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Challenges that come with energy transition

V Rishi Kumar | | Updated on: Jun 23, 2022
The government should consider innovative market reforms to further incentivise the deployment and uptake of renewable energy 

The government should consider innovative market reforms to further incentivise the deployment and uptake of renewable energy  | Photo Credit: taeya18

A comprehensive strategy focusing on renewable energy is needed to accelerate decarbonisation and reduce fossil fuel dependence

The recent power shortage across India has triggered a discussion on how the country needs to approach its energy transition as it sets out to achieve the 2070 net zero goal.

The surge in power demand during summer has laid bare the vulnerability of the coal-fired thermal power plants. It has exposed how the gas-fired plants remain unused due to lack of fuel supplies and how the much-touted plan to set up and operationalise nuclear power plants has been extremely slow off the block. As for the renewable energy sector, it is still years away from being a viable alternative to meeting the energy demand.

Says Swasti Raizada, Policy Advisor, Energy, International Institute of Sustainable Development (IISD), “The coal-linked power crisis and the oil price rise are two sides of the same story—the energy supply sources not shifting fast enough to meet demand expectations. In the power sector, coal projects—including mining and power generation—are becoming increasingly difficult to finance. Mixed policy signals like allowing the use of imported thermal coal to meet the rising power demand in the short-term, are further contributing to the price volatility and woes of investors and project developers.”

Ethanol blending

In the short-term, ethanol blending can help the government reduce its dependence on oil and gas imports, but greater use of ethanol could impact meeting food requirements as more land will have to be diverted to produce ethanol. In the medium to long run, India needs to accelerate the adoption of electric vehicles (EVs). While many States have announced favourable policies, more regulatory and financing support need to be provided to EVs and for developing efficient batteries for its adoption.

Innovative market reforms

The expert view is that the government should consider innovative market reforms to further incentivise the deployment and uptake of renewable energy (RE). According to the latest study by IISD, in conjunction with the Council for Environment, Energy and Water (CEEW), ‘Mapping India’s Energy Policy 2022’, government subsidies for RE fell by 59 per cent since 2017 to ₹6,767 crore in FY21. It pointed out that government should provide support for RE technologies, including utility-scale battery energy storage systems, round-the-clock plants, and decentralised renewable energy that can replace our dependence on thermal power plants.

The government should also avoid providing fresh support for coal-based thermal power and phase out existing support measures. In FY21, coal subsidies continued to be two times higher than that for RE and stood at ₹12,976 crore. Given the long project lifecycle of coal projects, it will take too long to help with the short-term problem and will only make transition harder in the medium term.

The rising global oil and gas prices are yet another reminder why India needs to decarbonise transport as fast as possible. Government support for EVs has increased three times since FY17, reaching ₹849 crore in FY21, but it remains low compared to the ambitious plan to ensure that 30 per cent of all new vehicle sales are electric by 2030.

Expensive power

“To address the power shortage crisis, the current government focus is to ramp up domestic coal production and blend it with imported coal. But coal power is expensive and many discoms have shown their reluctance in buying such expensive power. Instead of building more coal mining or coal capacity, India needs to invest in deflationary renewable energy. The pace of deployment of RE has been slow, so the government should accelerate deployment of RE and other flexible generation sources to make RE a firm power,” says Vibhuti Garg, Energy Economist, India Lead, Institute of Energy Economics and Financial Analysis (IEEFA).

Garg feels that since coal contributes to greenhouse gases, more coal-fired plants are inadvisable. Further coal prices are inflationary and depend on a long supply chain. India, she feels, should accelerate deployment of RE and provide more incentives through investing in R&D on storage and green hydrogen, and further providing fiscal support.

Power demand surge

Karthik Ganesan, Fellow and Director, Research Coordination at CEEW, says: “The recent power surge is a cyclical and a temporary one that reflects some of the rigidities in the current system. It hasn’t inherently changed our outlook for what India will consume (on average) in say 2030 or 2070. Readying up more assets to cater to this spike and the need for imports just reflects the lack of supply.”

As for coal-based plants, it is an industry that has its own lead time and there is a policy to drive adoption towards established targets. Perhaps, the main intervention is in evaluating the role of storage, including pumped storage, more closely and creating the necessary investment opportunities and channeling funding to it, to show that when implemented at scale, it can truly help offset demand from coal-based generation, which we still rely on when RE is not available.

Published on June 26, 2022
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