India will meet two of its Paris agreement targets ahead of schedule: IEEFA

Becoming a global climate leader by meeting two of the three Paris agreement target a decade earlier

India is expected to submit its Second Biennial Update report to the UN Framework Convention on Climate Change today, stating that India is on track to achieve the majority of its Paris agreement goals, with further estimates that India will achieve its 40% non-fossil fuel capacity target a decade early.

India’s achievements follow Prime Minister Narendra Modi’s 2015 announcement of ambitious policy commitments to meet the global Paris Agreement, with an emphasis on sustainable development and climate justice.

The Paris Agreement requested each country outline, update and communicate their post-2020 climate actions, known as nationally determined contributions (NDCs), reflecting a country’s ambition for reducing emissions, taking into account its domestic circumstances and capabilities.

India’s NDCs included three key targets:

• To achieve 40% of electric power installed capacity from non-fossil fuel by 2030, representing a jump of 33% over non-fossil fuel capacity of 2015;
• To reduce the emissions intensity of its gross domestic product (GDP) by 33-35% from the 2005 level to 2030, through an increased focus on energy efficiency and renewable energy, to include 175 gigawatt (GW) of renewables by 2022, the development of 25 solar industrial parks, and for India to anchor the global solar alliance; and
• To create an additional 2.5-3.0 billion tonnes of carbon sinks – reservoirs that accumulate and store carbon dioxide, through the planting of additional forest and tree cover.[1]

India has plans in place to surpass its targets. India’s visionary National Electricity Plan (NEP) 2018 has established a clear pathway for the country to well exceed the first target, being 40% of electric power installed capacity from non-fossil fuels by 2030.

The NEP 2018 also forecast fossil fuel capacity would shift from 218 GW or 67% of 2017 installed capacity to 264 GW, or just 43% of total installed capacity by 2027. IEEFA estimates India’s thermal power capacity will be 226 GW, or 63% of India’s total of 360 GW, by March 2019.

In a significant achievement, India’s non-fossil fuel capacity target is set to exceed a 40% share for the first time by the close of calendar 2019, a decade early.

Renewable energy (excluding large scale hydro power) is targeted at 275 GW by 2027, representing a fivefold expansion on March 2017 installations of 57 GW. Renewables alone would represent 44% of installed system capacity by 2027, with hydro and nuclear representing another 80 GW or 13% of the 619 GW total.

India had already installed over 25 GW of solar by September 2018, a fourfold increase in less than three years. Total renewable energy installations across India reached 75 GW by September 2018, representing 21% of total installed capacity and generating a record high of 11.9% of all electricity in the September 2018 quarter.

India’s ambitious NEP 2018 target of reducing fossil fuel capacity to just 43% of total installed capacity by 2027 has invariably encountered various headwinds, including in recent months concerns over the capacity of the electric grid to quickly incorporate high variable energy penetration.

While there is more to be done to deliver on this ambitious electricity system transformation, IEEFA notes the momentum is very positive, with 26 GW of new solar tenders in train and Prime Minister Modi targeting US$70-80bn of renewable energy investment in the coming four years.

In doing its ‘unfair share’, India has clear social, political, and economic rationales to support their ambitious vision for energy transformation.

Rising community concerns over excessive air pollution and associated health costs have become very apparent, none more so than in Delhi. Further, the devaluation of the rupee coupled with a volatility in oil prices during 2018 has increased the country’s energy security concerns, drawing attention to India’s excessive reliance on increasingly expensive imported fossil fuels.

In addition, US$10bn worth of financial distress being experienced by import coal fired power plants at Mundra in Gujarat is further adding to the country’s significant financial and political angst of late.

More positively, deflationary renewable energy tenders have been completed at prices consistently well below Rs3/kilowatt hour (kWh) during the last two years, making renewable energy the lowest cost source of new electricity generation.

The effective momentum to progressively decarbonise the Indian electricity system was clearly detailed in a recent Global Coal Plant Tracker report, which noted in the first six months of 2018 alone, 26 GW of Indian coal fired power plant proposals were shelved or cancelled. Indeed since 2010, India has seen a staggering 573 GW of coal plant proposals cancelled or shelved. Energy company NTPC Ltd has shelved 13 GW of coal plant proposals to-date in 2018.

Additionally, India has introduced emissions standards for new thermal power plants, including retrofitting requirements for existing plants. The Central Electricity Authority of India is planning for a progressive closure of up to 48 GW of end-of-life thermal power plants by 2027 for those plants unable to justify the investment needed to achieve compliance. Already 8 GW have closed since April 2016.

Despite the ambition, the enforcement of emission standards for existing thermal plants is not been accelerated, especially for private and state-sector plants. Retrofits required to meet emission standards for plants still left with substantial operational life are expensive. This remains a huge challenge for government to resolve amidst the enormous financial distress being experienced in the thermal power sector.

In terms of India’s target to reduce the emissions intensity of its GDP by 33-35% by 2030 from the 2005 level, it was reported that by 2014, India’s emission intensity of GDP had reduced a massive 21% below 2005 levels, pointing to a 2% annual average improvement. IEEFA notes that maintaining this rate will put India nearly a decade ahead of its’ target.

India has made good progress with the LED lamp distribution program under the Unnat Jyoti by Affordable LEDs for All (UJALA) scheme, the Perform Achieve Trade (PAT) scheme imposing mandatory specific energy consumption targets on industry, and the Chiller Star Labelling Program providing star ratings based on energy performance, resulting in huge savings annually for the government. The Energy Conservation Building Code (ECBC) promoting energy efficiency in the building sector however needs to be pushed more aggressively for the desired results.

Finally, IEEFA notes India has made significant strides in achieving its development goals, ‘Make in India’ manufacturing goals, and energy access goals, without compromising its’ climate goal.

Consistent with India’s theme of “One World One Sun One Grid” – utilising and connecting solar energy supply across borders, the Indian government must continue its utmost promotion of renewable energy and energy efficiency development at the same time as encouraging domestic production to meet the needs and aspirations of its population (including 100% electrification reach) to further meet its Paris commitments.

[1] While this is not part of IEEFA’s work, we understand India is behind schedule on this key target.

Contacts:

Tim Buckley is IEEFA’s Director of Energy Finance Studies, Australasia.
tbuckley@ieefa.org

Vibhuti Garg – IEEFA energy economist.
vgarg@ieefa.org

Kashish Shah – IEEFA research associate.
kshah@ieefa.org

About The Author

IEEFA

The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

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