India's Shift to a Sustainable Energy Future

India’s National Action Plan on Climate Change (NAPCC) recommends that the country generate 10% of its power from renewable sources by 2015, and 15% by 2020. What progress has India made on renewable energy in recent years?

India is a key country in the efforts of the international community to shift to a sustainable, low-carbon path that will confront climate change, improve human health, and foster prosperity for all. In India, climate action will be most successful when integrated with efforts to tackle existing challenges in energy access, water security, agricultural productivity, disaster resilience, and broader economic development goals. For example, distributed or on-site generation of renewable energy, such as rooftop solar panels, can play a significant role in providing access, especially in rural areas. According to the World Bank, over 400 million people in India lack electricity.

India has taken important steps on renewable energy with increasing installed capacity. [1] The renewable energy goals require continued effort, strong implementation, and improved utilization of capacity, but there are favorable signs. In 2008, India launched its NAPCC, featuring eight national missions, ranging from R&D to sustainable agriculture, with centerpiece programs to scale up solar power and energy efficiency. [2] With respect to renewable energy, there are great opportunities for India and its international partners. As an Ernst & Young report states, in emerging markets “renewable energy potential is attracting high levels of foreign investment, generating new jobs and creating local supply chains…. For investors, renewable energy assets are generating robust returns.” [3] The role of government-to-government cooperation and public-private partnerships is also important.

The accompanying table shows that, while not in the lead globally, India’s renewable energy initiative has been substantial, and there are signs of building momentum. KPMG estimates that grid parity for solar in India could take place in 2017–19. [4] The Ernst & Young outlook for India for 2014 places it among the most attractive markets and forecasts growth “with ambitious targets and a series of large-scale project announcements.” Last year, India nearly doubled its solar energy capacity and there was great interest demonstrated in the first projects under Phase 2 bidding conducted by the National Solar Mission. Also, the Ministry of New and Renewable Energy is expected to provide tax benefits and grid improvements to take advantage of the potential for more wind energy.

What are the roles of the public and private sectors in this?

Many public officials and business leaders in India and internationally recognize the potential in India and are taking action. To make these measures successful and to go further faster, many realize that action is needed along a broad front. This includes technology and finance but also development of knowhow, streamlining of regulation and government administration, and a continued shift to greater reliance on the market. For example, while steps have been taken to deregulate fuel prices, the U.S. Energy Information Administration reports that India’s Ministry of Coal and Mines continues to control allocation of coal and subsidies to companies. [5] Also, to build public support, it is important to promote understanding of the economic, health, and other benefits of taking these steps. With India’s growing economy and energy security needs, this agenda is challenging, but the opportunities are enormous. Not only is low-carbon energy compatible with economic growth, but in many cases, such as in providing distributed generation in rural areas, it is a better, more cost-effective option. It can help bring relief for smog-choked cities and a new wave of investment opportunities.

One example of U.S.-Indian private-sector collaboration is the work that the World Resources Institute (WRI) and the Confederation of Indian Industry (CII) are doing with Indian and U.S. companies to explore, test, and demonstrate new models that make renewable energy more affordable. This activity creates more private demand for renewable energy that will create new business opportunities. Indian commercial and industrial companies like Infosys have been excellent champions for green power purchasing and understand the energy security value of renewable energy. U.S. companies are also setting increasingly ambitious internal goals for renewable energy and seeking to source energy in growth markets like India where they have growing footprints. This demand, combined with new models for making renewable energy more affordable, will create new opportunities for energy suppliers from the United States, India, and other markets. Building the demand for renewables from the largest users is one of the approaches that will support India’s renewable energy goals.

U.S. Secretary of Energy Ernest Moniz visited India earlier this month to take part in the U.S.-India Strategic Energy Dialogue. How important is this dialogue and others such as the India-U.S. Partnership to Advance Clean Energy (PACE)?

Cooperation between India and the United States on energy is important to shift our countries and the world to a sustainable, prosperous growth path. The U.S.-India Strategic Energy Dialogue is an important engine of this cooperative relationship along with PACE. The recent meeting of the dialogue involving Secretary Moniz and senior level participants from both countries provided an opportunity for in-person updates and direction for further steps on the PACE work plans. Cooperative R&D, financial support from U.S. agencies, partnerships to deploy clean energy, assessment of unconventional natural gas, and engagement of the private sector are key elements of PACE. Engagement by stakeholders with work on the three activity tracks under PACE—deployment, research, and energy access—can help maintain the momentum of this effort.

On a related note, the India-U.S. Track II Dialogue on Climate Change and Energy, convened by the Aspen Institute (on the U.S. side) and the Ananta Aspen Centre (in India), met in Washington and sent a letter to senior officials in both governments. Complementing and informing formal diplomatic relations, the Track II Dialogue aims to advance a bolder partnership between the two countries by creating space to exchange views on what each country is doing to tackle energy and climate change challenges and to discuss options for collaboration bilaterally and in multilateral arenas. The Track II Dialogue participants offered the following ideas to help further bolster clean energy and climate cooperation between India and the United States:

• Minimize the potential for trade disputes involving support for renewable energy by harmonizing policies, conducting early consultations on policies affecting renewable energy trade, and exercising restraint before initiating WTO disputes
• Create an India-U.S. partnership for climate resilience drawing on the experience of PACE
• Establish a framework for phasing down emissions of hydrofluorocarbons
• Under the existing Joint Clean Energy R&D Centers (part of PACE), leverage the whole U.S. Department of Energy R&D ecosystem of technologies to address opportunities in India and build capacity in science and engineering to enable innovation

What are the top issues that New Delhi should focus on to help achieve energy security for India?

India, like the United States, needs to think strategically about how to achieve energy security, economic development, and environmental sustainability simultaneously. Typhoons and heat waves are growing in intensity. Sea-level rise threatens to inundate population centers. Warming will significantly affect crop yields and therefore food security. Urban areas choked with pollution are suffering hundreds of thousands of premature deaths. Lessening and avoiding the damage from these must be part of any strategy to seek gains from energy development. Moreover, India is heavily dependent on imports of oil (over 70%) and coal (11%), making home grown renewable energy an important option for improving energy security. With falling renewable energy prices, it is becoming easier to solve the simultaneous equation of environmental sustainability and development, a point which if recognized can add momentum to achieving both goals. KPMG sees conventional power costs rising and solar prices falling, with parity in 2017–19 or even earlier for some sectors such as industrial and commercial consumers.

India is heavily dependent on coal, which is a main source of the greenhouse gases driving global warming. To shift to a low-carbon path requires more efficient use of coal, demand-side management of energy, development of carbon capture and storage, use of natural gas as a bridge fuel, and a ramping up of renewable energy sources such as wind, solar, and hydropower. To accomplish the shift to low carbon, it is important to stress that the need is not just a question of fuels but also regulatory and functional challenges for the electricity sector, especially in providing modern energy access to all and in achieving development goals. This includes improving transmission networks to both deal with losses and support new technologies. Electricity losses in India during transmission and distribution were about 24% in 2010, and losses because of consumer theft or billing problems added 10—15%. [6] An important regulatory challenge is developing strong market and regulatory models for energy access using mini-grid and off-grid solutions. India has launched efforts to make the shift described here, with leadership at the national level and in states such as Gujarat and Maharashtra, but as many officials and stakeholders in India and internationally know, stronger, more widespread measures are needed.

What opportunities are there within India to shift toward increased energy efficiency?

In the shift to a low-carbon path in India, energy efficiency is a high-value target for action and an opportunity both for Indian and international investors and other stakeholders. India’s National Energy Efficiency Mission includes the “Perform, Achieve, and Trade” program which sets a percentage by which companies must reduce energy intensity. Those that beat their targets receive tradable permits they can sell to plants that come up short and would otherwise face penalties. Other efficiency programs are directed at buildings, appliances, and vehicles. According to one study, by pursuing these efficiency gains, India can avoid 120 gigawatts of power capacity by 2030 and, with stronger measures, has the potential to achieve substantial additional gains. [7]

One energy expert has said that rather than building new, mostly carbon-emitting generation facilities, “investment in a more efficient electricity grid would do wonders for both [India’s] energy security and the environment,” adding that “today, India’s transmission and distribution losses are astounding.” [8] Another important opportunity for increased efficiency is in building codes, made critical by the massive urbanization expected in coming years. Buildings in India already consume over 30% of electricity and two-thirds of the buildings that will exist in 2030 will be built between now and that date. As an example of what can be done, the city of Hyderabad recently adopted an “energy conservation building code” for commercial and high-rise residential buildings, expected to garner major energy savings. There is a key role here for state and local governments working with the private sector to reap huge benefits for the low-carbon future. Another area for stepped-up action on efficiency is fuel economy, where India is moving forward with new standards but has greater potential. Though India has looked to the vehicle standards of the European Union, the measures in India are not as advanced.

India has repeatedly advocated for LNG imports from the United States as part of its energy security plan. Could you speak to what role greater gas consumption might play in helping meet India’s energy needs in a sustainable manner?

Burning natural gas results in less carbon dioxide than burning coal, which means in principle that gas does not contribute as much to global warming. Thus, some people refer to natural gas as a bridge fuel to buy time to shift toward primary reliance on zero-carbon fuels and fuels used with carbon capture and storage. However, in such a strategy care must be taken to avoid the problems associated with extraction and transport of natural gas such as fugitive methane emissions and the environmental problems accompanying some forms of extraction. Methane, the primary component of natural gas and a potent greenhouse gas, is leaked or vented throughout the natural gas production life cycle, which undercuts the climate advantage natural gas otherwise has over coal. Common-sense regulations such as requiring periodic leak detection and repair at all major emissions sources, from the wellhead to the end-user, can reduce methane emissions while delivering more gas to market. [9]

While shale-gas potential is generally seen as greater in other parts of the world, cooperation under the U.S.-India Strategic Dialogue includes shale-gas resource assessments and sharing lessons on extraction. If pursued with the precautions mentioned above, this initiative could contribute to the larger effort to explore the use of natural gas in a strategy to shift to a low-carbon path for sustainable development. While natural gas is not a long-term climate solution, if upstream methane emissions are reduced to the extent technologically feasible, it can be a first step toward reducing carbon dioxide emissions in the power sector. Natural gas can also help integrate additional renewable generation into the grid, as gas turbines can cycle down quickly when the sun is shining and the wind is blowing, and cycle up quickly as needed.

Do you have anything else to add?

In the Ernst & Young attractiveness index for renewable energy, the United States, China, Germany, Japan, the UK, Canada, and India are the top seven, in that order, ahead of France, South Korea, Brazil, Spain, Taiwan, Mexico, and others. The index also shows the relative strengths among the top countries, with Canada, the UK, and Germany leading in macro stability; the UK, Canada, and the United States leading in ease of doing business; and Japan, India, Germany, and China leading on prioritizing renewables. While overall the U.S. leads, the report notes that the gap is narrowing as “congressional gridlock continues to hamper U.S. policy.” All countries stand to benefit from renewed effort, and each has particular strengths to leverage and areas for improvement. The story that emerges from a close look at India and the India-U.S. collaboration described above is that, working together, our two countries can improve our efforts and reap great benefits. We can benefit by confronting together the challenges of climate change and energy security and by enhancing economic growth, jobs, and human health and well-being.

Endnotes

[1] Central Electricity Authority, “Executive Summary: Power Sector,” January 2014, http://www.cea.nic.in/reports/monthly/executive_rep/jan14.pdf.

[2] Neha Pahula et al., “GHG Mitigation in India: An Overview of the Current Policy Landscape,” World Resources Institute (WRI), WRI Working Paper, March 2014, http://www.wri.org/publication/ghg-mitigation-ind-policy.

[3] “Renewable Energy Country Attractiveness Index (RECAI),” EY, February 2014.

[4] “The Rising Sun: Grid Parity Gets Closer—A Point of View on the Solar Energy Sector in India,” KPMG, September 2012, https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/the-rising-sun-grid.pdf.

[5] U.S. Energy Information Association, “India,” March 18, 2013, http://www.eia.gov/countries/cab.cfm?fips=in.

[6] Yoginder Alagh, “Transmission and Distribution of Electricity in India: Regulation, Investment, and Efficiency,” OECD, http://www.oecd.org/dev/partnerships-networks/46235043.pdf.

[7] Rajat Gupta, Sushant Mantry, and Ganesh Srinivasan, “India: Taking on the Green-Growth Challenge,” McKinsey & Company, 2012.

[8] Charles Ebinger, “India’s Energy Policy and Electricity Production,” National Bureau of Asian Research, Policy Q&A, October 2011.

[9] James Bradbury et al., “Clearing the Air: Reducing Upstream Greenhouse Gas Emissions from U.S. Natural Gas Systems,” WRI, April 2013.

Manish Bapna is the Executive Vice President and Managing Director of the World Resources Institute (WRI), a think tank working at the intersection of the environment and development. He served as WRI’s acting president from 2011–12. Mr. Bapna oversees WRI’s thematic programs and global network of offices, chairs WRI’s management team, and works to strengthen the impact of WRI research.

This interview was conducted by Sonia Luthra, Assistant Director for Outreach at NBR.