A truly bright future for renewables

Ajay Shankar | Updated on March 10, 2020

Renewable energy with storage has just turned cheaper than thermal power. India can now emerge as a clean energy leader

Technological innovation and competition often disrupt the existing market paradigm dramatically. This was seen with the introduction of smartphones by Apple. This was so disruptive that it led to the end of the Nokia and Blackberry generation of mobile phones.

A similar inflexion point has just occurred in renewable energy in India. Electricity from solar panels is generated when the sun shines, and from wind farms when the wind blows. But when there is no sunlight or wind to harness, the use of fossil fuels for generating electricity is unavoidable.

The use of coal and construction of new coal-based thermal power plants is required in India, as the country needs to increase its per capita electricity consumption manifold to meet its development goals. Though battery storage for electric cars has been available in the market with improved performance, large-scale storage for grid supply is still an emerging technology. It was going to be very expensive to begin with, and hence unaffordable for India. This has been the conventional view; but it has suddenly become obsolete.

Cost-effective option

The key to India’s extraordinary success in harnessing cheap solar power has been the competitive tariff-based bidding process, which has given developers full freedom in choosing technology and sourcing products. The public sector Solar Energy Corporation of India (SECI) of the Ministry of New and Renewable Energy has just concluded the world’s largest renewable-cum-energy storage bid process. The market discovered prices are far lower than expected. With pump storage, the weighted average tariff is ₹4.06, and with battery storage at ₹4.30 per unit.

This may well be the lowest discovered price for storage of renewable energy in the world so far. It is clearly cheaper than the latest discovered price of thermal power projects, which have been in the range of ₹5-7 per unit. The implication is simple and clear: the age of coal in the market is over.

The logic of the market would be for SECI and the distribution companies (discoms) to invite similar bids for future electricity needs, as they would get cheaper electricity for consumers. With the market having made renewable energy with storage cheaper than thermal power, a complete switch-over to renewables for additional electricity generation has now become the least-cost option.

The implications are revolutionary. India can scale up its ambition to having all its additional electricity demand being met from renewables. It can stop taking up the construction of any new coal-fired stations, as it does not make economic sense anymore. The issue of managing the grid with intermittent supply from renewables also becomes dated. Renewables combined with storage would henceforth supply electricity, just like conventional plants.

By the end of this decade, if not earlier, a view may also need to taken on the cost implications of closing the existing coal based thermal plants and replacing them with renewables. India would be taking a world leadership role on climate change and global warming by moving away from fossil fuels for generating electricity.

Climate impact

From a climate change perspective, getting all surface transport to use electricity would be the next frontier. The Indian Railways is already trying to achieve 100 per cent electrification, as it is far cheaper to move trains by electricity than by diesel. Electric vehicles are at present caught in the charging infrastructure conundrum.

Demand for electric vehicles needs the charging infrastructure, and private investment in the charging infrastructure makes commercial sense only when there is sufficient demand.

One solution would be for a policy direction given to the discoms to invest in charging infrastructure for multi-storey residential and commercial complexes as well as for public charging stations. This may be combined with a policy direction to the State Electricity Regulatory Commissions to treat this investment as being eligible for a return.

Electric two-wheelers, three-wheelers and cars have arrived with attractive offerings in the market and lower life-cycle per kilometre costs. With charging infrastructure in place, they would gain market share rapidly on their own. Hybrid electric buses and trucks are also showing promise globally. Pure electric buses for city services could be subsidised to reduce air pollution, which in North Indian cities is resulting in a health emergency. With charging infrastructure on the highways, the use of fossil fuels could come down drastically.

Carbon neutrality

India is now in the fortunate position where it could seriously consider becoming one of the first few large economies to become net carbon neutral. Technologies for using electricity — which is becoming carbon neutral — and for industrial sectors such as cement and steel are already emerging, though petrochemicals are more of a challenge. The UK and France decided last summer to aim at net carbon neutrality by 2050. Now, the European Union as a whole is also looking at becoming net carbon neutral by 2050. The scientific consensus is that global warming should be restricted to 1.5 degrees. The Paris Agreement aimed at restricting it to 2 degrees. With the present trajectory, this will be missed. Extreme weather events are already being experienced in different parts of the world and at huge costs. If mankind is to save itself, moving to to net carbon neutrality as quick and early as possible is imperative.

The good news is that this now appears feasible and affordable, as far as electricity and surface transport are concerned. If this can be achieved by most large economies in the next 15-20 years, the prognosis becomes so much better.

Civil society groups in Europe are demanding more ambitious goals for 2030. They are rightfully arguing that the commercial interests of the dominant fossil fuel and the traditional auto industry should not be allowed to stall and delay the overdue transition away from fossil fuels.

But with the price advantage now being decisively with renewables, the transition away from fossil fuels could happen far more rapidly than anticipated earlier. India should, hopefully, be in the lead in this regard.

The writer is Distinguished Fellow, TERI, and former Secretary, DIPP. The views are personal

Published on March 10, 2020

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