity addition within the sector, the high charges levied by DISCOMS pose questions about the application of renewables. Correcting this pattern could promote the greater absorption of renewable energy, especially in the electric vehicle space.  

India has immense potential to build on its strong track record and lead the clean energy revolution of the future. Stakeholders from across government and the private sector must unite to overcome the hurdles that sustain fossil fuel consumption, forming a virtuous circle which strengthens sectoral capabilities, drives up productivity, scales sustainable solutions and makes India an exemplar of a brighter energy future.   

Views are personal. Kumar is Vice President-India, Global Energy Alliance for People and Planet (GEAPP); Sinha is Non-Executive, Country Advisor-India, Global Energy Alliance for People and Planet (GEAPP)