Energy Transition: Challenges and Solutions – Explained, pointwise

Introduction

The window for climate action is shortening rapidly. IPCC Sixth Assessment Report had pointed out that Earth will warm up by 1.5°C (above pre-Industrial level) over the next couple of decades. According to NASA, the planet’s average temperature was 1.02°C warmer in 2020 than the mean temperature between 1950-80. If the temperature rise is to be limited to 1.5°C, the emissions must peak by 2025. To limit the temperature rise, it is essential to shift away from fossil fuels. Without the Energy Transition, the planet may face disastrous consequences with rising frequency of extreme weather events. However, the path to energy transition is riddled with several challenges which has slowed down the pace of the decarbonisation of the economy. Overcoming these challenges is necessary to ensure a just and equitable shift to the sustainable economy.

What is the meaning of Energy Transition?

In the present context, Energy Transitions 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).

Switching from nonrenewable energy sources like oil, natural gas, and coal to renewable energy has been made possible by technological advancements and a societal and Governmental push toward sustainability. Energy Transition involves structural and permanent changes to energy supply, demand and prices. Energy Transition is possible when all sectors which are major consumers of energy like industrial, transportation, domestic and commercial sectors etc. are decarbonized.

The human civilisation has witnessed energy transition in the past as well, e.g., the transition from wood (as primary source of energy) to coal happened in the 17th and 18th centuries. The shift from coal to oil occurred predominantly in the 20th century. These shifts or Energy Transitions were accompanied by structural shift in other sectors like industry, transportation, energy generation etc.

What steps have been taken by India towards Energy Transition?

Commitments under Nationally Determined Contributions (NDCs): India has committed to 3 targets under the Paris Climate Action (by 2030). These include (a) Bringing down the emission intensity of economy (GDP) by 45% (compared to 2005 levels) by 2030; (b) Achieve 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030; (c) To create an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030; (d) To put forward and further propagate a healthy and sustainable way of living based on traditions and values of conservation and moderation, including through a mass movement for ‘LIFE’– ‘Lifestyle for Environment’ as a key to combating climate change, among others.

Other Climate Action: In addition to the NDCs: (a) India has committed to achieve Net Zero by 2070; (b) India is aiming to become a global hub for green hydrogen production and exports; (c) India targets to achieve 20% ethanol blending in petrol by 2025-26 (earlier target year was 2030).

Renewable Purchase Obligations (RPO): To expand capacity of renewable energy and to promote its adoption, a mandate of Renewable Purchase Obligation has been issue to the utility companies (i.e., all electricity distribution licensees should purchase or produce a minimum specified quantity of their requirements from Renewable Energy Sources).

International Solar Alliance: India is also showing global clean energy leadership through initiatives such as the International Solar Alliance, which has more than 70 member countries.

Policy Measures: The Energy Conservation (Amendment) Act, Missions like National Green Hydrogen Mission, National Policy on Biofuels, Fiscal incentives (production linked incentives), and market mechanisms (PAT Scheme, proposed Carbon Market) are examples of interventions that demonstrate India’s serious commitment to energy transition.

Other Government Initiatives: (a) Subsidies on Petrol and Diesel have been removed in the last decade; (b) Subsidies are being provided to EVs; (c) FAME Scheme (Faster Adoption and Manufacturing of Electric Vehicles) was launched in April 2015 under the National Electric Mobility Mission; (d) Government has provided fuel gas for cooking to millions of households enabling a steady transition away from the use of traditional biomass such as burning wood etc.

What are the challenges to Energy Transition?

Policy and Regulation: The introduction of new energy sources has required changes to current energy market regulation. The present energy transition has largely been driven by Government policies and regulations. In contrast, the previous energy transitions (wood to coal to oil and gas) had occurred through inter-fuel competition, efficiency of new fuels and market forces that accompanied the industrial development. Misplaced policies can produce undesirable effects e.g., critics argue that carbon tax in developed economies (the EU and the US) has shifted the polluting manufacturing units to Asian economies where regulation is lax. This has allowed MNCs to continue to emit GHGs. Such policies haven’t contributed to cut down in emissions, only shifted them from developed to developing countries.

In addition, many policies pose new associated challenges e.g., the promotion of use of ethanol as fuel has led to diversion of crops for fuel generation. This has raised food prices (due to diversion of maize and sugarcane for generation of fuel).

Technology: Energy generation and consumption through sustainable methods pose several technological challenges e.g., power generated through solar and wind energy is intermittent and poses challenges in grid stability and load balancing (e.g., solar energy is not available at night when load might be high). Hence there is requirement of large storage capacity (in batteries). Similarly, hydrogen is highly explosive in nature and will require new technologies for safe production, storage, transportation and use.

Finance: Restructuring the energy systems and development of technological solutions require access to finance. The IEA has estimated that over the next decade US$ 1-1.3 trillion will need to be invested in the power sector per annum (mainly in renewable energy and power networks), plus up to US$ 1 trillion per annum in improving energy use in end-use sectors. Banks and Financial Institutions will find it difficult to finance risky investments in technology development. Moreover, developing countries lack access to finance to support the Energy transition (e.g., building solar power plants and corresponding distribution infrastructure).

Networks: The present energy system has large and complex network of storage and distribution systems e.g., the predominance of fossil fuel based system (hydrocarbons) has seen the development of a network of pipelines, shipping fleets, and distribution outlets that are the core asset base in the global energy system. This infrastructure will need to be adapted or re-purposed if it is to remain relevant to a decarbonised energy sector. There is a risk of lot of these assets ending up being stranded (i.e., rendered useless or without value). It will be difficult to adapt existing gas-based infrastructure for hydrogen as handing hydrogen requires much more safety measures.

Impact on Consumers (including energy justice and access issues): Energy transitions could give rise to intra-generational, intergenerational, and spatial equity concerns e.g., Transition away from fossil fuels can affect near-term fossil-dependent jobs. Government’s obligation for climate action can shrink their capacity to spend on welfare programmes and thus exacerbate existing economic inequities. Consumers may be impacted by higher costs of energy from renewable resources. They may be unwilling to adopt new systems (e.g., Electric Vehicles) or to pay more in the short term for a product that can improve long-term welfare.

Differences about Transition Paths and Energy Mix: Different countries and regions are starting from different positions both in terms of their economic development, current energy mix, and carbon emissions. Different regions are endowed with different resources and will be try to adapt according to their circumstances. This has given rise to differences among countries (especially developed and developing) about which clean technologies should be adopted and how they should be financed.

Source: World Energy Transitions Outlook, 2022 (IRENA). Pathway suggested by IRENA for Energy Transition.

Geopolitical and Energy Security Implications: During the 20th century the geopolitics was centered around oil and the oil rich regions. The shift to new technologies has given rise to new concerns e.g., China has large reserves of elements/materials used in new technologies and controls their supply chains. China has exploited its position for strategic purposes e.g., cutting down supply of materials to Japan.

What step can be taken to address challenges to Energy Transition?

Acceleration in Deployment Rates of Renewable Energy (RE): Acceleration in deployment of renewable energy (RE) is necessary to match the pace of demand growth. It is critical to India’s Just Energy Transition (JET). Meeting India’s 2030 target requires accelerating non-fossil capacity addition from 16 GW a year in 2022 to 75 GW a year by 2030.

This can be accomplished through; (a) Solarisation of agricultural electricity demand; (b) Electrification of diesel-powered Micro, Small and Medium Enterprises (MSMEs); (c) Decentralised RE for residential cooking and heating etc. Stimulation of energy demand through rural productivity enhancement will further aid RE acceleration as well as help to address the rural-urban economic divide, create rural jobs, and thereby address inter-generational and spatial inequities.

Enhancing Finance and Technology Transfer: The developed countries must enhance climate finance and fulfil their obligations under the Paris Climate Agreement. Recognising their historical contributions, developed countries should share technology with developing countries to ensure equity in energy transition. To achieve net zero emissions by 2070, the IEA estimates that an average of $160 billion per year will be required across India’s energy economy between now and 2030. That is three times the current level of investment. International financial support will be necessary.

Global Coordination: There is a need for global coordination to establish standards with respect to energy transition to ensure uniform transition (e.g., with respect to Electric Vehicles and associated infrastructure) without disruption.

Re-aligning utilization of Coal: In the long term coal will be phased out (with phase down in the medium term). In order to ensure there is minimum disruption and the existing assets are utilized there is a need to re-align the current use of coal resources to enhance efficiencies until the period of complete phase-out. Coal-fired power plants could be better utilised if located near coal mines rather than in states with the highest energy demand. This would allow coal to be used more efficiently because coal transportation requires more energy than electron transmission and would result in fewer emissions. It would also result in cheaper power, as transportation costs one-third of the cost of coal for power plants; the savings could also be used to fund much-needed emission control retrofits.

Government Support: The Government ought to support decentralised renewable energy technologies that can reduce reliance on thermal power plants, such as utility-scale battery energy storage systems. It is imperative to set aside special ‘transition funds’ to assist coal-dependent regions in India, some of which are among the most impoverished regions.

Alternate Livelihood Opportunities: People employed in fossil fuel based energy systems (coal mines, power plants etc.) will be losing their jobs as a result of energy transition. They will need to be retrained and provided with new employment opportunities as quickly as possible.

Decarbonising Heating and Cooling: All new buildings must be energy efficient. Decarbonising heating and cooling will require changes to building codes, energy performance standards for appliances, and mandates for renewables-based heating and cooling technologies, including solar water heaters, renewables-based heat pumps and geothermal heating.

Demand-side Management: Innovation, recycling, and the circular economy will play significant roles in the pursuit of efficiency over the medium and long term.

Private Funding: Balance of private and public funding will be required to meet the investment requirements over the long term.

Conclusion

Energy Transition is the most vital aspect of shift towards green and sustainable economic systems. However, there are several challenges that may derail the transition. In addition, there are concerns related to equity especially the impact of energy transition on developing economies. There is a need for greater efforts in terms of financial support and technology sharing to ensure that the process of energy transition is equitable and least disruptive.

Syllabus: GS III, Infrastructure: Energy; GS III, Conservation.

Source: The Hindu, The Hindu BusinessLine, IRENA, TERI