Why is India's Renewable Energy transition still not in an over-drive?

"The stone age did not end because the world ran out of stones"

- Sheik Zaki Yamani

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I read this apt quote in a 2015 article by Ajay Shah on the Leap Blog , while he was talking about the ways and means of transitioning into a renewable future. This current energy transition in India at a larger level, has also got me thinking, to make me pen down the pros and cons of this transition.

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There are key roles both corporates and policy-makers have to play in this transition. So, here it goes below. A very brief attempt at the same.

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So, what is working right in this renewable transformation journey of ours?

1)???? Renewable additionality - In 2022, of the total electricity addition, 92% came from wind and solar – that’s an amazing sign of on how the additionality focus has now shifted completely towards renewable.

2)???? The battery revolution - The batteries are much cheaper today (but the state regulatory mechanism is currently missing). The lithium-ion batteries can be a storage-solve (but needs an efficient recycling mechanism to sustain its benefits beyond the first use).

3)???? De-centralized power - The designs and solutions to de-centralise electricity generation at community level exists, and can help navigate around peak-load of the central grid.

4)???? Pricing of input materials - The price of photo-voltaic cells (for solar power) has crashed in the past decade.

5)???? Industry buy-in - The biggest of industrial names are getting into renewable energy generation (both in the developed world as well as developing ones like India).

6)???? International pressure for de-carbonisation – This has picked pace (although it is still the younger consumer, the activist investor and the investigative media which is still driving this conversation).

7)???? Roof top solar - Has picked up momentum (although monitoring it is now a necessity, for general future forecasting & demand accuracy).

8)???? Dynamic availability of renewables - Facilities like GTAM and GDAM let renewable energy developers sell power in the open market without long-term PPA’s – win-win solution for the buyer and seller.

9)???? The union government has diversified its investments, as well as promoted private investment across various renewable energy segments – solar, wind, EV’s, hydrogen included (although the EV preference for mobility transition is itself open to debate – more on that in a previous podcast I had shared on this newsletter).

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But what is still not working right for this transition, for it to happen in a sustainable manner?

1)???? Carbon taxes on GHG-heavy sources has still not picked momentum. The oil lobby's might was evident at the recent COP28 summit (more on that in the newsletter article titled “23 lessons on sustainability from 2023”).

2)???? In certain states in India, the obsession with cross-subsidy charges on corporates for going renewable, dis-incentives the renewable flip as medium-term business-cases fall flat both because of uncertainty in policy as also the cost dis-advantages.

3)???? Power of the state regulator - The state DISCOMs can still put a halt to an otherwise well-meaning national renewable policy, and pause it at the state regulatory level. Given that electricity is a state-subject, inter-state PPA’s are still a challenge.

4)???? Set-up cost challenges - Renewables installation cost of capital (Wind, Solar, EV included) has still not stabilized, because of a lack of capital account openness.

5)???? To subsidise or not to subsidise - What this energy transformation needs are less of subsiding the clean energy sources, but NOT subsidising the non-renewable sources (our grid is still on 80% non-renewable power!).

6)???? Forecasting capabilities - Reliable long-term demand projects and forecasts for wind and solar is missing at a union government level.

7)???? Skilled work-force readiness – This has not developed commensurate with the energy transition, which could be a serious problem in the near future when maintenance and recycling takes center-stage and starts affecting the life-time prices for such sources.

8)???? Dynamic pricing - The policy strength to start implementing a dynamic pricing mechanism basis peak-load and time of the day usage, is still mired in its political economy challenges.

9)???? Agriculture, and who will touch it - From a political economy perspective, 20% of the total electricity usage goes towards agriculture – which has around 70% of the power needs that comes from the grid of which a mere 1%-2% right now is through renewable means. It is here that de-centralized solar solutions can be game-changers (govt. schemes also exist on solar irrigation pumps, but the allocation is not enough. There needs to be a change in not looking at these as welfare measures, but instead that of private sector innovation which can drive this de-centralization much better).

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Clearly, the age of crude oil need not wait for all available oil to run out, but a tremendous transformation in the policies, that sees a further detachment of the role of state from electricity generation, transmission and distribution. Instead letting the market mechanism and de-centralized community-level solutions take center-stage is more critical. The union govt. can instead focus its energies on a) utilising its existing institutions in getting the forecasting for renewables right, b) driving demand information transparency across the power sector in general, and c) create the macro-economic stability of interest rate and cost of capital; all of which can be key enablers of a just energy transition.

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Acknowledgments - Thanks a lot to key experts in the field like Guillaume Pitron (Author of The rate metals war), Ajay Shah (LeapBlog and co-author of In service of the republic), Vijay Kelkar (co-author of In service of the republic), Renuka Sane (TrustBridge and The Print), Amitabh Kant (Niti Ayog), Kashish Shah (Institute for Energy Economics and Financial Analysis), Sumant Sinha (Author of Fossil Free), Siddharth Kara (Author of Cobalt Red), Paul Lienert (Reuters journalist on the EV transition) and many others, whose writings continue to inspire me to probe more into our Energy Transition.