Clean Tech

Green thrust to economic recovery

V Rishi Kumar | Updated on June 02, 2020 Published on June 02, 2020

A prescription to build a more sustainable and equitable world post the pandemic. V Rishi Kumar reports

The Covid-19 pandemic has demonstrated the lack of preparedness of the global economy to systemic risks. The Energy Transitions Commission (ETC), a global coalition of leaders from across energy, industry, finance and civil society, recently outlined key priorities to support economic recovery from the ongoing coronavirus crisis and highlighted the energy transition required to avoid climate crisis in the future.

ETC outlined seven priority areas for the next wave of government stimulus to boost economic recovery while building a healthier, more resilient, net zero-emissions global economy. These include investments in renewable power systems, boosting the construction sector via green buildings and green infrastructure, supporting the automotive sector while pursuing clean air, making second wave of government support to businesses conditional to climate commitments, providing targeted support to innovative low-carbon activities, accelerating the transition of the fossil fuels industry and focusing on carbon pricing and regulations.

It is suggested that governments should accelerate investment in renewable power generation, flexibility provision and grid infrastructure. This can be achieved by de-risking private investment through competitive auctions for renewable power generation, enabling investment in transmission and distribution grids, and fast-tracking the planning process on shovel-ready projects.

In this context, what must India do to stay economically afloat and environmentally astute? With regard to the renewable energy sector, as and when the domestic market opens in a post-Covid scenario, a substantial downward revision in the trajectory for demand growth is expected, along with a slower growth rate. “This will impact the required trajectory of generation capacity expansion, in order to meet demand growth. We already had a situation of overcapacity in the thermal (read coal) sector prior to Covid, which led to many new plants becoming stranded assets or non-performing assets. We had hoped that demand growth over the coming years would absorb this excess capacity: that is now likely to be delayed,” says Dr Ajay Mathur, Director-General, The Energy and Resources Institute (TERI), and a member of the ETC.

He argues that in an environment of protracted overcapacity in the sector, there will probably be pressure to reduce the capacity expansion targets for renewables in order to reflect the new situation. This, in itself, is not a bad thing: what is important is not the capacity expansion per se, but that renewables come to occupy an ever more significant share of total generation. With demand growing slower now, that can be achieved with less generation capacity additions.

“The important thing is to reassure the market — developers, generators, discoms — of the continued commitment to renewables, even as we adjust to this new situation,” he emphasises.

The second impact is expected to be on discom finances. There were already mounting dues from discoms to generators prior to Covid, particularly as the economy slowed down in 2019. Mathur feels that this is going to only get worse, with the discom situation likely to become dire. This will impact renewables as well, as they are also subject to this off-taker risk.

However, a few things help to shield renewables somewhat. First, once built, renewables are zero marginal cost, meaning that it is always attractive to off-take the power. Second, the tariffs on renewables are truly attractive. Discoms can actually save money by mothballing their old coal plants and buying new, cheaper renewables. Thus, Covid is likely to slow the growth rate of renewable generation capacity, but not change the fundamental trend: India’s power mix will increasingly be made up of variable renewable sources like wind and solar.

Transport trends

The automotive sector is also likely to undergo several changes, with social distancing set to become the new normal. It is felt that there will be fewer takers for public transport and citizens who can afford it will prefer to ply their private vehicles.

In a recent survey conducted by TERI, about 35 per cent of the respondents indicated that to go to work they would prefer to shift from public transport to their cars and two-wheelers, post the pandemic. One direct repercussion expected is an increase in the sale of four-wheelers and two-wheelers, both in the primary and secondary markets. But that is dependent on the future job scenario and whether consumers can afford to buy their own vehicles. The auto industry was facing a trying time even pre-Covid.

However, despite these odds, Mathur feels the focus on clean fuel vehicles, including electric vehicles, should remain intact.

“Along with the scrappage policy, which is a huge step towards cleaner air and would phase out inefficient Bharat Stage (BS)-1 and BS-2 vehicles registered before 2005, the government should, in parallel, incentivise the sale of clean fuel technologies,” he says.

Health, food, housing

Covid-19 has also brought forth concerns that could be compounded due to climate change, especially crucial public issues such as public health, food security, energy security, and affordable housing. As we emerge from the effects of the pandemic, Mathur as well as the ETC priority report emphasise that it is essential we look at recovery that is green, adaptable and resilient, and which should serve as the new growth paradigm.

“This will have socio-economic impact through sustainable alternative livelihoods and resilient infrastructure. A climate-resilient recovery will make us better prepared for climate-induced shocks that will be intensified and whose frequency will increase in future. It also has local benefits like cleaner air,” says Mathur.

Laurence Tubiana, CEO, European Climate Foundation, also makes a similar point in the report. “All the evidence we have suggests people want cleaner air... after months of worrying about our lungs, it would be crazy to pump money into dirty businesses. What the Commission clearly identifies is that there is another way. Not only do renewable energy, electric cars and the host of new clean technology we have at our fingertips make health sense, they also make economic sense and will create thousands of new jobs. It’s time we embrace the economy of the future, not dirty ones of the past”.

Mathur feels innovation may be the key, going forward, and tries to dwell on the changes that may emerge. “Every large-scale shock creates innovation, what Schumpeter called creative destruction. What we are seeing is certainly that there is social innovation: work from home is becoming more attractive and accepted, there are big question marks around the social acceptability of public transport, global trade is likely to change substantially. India may benefit from the digitally accelerated growth of services trade but doesn’t seem yet positioned to benefit from manufacturing exit from China. The retreat of migrant labour, and the question marks that Covid-19 has created around India’s slum-heavy model of urbanisation may create lasting impact on the labour market and the rural-urban divide,” he says.

All in all, the ETC report wants to push the positives forward when it says, “Clean energy, low-carbon and digital solutions are fundamental pillars of a better economy: they can improve the quality of the air we breathe, enhance our quality of life, limit the occurrence of climate-related disasters. They can also underpin new businesses and new jobs.”

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Published on June 02, 2020
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