While coal continues to be a mainstay in India, renewables are growing, too.

India’s energy sector: Ten years of progress, but in fits and starts

As the current administration ends its second term, CarbonCopy presents a report card on India’s energy sector that cannot completely let go of the old, while it tries to make room for the new

How has India’s energy sector changed over the past ten years? The obvious way to answer that question vends through numbers. What percentage of India’s power sector runs on fossil fuels — as opposed to renewables? Is the country adding more renewable capacity or still erecting more oil, gas and coal-based plants?

Ask such questions and you will find relatively familiar answers. The country’s installed power capacity has climbed from 305 GW in 2015-16 to 441 GW now. While coal continues to be a mainstay, rising from 185 GW to 217 GW in this period, renewables are growing, too. Wind and solar now account for 128 GW of India’s installed capacity. India is adding more renewable than fossil fuel capacity. One could go on. While useful, these numbers are just the top of the proverbial iceberg.

A wind park in Jaisalmer, Rajasthan. Photo: Vineethasara/Wikimedia Commons

A clutch of messier processes, some of them harking back to political economy, produce and shape the trends captured in these numbers. These processes — be it those that support the persistence of coal or India’s accretion of solar capacity – shape India’s energy transition.
They need to be understood. CarbonCopy presents outtakes from its nearly eight years of energy reportage. 

1. India’s energy policy is muddled, it backs both renewables and fossil fuels

In 2020, CarbonCopy reported on how India seems to want everything at once.  The government’s energy projections significantly outpace the country’s growth rate. It wants to double India’s oil demand by 2030; treble gas demand by 2030; boost coal production by 40% between 2018 and 2024; post a five-fold jump in the country’s renewable power capacity by 2030; and make all two-wheelers, all three-wheelers and a third of all four-wheelers electric by 2030. Subsequently, the government also projected large expansions in India’s hydrogen, nuclear, hydel and pumped storage capacity.

The reasons for this simultaneous push on renewables and fossil fuels is easy to understand. Fossil fuels are a major source of funds for the Indian state; Some of the country’s biggest businessmen have large investments in sectors such as oil, gas and coal; Fossil-fuel-rich countries lobby for these fuels as well — US shale gas startup Tellurian’s attempt to access the Indian market is one instance. In tandem, India’s attempts at central coordination of energy — to create integrated energy policy plans — have frayed over the past 10 years. Ministries running these sectors, keen to stave off their own obsolescence, are unilaterally sketching fresh expansion plans. Large consequences follow from here.

2. India is becoming the last big market for fossil fuels

Since 2017, a number of fossil fuel producers have invested in India. Most of these investments are not in exploration but in downstream activities like oil refining and distribution networks. Rosneft bought Essar’s refinery. Aramco and ADNOC announced plans to set up a refinery in Ratnagiri. Total invested in Adani Gas. Novatek tied up with Hiranandani.

The logic is evident. Fossil-fuel-rich countries wanted to sell as much of their inventory as they could. India is playing along — even using this new clout for fresh diplomatic and geopolitical gains. Nowhere is this more evident than in the gas sector. Even though imported gas is much costlier than any of the fuels it wants to replace, India wants to boost the share of gas in its energy mix to 15%.

With that, countries like Qatar, Russia and the USA are trying to sign long-term gas supply deals with India.

These purchases, however, might prove to be white elephants for the country.

3. Price, not policy, is shaping India’s energy transition

In the absence of policy, price is determining the contours of India’s energy transition. As battery storage and solar panel prices continue to fall — and 24×7 bids for wholly RE power, including batteries, solar, wind and hydel, come in — alternative forms of energy are struggling to stay competitive. Be it imported gas, nuclear, hydel or even thermal power.

With that, the country might be saddled with under-utilised capacity or dud investments (be it small and modular reactors, dams or imported gas deals).

In response, fossil fuel majors are rebundling. Players like NTPC and Adani are backwards and forwards integrating — stretching out to cover the entire power supply chain from coal mining to power distribution — to squeeze out additional efficiencies.

A power plant with its own Discom doesn’t have to wonder when payments will come. A power plant with a captive coal block, similarly, doesn’t have to worry about coal stockout or poor quality of coal.

This search for competitiveness comes with its own consequences.

4. The rise of megaliths in India’s power sector

A standalone thermal power plant is less competitive than a power plant with its own distribution company. And, as CarbonCopy wrote in 2021, a power plant with its own Discom will be less competitive than a rival with its own coal block, transmission lines, power plant and Discom.

And so, India’s power sector is seeing consolidation. Adani, which started with thermal power, has not only entered everything from coal mining to Discoms, it has also expanded laterally — moving into renewables generation; be it solar, wind or pumped storage. NTPC is rebundling as well. The logic is simple. Bundling solar power with more expensive thermal power, to take one instance, gives an extra lease of life to uncompetitive TPPs.

Conglomerates like Adani and Ambani have also forayed into RE manufacturing. In all, a baton is being passed in India’s energy sector. The early movers in the sector were standalone players, each occupying a rung or two in India’s unbundled energy landscape — TPPs, discoms, RE manufacturers, assemblers, developers.

That is changing now. Not only are the conglomerates coming in, even the early movers in energy are backwards integrating into manufacturing — and diversifying into multiple forms of energy.

5. Solar is about to take off

Late last year, India’s power sector crossed a rubicon. A tender by Indian railways, seeking Round The Clock (RTC) renewable power netted a price lower than that of coal. Even as India continued to back fossil fuels – and failed to create a robust market architecture for renewables – market forces have been at work. Prices of solar modules and battery storage have been steadily dropping, bringing the country finally to this point where renewables no longer need to be backed up by thermal power.

Solar Power Plant Telangana I in state of Telangana, India. Photo: Thomas Lloyd Group/Wikimedia Commons

If the country gets its act on land acquisition, transmission and financing together, it will see a massive jump in renewable capacity from here on. Over the next three years alone, it could add anywhere between 80-100 GW in solar alone, as CarbonCopy is told by industry bodies and senior government officials. 

6. A large battle on the contours of power distribution is brewing

Between solar’s expansion and large power producers’ diversification, India’s power sector stands at the cusp of radical transformation. According to an official at the National Solar Energy Foundation of India, not only are large power consumers trying to create their own renewable arrays, firms like Adani and Ambani are also said to be eyeing the large merchant power market, offering 24×7 renewable power to firms, especially those exporting to regions like the EU.

There is also speculation that Ambani might offer micro-grids to retail consumers. Reliance Jio had given phones away for free but charged for airtime, this reporter was told in 2021. In energy, too, it is speculated that Reliance will set up free renewable energy infrastructure in residential clusters and industrial areas — think small local grids comprising solar/wind installations and electrolysers that deliver 24×7 power — and charge only for the power. Such a model would disintermediate Discoms — and take the country towards a new future of microgrids. 

Other firms, like Adani, are following the existing template of centralised power generation, power generated in large solar parks and then ported across large distances through transmission lines and subsequently distributed through Discoms.  This is very much an area to watch. How will the power sector change over the next ten years?

7. With decarbonisation, India’s economic geography is changing as well

As recently as five years ago, India’s energy landscape was well ordered. Central and eastern India produced coal. Thermal Power Plants came up around them — or near large consumption centres. Large consumers of steel, too, usually, came up near coal mines.

This economic geography around energy is changing now. As Niti Aayog data shows, most renewable energy parks are coming up along western India. In tandem, most investment into renewable technology — like e-mobility — is also flowing into states in the south and the west. Principally, Tamil Nadu, Telangana, Karnataka, Maharashtra and Gujarat.  Even as these states compete to land projects, states like Jharkhand, Odisha and Chhattisgarh have to contend with questions about a just transition.

They might not be able to replace their coal mines and power plants with renewable alternatives. Their steel plants might take a pounding as well. Not only are smaller steel plants losing competitiveness, larger steel plants are under strain due to carbon border taxes, etc. In all, the world is seeing a reallocation of steel manufacturing capacities.

Region after region in India slipped into ruin as their economic clout dwindled. What does the coal-belt do?

8. Mission drift for energy PSUs?

In all this, India’s state-owned energy firms are scrambling for answers.
NTPC is expanding beyond thermal power plants into hydel and nuclear power. Coal India is expanding beyond coal mining into thermal power plants, solar parks and critical minerals’ exploration. NHPC is looking beyond dams at thermal, solar and wind. IOC is looking at hydrogen, solar and wind. ONGC is thinking of getting into oil-to-chemicals plants. GAIL wants to get into photovoltaic manufacturing

Hardwired into these diversifications are larger questions. In the case of nuclear, NTPC has partnered with NPCIL for large plants, but wants to go it alone for SMRs. Similarly, Coal India is foraying into thermal at a time when the sector’s economics are eroding. Questions about core competency — and if this is the best just transition that can be planned for these organisations — come to mind.


In addition to these, a clutch of other processes are shaping India’s energy transition.

As with India’s abortive hydel and thermal power plant booms, a clutch of politically connected firms are moving into the renewable sector as well. Their capacity to deliver has to be tracked. With its capacity to determine the viability of RE investments, climate finance is a large bone of contestation. As are India’s attempts to source critical minerals — whether through overseas deals, domestic mining or intensive recycling. There will be others.

This is our ongoing moment in energy. Global oil and gas majors are vying to sell more hydrocarbons to India. The country lacks a clear energy transition roadmap. The domestic energy sector is consolidating into an oligopoly with firms straddling renewables and fossil fuels. The country’s economic geography (around energy) is changing. Renewables, however, are on the cusp of massive expansion. Just transition is elusive. SPSUs have embarked on uncertain transitions. 

All of which brings us to a larger question. By the end of the current government’s second term, India is getting hit harder by climate change. It needs to decarbonise urgently. The processes driving decarbonisation, however, are multi-variate, with some even working at cross-purposes. 

And yet, decarbonisation is one vector along which India’s fight against climate change has seen the most progress. On other fronts, like adaptation (climate-ready cities) and mitigation (curbing pollution), the country is doing even more poorly.

The country will get a new government soon. One of the tasks before it? A winnowing of these processes.

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