Is NITI Aayog’s climate index status quoist?

Aayush Anand |Amarendu Nandy | Updated on: Jul 05, 2022
Renewable energy must be given more weightage

Renewable energy must be given more weightage | Photo Credit: SRINIVASAN KV

The weights attached to the six parameters have skewed the rankings of States and need to be reworked 

The State Energy and Climate Index (SECI), recently launched by the NITI Aayog, aims to track and benchmark the efforts made by States and Union Territories (UTs) in the climate and energy sector, capturing dimensions such as energy access, consumption, efficiency, and environmental protection.

NITI Aayog policy experts expect SECI to trigger a competitive spirit among States and UTs and hope that consistent with the spirit of cooperative federalism, such an exercise at the sub-national level shall cumulatively contribute to helping India fulfil its commitments on climate change and clean energy transition in the global fora.

Notably, India’s Panchamrit elements, presented at the COP26 Conference in Glasgow, aim to meet 50 per cent of India’s power requirements from renewable energy sources by 2030; substantially reduce the carbon emissions and intensity of the economy by 2030; and, reach net-zero emissions by 2070. The conceptualisation of SECI, and the commencement of benchmarking exercise through it, is a crucial step in that direction.

SECI measures progress on 27 Key Performance Indicators (KPIs) covering six parameters — Discoms performance; access, affordability and reliability of energy; clean energy initiatives; energy efficiency; environmental sustainability; and new initiatives.

The exercise classifies States into large and small categories and the Union Territories as a separate set. Table 1 summarises the top and bottom three performers in each category, released in Round I results.

There can be little disagreement on the need for such an index. The benchmarking exercise can be a powerful nudge, particularly for laggard States, helping them reassess their policies and implementation strategy vis-à-vis their peers.

The lacunae

SECI, however, suffers from certain limitations that need to be urgently addressed to make it more meaningful and consistent with its overarching objective.

One, there seems to be a conflict between SECI’s current design and the core philosophy that it propounds. Among the different parameters the Index considers, Discoms performance is assigned a disproportionate weight (40 per cent) compared to those that track efforts made by States and UTs in transitioning toward clean energy (15 per cent); in driving environmental sustainability (12 per cent); or in launching new initiatives (12 per cent) to lower their carbon footprint.

As a result of the unexplained arbitrariness in weights, Gujarat tops the overall score among large States in SECI Round I list, mostly riding on the extremely high weight assigned to the Discoms performance parameter. Interestingly, the State is not even among the top six for four out of six parameters, and despite the relatively unsatisfactory efforts made toward driving environmental sustainability and new initiatives, where it ranks 9th and 13th, respectively, among 20 large States.

If equal weight is assigned across all parameters, Gujarat’s position will come down from 1st to 5th, and Kerala, pursuing a more balanced path in climate and energy initiatives, will come out on top. Thus, it is imperative that the construction of the Index is based on an objective rationale rather than motivated by subjective and extraneous considerations.

Two there is an urgent need to rethink and revise the weights assigned to other KPIs critical to reforming the current energy value chain. For example, the KPIs on renewable energy penetration and utilisation of RE potential, which can play a vital role in bringing down the high input cost of electricity and emission levels, have a combined weight of only 7 per cent.

Similarly, a small 4 per cent weight has been assigned for the proportion of consumers with smart meters. The adoption of smart meters is the panacea for reducing AT&C losses and for better targeting DBT schemes for reducing deadweight losses of Discoms. There is a need to revisit the design and methodology to make the Index genuinely progressive.

Clean power PPAs

Three, the Index appears to promote a status quoist approach insofar as energy management is concerned. A recent McKinsey report suggests that grid emissions can be considerably reduced through Clean Power Purchase Agreements (PPAs), where sourcing power shall be through optimised renewable energy coupled with long-duration energy storage systems.

Unfortunately, States have exhibited low inertia in transitioning towards such futuristic clean PPAs. Including indicators such as the ‘State’s progress in implementing clean PPAs’ and their ‘efforts to develop a battery ecosystem’ can nudge States to adopt them and help drive policy certainty in this regard.

Four, SECI is not progressive and fair to States’ making real contributions to the net-zero emissions goal. For example, the building sector, which consumes approximately 38 per cent of India’s total annual primary energy demand, is critical to driving a sustainable national energy growth trajectory.

Toward this objective, States such as Telangana and Andhra Pradesh, which have been at the forefront of notifying and implementing the Energy Conservation and Building Code 2017, do not even figure in the top 10 of the SECI list.

Finally, there is no consideration in the Index for measuring the States’ progress toward ‘Just Transition’. SECI rankings indicate, quite predictably, that coal-rich States are the worst performers. However, international experience suggests that implementing ‘Just Transition’ policies require long-term planning, implementation, and engagement.

To be fair to States fiscally dependent on revenues from non-renewable resources, SECI should ideally capture indicators of ‘Just Transition’ so that it encourages the laggard States to strive for resilient and climate-neutral economies and societies.

SECI is a laudable and timely initiative. However, in its current form, SECI focusses more on highlighting the symptoms rather than facilitating the cure. It needs to include more progressive indicators, and develop more objective and fair criteria to recognise the good and innovative work done by various States.

Anand is an Executive MBA student at the Indian Institute of Management (IIM) Ranchi; and Nandy is Assistant Professor at IIM Ranchi. Views expressed are personal

Published on July 05, 2022
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