Clean Energy Transition of States and their challenges – Explained, pointwise

Introduction

The Institute for Energy Economics and Financial Analysis (IEEFA) and Ember has recently released a report titled “Indian States’ Energy Transition“. The report highlighted the glaring inequality in the Clean Energy Transition of States. As per the report, Karnataka now has the best-equipped power systems to convert its electricity system from fossil-powered to renewable energy sources, followed by Andhra Pradesh and Gujarat. On the other hand, Bihar, Haryana, and Uttar Pradesh did the worst. 

What is a clean electricity transition? 

This refers to the shift from fossil-based power production and consumption to renewable energy sources by transforming the electricity sector through innovative policies, efficient technologies, and greener market pulls while ensuring reliable supply with effective closed-loop systems in place. 

An effective clean electricity transition requires a timely switch towards a clean power-fuelled, economically feasible, politically viable, and secure system that can create value for business and society. 

What are the report’s key highlights on the Clean Energy Transition of States? 

The report analyses 16 states that account for 90 percent of India’s yearly power demand. Their scores were calculated based on states’ performance on four major dimensions. Such as Decarbonisation, Performance of the Power System, Readiness of the Power Ecosystem, and Policies and Political Commitments.

Karnataka: 

• Karnataka ranks first in all four dimensions of the clean energy transition. 
• The state fared the best in decarbonizing its power sector and has the highest share of renewables in its power supply mix (48%). 

Only Delhi’s power sector’s emission intensity of GSDP is lower than that of Karnataka (2.2 kgCO2eq/Rs1,000).  

Haryana has the lowest installed capacity of older, more polluting coal power plants.

Maharashtra: 

• It has the biggest power demand in India and was found to be in the mid-range. This is mostly because the state is slow to use renewable energy and can’t shut down older, more polluting coal power plants. 
• Its renewable energy share (11%) is lower than most other states. 

Chhattisgarh has the highest emissions intensity of GSDP (43 kgCO2eq/ Rs1,000). Its renewable energy share in the power supply mix (1%) is better than only Bihar.  

Bihar, UP, and West Bengal: 

• These states must work more to improve their clean energy transition performance. 
• These states should maximize their renewable energy generation potential, and at the same time increase commitment to moving away from fossil fuels-based electricity.

What is the need for the Clean Energy Transition of states? 

India’s clean electricity transition requires all states and Union Territories to transform their power sectors. More specifically, progress in states with high power demand is not only crucial but also urgent for India’s power sector to achieve a clean electricity transition. 

The transition needs Indian states to work together and take the lead to fight the problems that make it hard to reach India’s goals, such as fulfilling Nationally Determined Contribution (NDC), India’s net-zero commitments, and the implementation of the ambitious climate action at the national level.

What are the challenges faced by states in their clean energy transition?

Under utilisation: Renewable energy-rich states are not utilizing their renewable energy generation potential. Potential hurdles, such as land conflict, technology upgrades, and lack of transmission infrastructure, could come in the way of the clean energy transition of states. 

For instance, even the top performer Karnataka has utilized only 11% of its total renewable energy potential.

Ignoring other possibilities: While the states are focusing on large-scale renewable power projects, mainly utility-scale solar, they are ignoring other possibly viable options, such as rooftop solar, small hydel plants, etc. 

Different priorities between the centre and states: The national (central) government and sub-national (state) governments in India often have different priorities with respect to the energy sector. For example, 

The Centre’s perspective is informed by macroeconomic stability, economic growth and geostrategic issues. On the other hand, states are driven more by local and state-level concerns. Further, the State’s political-economic realities are affected by factors such as energy access, affordability, local jobs and economies. 

Energy Transition at the State Level and Fiscal Impact: Many coal-producing states naturally rely heavily on fossil fuels for revenues as they benefit from both coal-related royalties from mining but also tax revenues from sales of oil and natural gas.  

The transition and its impact on the state’s employment:  As the country moves away from fossil fuels, there will be negative effects on jobs all along the value chain. This includes employment across mining, transport and storage, processing and manufacturing, and trade. 

What steps have been taken by the Indian states towards the clean energy transition? 

Initiatives of the central government to facilitate clean energy transition of states

• Intra-State Transmission System – Green Energy Corridor Phase-II for laying the infrastructure for connecting electricity generated from renewables with the power grid in seven states. This scheme would receive 33% central financial assistance. This is crucial to create green market mechanisms for inter- and intra-state renewable energy trading. 
• The scheme for “Development of Solar Parks and Ultra Mega Solar Power Projects” has a target of generating 40GW capacity by March 2024. So far, the central government has sanctioned 50 solar parks with a combined capacity of 33.82GW in 14 states.  
• Progressive policies like net metering, banking of power and feeder segregation are implemented under the ‘Kisan Urja Suraksha evam Utthaan Mahabhiyan Yojana (KUSUM)’ scheme. 
• The green day ahead market (GDAM): The Power Ministry has launched GDAM to enable India to achieve green targets and facilitate the integration and expansion of green energy in an efficient, competitive, sustainable, and transparent manner.  
• The government has permitted foreign direct investment up to 100 per cent under the automatic route and has wavered Inter-State Transmission System (ISTS) charges and losses for the inter-State sale of solar and wind power for projects. 
• Indian Renewable Energy Development Agency Ltd (IREDA), as of November 2020, has financed more than 2,700 renewable energy projects in India with cumulative loan disbursements to the tune of ₹ 57,000 crore. 

Initiatives of state governments to facilitate clean energy transition

The Interstate Clean Energy Procurement Program (ICEPP) was launched in India by the U.S. Trade and Development Agency (USTDA). ICEPP will help eight Indian states build up their clean energy infrastructure by giving public procurement officials training on best value and life-cycle cost analysis. USTDA is funding ICEPP through its Global Procurement Initiative (GPI). 

Various states also have many initiatives. Such as,

• Rajasthan: Rajasthan Wind Solar Hybrid Policy 2019 and Rajasthan Electric Vehicle Policy 2022 helped accelerate the capacity addition.  
• Karnataka: It was the first southern state in India to notify a renewable energy policy, the Karnataka Renewable Energy Policy 2009-14 to harness green, clean, renewable energy sources for environmental benefits and energy security. Recently, the state released the Karnataka Renewable Energy Policy 2022-2027.
• Tamil Nadu has a dedicated solar energy policy 2019 and EV Policy 2019 
• Several states have announced their EV Policy to complement the national scheme and to address state-specific needs. 

What should be done to ensure the clean energy transition of states? 

In order to enhance the state’s clean energy transition, the “Indian States’ Energy Transition” report has recommended the following, 

Focus on offshore wind energy: India has the potential to generate 140GW of electricity from offshore wind along its 7,600km coastline. However, there is a need to develop local supply chain, logistics and port infrastructure to utilise offshore wind’s full potential. 

Pay attention to coal plants: State energy departments need to closely monitor their coal plants and retire older plants, unless needed as peaker plants during high-demand months. 

Increase green market participation of states: States need to focus on increasing participation in green market mechanisms like GDAM, GTAM, open access, corporate PPAs etc. In addition, states also need to focus on innovative bilateral financial markets mechanisms like Virtual Power Purchase Agreements (VPPA) and Contracts for Difference (CfD). 

Introduce private sector participation: The introduction of private sector participation and competition shall bring more capital and management expertise into the electricity sector. This will help enhance operational efficiency, and increase accessibility and affordability. 

Focus on feeder segregation: Reliable state-level data on feeder segregation needs to be made available for more robust analysis. States with large agriculture loads need to focus more on feeder segregation. 

Develop a circular approach: States need to develop a holistic and circular approach towards handling solar panel, battery, and electric vehicle waste. This is even more crucial as India sets up new manufacturing units under the Atmanirbhar Bharat scheme. 

The other recommendations include, a) Data transparency and availability at the state level needs an enhancement for robust analysis, b) Robust transmission infrastructure is necessary to better evacuate renewables at the state level, c) Initiatives like ‘Time of Day tariff’ and ‘Direct Benefit Transfer’ need more focus for state-level implementation in addition to regular tariff revisions by the state regulators.