A green transition, but not without the coal-rich states

Source: The post is based on the article “A green transition, but not without the coal-rich states” published in “Indian Express” on 26th October 2023.

UPSC Syllabus Topic: GS3 Indian Economy – infrastructure (Energy)

News: The article discusses India’s energy transition from coal to renewable energy (RE). India has seen waves of power plant constructions. New renewable energy projects mainly benefit certain states, leaving others with financial strain. Solutions are needed to ensure all states benefit from the transition.

What is the history of the evolution of India’s power sector?

First Wave (mid-1970s to mid-1990s):

Central Public Sector Undertakings (PSUs) took the lead. Notable creations include: NTPC and Coal India.
Aimed to fix imbalances in state power supplies. The initial plants were strategically placed to serve multiple states.

Second Wave (2000-2015):

Triggered by the Electricity Act, 2003.
Private promoters played a major role.
New plants mostly located in central, western, and southern India.
Private investment in power centered around states with industrial demand and strong finances.

What is the significance of coal in India’s energy mix?

Continued Use and Investment: Coal remains a significant part of India’s energy landscape.

New Power Plants: The power minister has announced plans to build new coal power plants.

Addressing Peak Power Problems: The reliance on coal is evident in efforts to manage seasonal demand surges in electricity.

What is Energy Transition?

In the present context, Energy Transition refers to the transformation of the energy sector from fossil-based systems of energy production and consumption to renewable energy sources. It involves a shift in the energy mix to reduce, if not eliminate, the carbon emissions (and other greenhouse gases).

Read here for more detail: What is the meaning of Energy Transition?

In India’s context, by 2030, solar and wind could account for 51% of generation capacity. Solar and wind’s contribution might rise from 8.3% in 2019 to 31% by 2030.

What are the implications of the renewable energy transition?

1)  Regional disparities in distribution:

As of August 2023, eight states generated 92.5% of all renewable energy.
Mainly western and southern states are benefiting.

2) Challenges for RE-Poor States:

Coal royalties, a key revenue, will decrease.
Power procurement costs will rise for these states leading to budget deficit.

3) State vs. Union Tensions:

Disagreements over revenues, power operations, and transition costs.
State transmission companies bear the integration costs of RE projects.

What can ensure a balanced energy transition?

1) Support for RE-Poor States: States with less renewable energy need more involvement in the transition.

2) Financial Assistance: Offer preferential lending for RE projects in states with less renewable resources.

3) Increased Federal Negotiations: Give RE-poor states a bigger voice in power discussions, possibly by reviving institutions like the Inter-State Council.

Financial Transfers: The Finance Commission can provide explicit financial aid to RE-poor states.

Collaborative Policies: Implement a just transition mechanisms and collaborative industrial policies.

Equitable Green Policy: Ensure all states, not just the historically privileged ones, benefit from the green industrial policy.

Question for practice:

Critically examine the potential economic and fiscal disparities created by India’s energy transition. How will this shape future regional development and centre-state relations?