The Impact Of the New Clean Energy Transition By the Indian Government
India has been a late starter in the clean energy transition but has picked up pace and is being seen as one of the biggest markets for clean energy
Clean energy encompasses all zero-carbon energy sources and is agenda for most countries across the world. Post the Paris Accord, most governments have a definite agenda to reduce carbon footprint by harnessing the green energy sources. This offers a huge investment opportunity; thus clean energy has support from not only the government but also from global funds and multinational companies who are looking to comply with the new paradigm. All renewables sources such as solar and wind form part of clean energy, while the emerging area within this is biofuels, both liquid and solid biofuels. Like any reform even this has to be pushed by the government till the benefits are understood or the cost viability sets in.
Governments in developed nations have pushed the clean energy agenda harder and supported with favorable policies to enable the transition. Case in point is the solar and wind energy capital subsidies given by European countries to promote its use. That not only helped them reduce the carbon footprints but also ensured the equipment ecosystem is developed which then becomes source for the global applications and had an early start for the R&D. We can conclude that the government push in Europe had helped many equipment manufacturers to build their companies, which are now profiting from spread of these concepts globally.
India has been a late starter in the clean energy transition but has picked up pace and is being seen as one of the biggest markets for clean energy ecosystem globally. Although the focus of all governments have been improving the basic infrastructure across the country, clean energy was seen as a luxury for the policymakers few decades back. With time as India becomes a global power the pressure to become compliant with consensus efforts on climate change and pollution such as the Paris Accord becomes unavoidable. With tangible targets on carbon emission and ways to curtail the same, this has pushed the government to propel the agenda on clean energy and also made sure the transition is across segments. The recent statistics and statements are a testimony that the government of India is also pushing for the transition to clean energy very seriously.
- The Prime Minister recently announced that India’s target is to have 450 GW of renewable energy by 2030
- India’s energy sector will be industry-friendly and environmentally conscious
- India’s target is to have 175 GW of renewable power by 2022.
India with clear skies and presence of the Himalayan range to the Thar Desert, makes it an ideal for solar and wind energy sources, paving the way for global majors for both strategic and financial investments. Additionally viability of solar even for small scale use makes it popular even at retail and commercial levels. Such is the proliferation of solar in India that recent auctions have seen solar tariffs dropped below INR 2/KWH. Similarly, wind farms have been explored by large corporates to benefit from the accelerated depreciation benefit allowed and thus even the wind energy had seen lot of capacity addition in the past decade.
With the power generation mix, which is dominated by coal-based power plants, governments aims to increase alternate fuels such as gas and biofuels. The government aims to increase the share of natural gas in the country’s energy mix to 15 per cent by 2030, from 6 per cent today. Government efforts have been increasing the domestic gas production which has been lower than expected and also improve the transmission infrastructure. India has five operating terminals for liquefied natural gas and projects under construction could result in up to 11 additional terminals over the next seven years.
Although the emissions intensity has decreased in line with targeted levels, progress towards a low-carbon electricity supply remains challenging. A recent guideline and initiative towards this shortcoming is an admirable step by the government which is for promotion of biofuels. Biofuels are a renewable source of energy as well cleaner source than fossil fuels such as coal or furnace oil. These produce minimal amount of carbon monoxide and oxides of sulphur and nitrogen, which are polluting and damaging to the environment. Most users have moved from fossil fuel to biofuels as a source to adhere to tightened pollution norms and lower operating cost. Usage pattern for biofuels especially the solid biofuels made from agriculture residue has found its way to Industrial boilers, heat generators and even small burners.
All private power producers have been asked to attempt 5 per cent co-firing in their plants by substituting coal with biofuels. Government had led with an example and NTPC has invited tenders for biomass pellets at their power plants across the country substituting 5 per cent of coal. This is indeed a great fillip to solid biofuels sector in India. Similarly the OMCs like BPCL, HPCL and IOC have been blending bioethanol in petrol. Many sugar manufacturers have put up capacities to make bioethanol from molasses, this has also de-risked their businesses as ethanol prices are stable and demand is assured.
The PM listed seven key drivers India’s energy map, one of which is greater reliance on domestic sources to drive biofuels. In India, biofuels usage and promotion is a win-win for all- rural economy and governments clean energy transition agenda. Biofuels are made from any type of waste or residue which is organic in nature. India being agrarian economy, the agriculture residue is available in humongous quantity. Past decade has seen a big impetus to use of solid biofuels as a fuel to replace fossil fuel in India. It would be much shorter list amongst corporates who do not use solid biofuels.
The solid biofuel revolution is a combination of government push for clean energy and also the cost savings which are tangible to corporate users. Biomass briquettes made from agri residue such as soya husk or mustard stalk are widely used and their usage saves 30-40 per cent vis-à-vis furnace oil. In addition the SOx and NOx emissions are much lower than any fossil fuel.Government has enabled the transition to clean energy by rolling out several initiatives but also from stricter environment rules and incentives to promote the segment. To promote solid biofuels supply and its ecosystem, the government has offered capital subsidies to rural entrepreneurs. We believe scope of this transition is much wider and long lasting, not only because of the steep targets on reduction of carbon emission but also the potential of biofuels in India. India generates around 500 million tonne of agri residue every year and of which almost 200 million tonne is destroyed or burnt without any productive use. This in value terms is almost INR 50,000 crore worth of business.