A must-surge year for climate goals

News: The year 2022 will be critical for India’s renewable energy industry if it is to hit the country’s ambitious 2030 and 2070 climate goals. If we don’t speed up the pace in 2022, it will make the targets more difficult to reach in each succeeding year.

What is the present situation wrt renewable energy in India?

India recently crossed 100 GW of renewable capacity, leaving around 350 GW to install to hit 450 GW (excluding nuclear and hydro). This means adding 30-40 GW installed capacity annually for nine years straight.

The target is achievable, but not easy. For example, in 2021, India added 14 GW through solar and wind capacity.

Why India is optimistic to achieve its renewable energy climate goals on time?

The base prepared in the preceding years gives India a good shot in 2022 and beyond at hitting its climate goals.

Enabling policy environment: Govt’s focus on public private partnerships and a conducive policymaking environment have created a strong base for RE that can be ramped up. For instance,

– it allowed up to 100% FDI in renewables via the automatic route

– it announced a productivity-linked scheme to boost manufacturing in the sector.

Friendly finance: With climate change becoming a huge focus internationally among political and business circles, as well as concerned citizens, climate finance has attracted very serious funding. By the end of COP26, 450 financial firms have vowed to put green investments at the heart of finance.

Renewable rush: Another factor enabling the renewable sector to grow fast is the sharp increase in the number of participants, attracted by a generally enabling policy environment and massive scope for long-term growth.

What is the way forward?

SECI and a demand boost: India would need to conduct 20-30 auctions for a total of 30-40 GW a year. Hence, it would be important to expand and strengthen SECI (Solar Energy Corporation of India) in 2022 to ensure enhanced auction activity.

– For this we need more electricity demand. In this context, both the Govt and industry can take measures to boost demand, which, in turn, will lead to expansion of renewable capacity. The increased requirement can then be harnessed by SECI to undertake more auctions.

Ease taxes: India’s renewable push over the next few years will require strong local manufacturing to de-risk supply chains, especially amid Covid-linked economic uncertainty. It is essential that taxes and duties on RE equipment such as turbines, modules, and electrolysers (including for battery storage) are lowered and rationalised.

– For instance, the GST on renewable equipment should be capped at a maximum of 5% for viability of manufacturing, and electricity should be included under GST to reduce prices for end consumers.

Pass the Electricity Amendment Bill, 2021: The Bill needs to be urgently passed and implemented effectively, putting the 4 Cs —customer, competition, compliance, and climate—at the centre of the sector. Passing the Bill will allow the delicensing of distribution, letting private firms enter distribution and compete with discoms. This’ll give more choice to consumers via lower tariffs and better service. This will attract fresh capital and new technologies, resulting in lesser losses for the sector overall.

Green hydrogen: India needs to push for green hydrogen to help meet its climate goals, especially in addressing the emissions from sectors responsible for significant carbon emissions, like such as chemicals, industrial, fertiliser and heavy transport. If developed rapidly, Green Hydrogen can slash India’s huge reliance on polluting and expensive fossil fuels used in hydrogen production (95% of global hydrogen output till 2020 was grey hydrogen, with green hydrogen a minuscule 0.1%).

Greater investments in electrolyzers, and targeted policy interventions such as clear-cut green hydrogen obligations will help.

Source: This post is based on the article “A must-surge year for climate goals” published in Business Standard on 6^th Jan 2022.