Supporting India’s energy transition, a climate imperative

Kartikeya Singh | Updated on: Jun 27, 2022
 The G-7 must help fund and support India’s transition from a fossil-based economy to a carbon-neutral economy

 The G-7 must help fund and support India’s transition from a fossil-based economy to a carbon-neutral economy | Photo Credit: POOL

An India–G7 partnership could provide an opportunity to catapult India into a new industrial-era

One of the biggest announcements coming out of last year’s United Nations Climate Change Conference (COP26) was the pact between donors and the government of South Africa to provide $8.5 billion to help ESKOM, the state-owned power corporation of the nation to begin to wean itself off coal. This was a significant move given the importance of coal and ESKOM in South Africa’s economy.

The aim of the so-called Just Energy Transition Partnership (JETP) is to restructure the business and communities currently dependent on a coal value chain towards one built on clean energy. If successfully implemented, the JETP could prove to be one successful model for how to provide a lifeline to transition the industries of the first industrial revolution ensuring that they meet the imperative of creating a climate-aligned economy.

Now, as the leaders of G-7 and India meet, there is a possibility of announcing a similar deal being dubbed the “India-G7 partnership” to help fund and support India’s transition from a fossil-based economy to a carbon-neutral economy.”

But getting “just energy transition” ready requires having a process that is inclusive of many key stakeholders who will be impacted because of switching from a fossil fuel driven business towards alternatives. First there must be political will. And we have seen this in the commitment by the government of India to move the economy towards net-zero carbon emissions as well as the several State governments who recognise that they need no new thermal power plants to power their growth.

Next a series of calculations are required to understand the costs of transition from phase down of coal power plants, ensuring affordable, reliable clean electricity sources are in place as the transition takes place, and that the transition process is a net job and revenue creator.

Currently there are very few examples of model pathways towards an affordable, reliable, clean electricity pathway for States as they manage the energy transition and fewer examples still of having a sense of what the costs would be for phasing down the coal value chain in a region.

Gujarat’s move

The most significant analysis is provided by scholars at the Gujarat Energy Research and Management Institute (GERMI) on the basis of the political declaration made in 2019 by the Chief Minister to not build any more thermal power plants. The analysis suggests that Gujarat can consider a complete coal phase-out law by 2040, which can be achieved in three phases. Ultimately, its success will depend on RE growth, storage, better grid flexibility and market mechanisms.

But an equally important part of the analysis gives us some figures of what it would take to retire the State’s thermal power plants, including the costs of paying staff salaries and repaying investors for the early retirement of some plants. The figure is roughly $3.5 billion. With this figure, a State like Gujarat which is already poised to gain jobs and more power through the growth of a local renewable energy and green hydrogen producing economy, the State could in effect be a model for initiating India’s use of JETP funds.

Similar analysis will be required of other key States and centrally owned PSUs which are wedded to the fossil fuel value chain before they could tap into funding to aid in their transition. Furthermore, the costs and strategies would vary particularly for those regions that are heavily invested in the coal value chain such as Jharkhand and Chhattisgarh. Here too, there could be a concerted effort to ensure that these regions are somehow made a part of the clean energy production value chain to make up for loss revenue while ensuring livelihood security for millions.

We are in uncharted territory driven by an imperative to acting to address climate change. If well executed, the India–G7 partnership could provide a once-in-a-century opportunity to catapult India into a new industrial-era.

The writer is Senior Associate, Center for Strategic & International Studies (CSIS)

Published on June 27, 2022
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