After years of impressive growth, India’s RE sector, in particular solar, have stumbled on market and policy hurdles. Is this a temporary blip in India’s RE trajectory or has the sector taken a bearish turn on the back of these uncertainties? CarbonCopy asked Jai Asundi, executive director at the Bangalore-based Centre for Study of Science, Technology and Policy (C-STEP), to share his views on the prospects of India’s energy landscape, and which way he thinks the wind is blowing.
India has ambitious renewable energy targets, do you see this as the first step towards net-zero emission plans?
India needs to be careful when it comes to such decarbonisation commitments. We are country that is still largely energy starved and there is a lot that still needs to be done towards improving energy access and demand. If we can do this cleanly and with minimal emissions, it would be the best way forward for the country. Still, the energy sector does offer the clearest avenues for decarbonisation currently.
The manufacturing push, particularly in the solar sector, is likely to come with added costs for developers and end consumers. How do you see this affecting the wider solar energy space in terms of new investments and developments?
This is very difficult to answer. On the one hand is the sense that this will boost domestic manufacturing capacity – which is a very good thing. On the other hand, should we not be taking advantage of the prices available in the global market to meet our targets? This is notoriously difficult to resolve, especially on a macro-economic scale, and predict how these things will play out. In my opinion, it is a case of wanting the cake and eating it too. At some point, policy makers might have to just bite the bullet one way or the other and take it on, irrespective of the political price. I don’t know that there is an absolute right or wrong here. If we are to look at it from an energy-security angle, it is important for us to have domestic manufacturing and we will need to pay that premium for it.
The reason this gains some importance today is that the price shock that this brings implies not only a change of calculations for developers, but also DISCOMs who could once again be more inclined to procure thermal power. Especially since many have to pay fixed costs in accordance with long term PPAs, irrespective of procurement. Will this have implications on India’s RE targets and the viability of new capacity?
This might have been the case if demand was to remain stagnant. But energy demand is poised to grow. If new energy demand such as that from the electrification of transport or other sectors can be met with renewables, then it certainly would not affect growth prospects too much. While we can’t say for certain how this will play out, there are definitely promising trends in play when it comes to prices and adoption of solar energy.
How important is decentralisation to solve India’s energy woes? What stops us from harnessing this potential?
The recent past in the solar and renewable space has been incredibly dynamic. The price has fallen from Rs.17/unit a little over 10 years ago to around Rs.2-3/unit today for the ground-mounted systems. In such a situation, there are a lot of uncertainties which Governments find uncomfortable when dealing with previous pricing numbers and PPAs. It only goes to show that the leading edge is also the bleeding edge. Most investments in the space so far are also private, and have come up to benefit private entities. However, at the same time, a push for decentralised RE is happening and is likely to gain momentum. But for this distribution companies (DISCOMs) will have to be seen as a part of the solution. Currently, they are portrayed as an obstacle but they bring with them a lot of benefits which add to the viability of decentralised sources. Absolute decentralisation of energy is an expensive affair and comes with added costs of storage while grid connected decentralised energy can be far more cost effective. So we think that DISCOM participation can enable economies of scale for decentralised RE which is vital for wider adoption. Right now we have the individual pieces but we need to make a workable model where the gains are maximised and well-spread out among all stakeholders.
So where do coal and thermal power fit in?
As far as we have tracked the space, we haven’t heard of any thermal power plant being approved since 2018 and those that have been approved with EIA reports have not been able to raise project finances. While there are some new thermal power plants under construction, there are many being retired. The CEA website has a long list of thermal power plants that are being decommissioned or retired. Worryingly, Plant Load Factors of TPPs in the country continue to be low. So while there are efforts on to reduce thermal power production/consumption, there are also financial aspects and long-term lock-ins due to PPAs that must be considered. Our modelling has shown us that electric power from coal will remain part of the grid energy mix for some time- at least for the next decade. Among the sectors, industry might be able to move away from coal faster.
Given that coal will stay for a while in India’s energy mix, where do emission norms for TPPs fit in to the equation? How can they be implemented?
According to our studies, it is very clear that the benefits of implementing emission control technologies and the Air quality norms for TPPs far outweigh the costs. The problem though is that the costs are quite high. A few years ago, we had argued that this actually was a great opportunity for local manufacturers, but with PLFs being low thermal power operators have claimed that it is not financially viable. The middle ground in the process may be that emission norms will be prioritised in cities that have been identified as non-attainment cities when it comes to air quality. So at least exposure to poor air quality is reduced. But it still remains that the benefits of avoided air pollution far outweigh the costs of doing so.