India at a Crossroads

DIRECTOR NOTES INDIA

India at a Crossroads Transitioning to a renewables-based electricity system by Ashish Gulagi, Manish Ram and Christian Breyer

A fast-growing economy, increasing population and more resource intensive lifestyles is fueling India’s energy demands. This Director Note explores the case for meeting India’s electricity needs from renewable energy. There has been a steady increase in energy use and the level of greenhouse gas emissions across the world in the last three decades fueled by higher levels of industrialization, population growth and improved standard of living. This trend is likely to continue, mainly due to the increased energy demand arising from developing countries. Figure 1

Global energy-related CO2 emissions, 2001-2017 36

An increase in emissions of 1.1% is observed in 2017 in comparison to 2015.

Gt CO2

34 32 30 28 26 24 22 20

2001

2003

2005

2007

2009

2011

2013

2015

2017

Source: Global Carbon Atlas The opinions expressed in this report are those of the author(s) only and do not necessarily reflect the views of The Conference Board.

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The energy sector—totality of all industries involved in the production and supply of energy—is a prime contributor to greenhouse gas emissions and this puts it at the core to fight climate change1. In this regard, renewable energy generation technologies have reached sufficient maturity to constitute a sound economic proposition and thereby have emerged as a preferred mitigation option to address the challenges of climate change.

Changing Global Energy Landscape: Trending towards Renewables Currently majority of global primary energy demand is met by fossil fuels. But, as shown in Figure 2, the share of renewables has seen a steady increase in the last decade. In 2017, the world added more renewable capacity than fossil fuels and this trend is expected to continue in the foreseeable future. One of the main factors for this change has been the steady decline in the renewable energy generation costs. Figure 3 provides an overview of the installed renewable capacities in 2017. Figure 2

World energy consumption by energy source quadrillion Btu

petroleum and other liquids

200

coal 150 natural gas 100 renewable energy 50 nuclear 0

1990

1994

1998

2002

2006

2010

2014

2018

Source: International Energy Outlook, 2017

Figure 3

Installed renewable capacities in 2017 Solar 55% Percentages do not add up to 100 due to rounding.

Wind (offshore) Bioenergy

Wind (onshore)

Hydropower 25

14

3 3

Geothermal (0.4%)

Source: IRENA

1 Foster, V., Bedrosyan, D. 2014. Understanding CO2 emissions from the global energy sector (English). Live wire knowledge note series; no. 2014/5. Washington DC; World Bank Group

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DIRECTOR NOTES INDIA INDIA AT A CROSSROADS: TRANSITIONING TO A RENEWABLES-BASED ELECTRICITY SYSTEM

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The Paris Agreement The Paris Agreement ratification has put transition to renewable energy generation on every country’s agenda. Many countries have already shown that operating the grid on fully renewable based electricity is possible for days or even months. Denmark generated 140 percent of the electricity requirements of a particular day from wind power and photo voltaic (PV), exporting the excess. Portugal was powered by renewable electricity sources for four and a half straight days. To go even further, Costa Rica met its electricity demands through renewables for 250 days in 2016. These examples illustrate how the future might look like, but it must be acknowledged that there are only a handful of such examples. Nonetheless, the drop in costs for renewable energy generation and storage technologies and further technological advancement e.g. low-cost batteries and power-to-X technology (technologies that enable energy storage and reconversion) will act as catalyst to make this more common.

Current Energy Landscape in India Energy use and emissions have almost doubled since 2000 Although India still has one of the lowest per capita energy consumption in the world, its energy use has almost doubled since 20002. The compound annual growth rate in electricity consumption from 2007 to 2016 has been 8.2 percent. This has primarily been driven by economic growth, rapid development and increase in population—which has roughly grown by 16 million per year over the last 20 years. Whilst India has made efforts to modernize its energy infrastructure, much of it is still plagued with persistent problems of the past. The huge transmission and distribution losses and the poor financial state of the local distribution companies has hampered growth. Figure 4

GDP and the primary energy demand, 2000-2040 Trillion dollars, purchasing power parity

TWh

24,000

2,400

20,000

2,000

Energy demand (left scale)

16,000

1,600

12,000

1,200

GDP

(right scale)

8,000 4,000 0

800 400

2000

2013

2020

2030

2040

0

Source: IEA

2 [CSO] – Central Statistics Office, 2018. Energy Statistics 2017, Ministry of Statistics and Programme Implementation, Government of India



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Energy demand likely to double by 2040 India’s energy usage is expected to soar, and even under the most conservative scenario, is expected to increase by 100 percent over the next 20 years. This is largely due to the expected growth in the economy, which is predicted to grow by five times and population, where it is expected that India will surpass China as the most populous country in the world. The energy demand in the future will primarily come from the industrial sector followed by transportation and infrastructure sector.

Heavy reliance on coal but share of renewables increasing In 2017, coal power plants met around 60 percent of India’s current electricity needs. The rest of the electricity demand was fulfilled by renewables (approx. 30 percent), gas (approx. 7 percent) and nuclear (approx. 2 percent)3. However, falling costs and climate change targets have created a conducive environment for renewable capacity addition in recent years. For example, for the first time ever, India had more capacity addition from renewables than fossil fuels in 20174. Overall, India’s renewable energy capacity has grown from 27 GW in 2000 to about 117 GW in September 2018.

A net importer of fossil fuel India primarily depends on imported fossil fuels to satisfy its energy demand and spends nearly USD 330 million/day on imported oil and gas5. In the current global political and economic landscape, over-reliance on energy imports can severely undermine the energy security of a country. Increasing population, growing socio-economic standards and a rapidly growing economy have increased the stress on security, reliability and affordability of energy supply, which is directly linked to economic stability and development of the country.

Power sector is just one part of the jigsaw The power sector along with agriculture, industrial processes and transportation have emerged as the largest contributors to carbon emissions in India. Whilst transition to renewable energy power generation will play an important role towards decarbonization, it alone cannot lead India’s low carbon transition. A multi-pronged approach is needed to decarbonize each of the aforementioned sectors to realize this low carbon transition. Further, as India becomes more urbanized, policy interventions will be needed to ensure an optimal low carbon development path.

3 [CEA] – Central Electricity Authority, 2017. Monthly installed capacities for 2017, Government of India 4 [PTI] – Press Trust of India, 2018. Grid connected clean energy capacity reaches 70 GW in April 5 Quartz India, 2015. Why India is spending $330 million a day on imported oil and gas, Quartz marketing on behalf of GE, New York

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Is transitioning to renewable energy desirable? Considering India’s population growth, rapid development, over-reliance on imported fossil fuel for energy generation and the associated environmental and health impacts, the case for transitioning to renewable energy sources looks desirable. The following section explores the financial imperative, socio-economic benefits and environmental benefits for India to transition to renewable energy sources to meet its electricity needs.

Financial imperative Cost of energy production perhaps is the single most important factor in determining the financial viability of an energy technology. The financial case of a specific energy technology can be explored by comparing the Levelized Cost of Energy (LCOE), an indicator that provides the unit cost of generating energy for a particular technology. It is calculated by dividing lifetime costs (e.g. generation storage, fuel and carbon emissions) by energy produced over the lifetime of the asset. The LCOE for renewable electricity generation will reduce further over time primarily due to technology improvements and competitive procurement. It will also benefit from economies of scale.

Socio-economic benefits Transitioning to renewable powered electricity will result in multiple socio-economic benefits. Primary benefits will be realized through the potential new jobs that will be created because of this transition. It is estimated that a total of 5.8 million jobs will be created in the South Asian Association for Regional Cooperation (SAARC)6 region, a majority of which are likely to be in India due to the size of its economy and energy needs in 2050. Figure 5 provides a breakdown of the associated jobs potential for various renewable technologies from now until 20507. Over time the nature of the jobs created will shift from construction and installation of power generation technologies to operation and maintenance. Such a transition is also likely to bring about public health benefits. First, transition to renewable energy generation would eliminate exposure to the various stages of energy production including those from fossil-fuel life cycle: extraction, distribution and generation. Second, health benefits will also be realized from reducing exposure to air pollution from fossil fuel burning. Lastly, access to energy based on clean technologies can enable economic development and social well-being through improved productivity, high incomes and improved health. However, it must be noted that a number of different sources contribute to this problem and addressing one aspect in isolation will not guarantee success. A holistic approach that seeks to decarbonize emissions from different sectors and sources is likely to augment potential health benefits.

6 SAARC is the regional intergovernmental organization and geopolitical union of nations in South Asia. Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka. 7 Ram M, Aghahosseini A., Breyer Ch., 2018. Job creation during the global energy transition towards 100% renewable power system by 2050, submitted



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Figure 5

Jobs created by the various power generation and storage technologies during the energy transition from 2015 to 2050 in the SAARC region

Renewable energy Fossil fuels and nuclear Storage Transmission

Technological distribution (%)

100 90 80 70 60 50 40 30 20 10 0

20102015

20152020

20202025

20252030

20302035

20352040

20402045

20452050

Source: Ram et. al., 2018.

Environmental benefits Some of India’s largest cities experience severe pollution levels and smog blankets have become a common feature in many North Indian cities. Overreliance on fossil-fuels for power generation is not only having catastrophic impact on health but is responsible for worsening air quality and increased pollution levels. A transition to 100 percent renewable electricity system will not only allow deep decarbonization but will also help curb and manage air pollution that results from the burning of fossil fuels.

Renewable energy uptake Although there has been an upswing in the number of countries, cities and businesses committing to 100 percent renewable energy targets, the pace of transition is far from what it needs to be to achieve the Paris Agreement goals. From India’s perspective, an ambitious regulatory commitment can aide the transition to 100 percent renewable energy. And, whilst public financing might be essential to drive this transition, private investments will also be needed to enable competition and rapid scaling-up of the renewable energy sector. Findings of The International Renewable Energy Agency (IRENA) show that companies actively consumed about 465 terawatt-hours (TWh) of renewable electricity in 2017, which is comparable to the electricity consumption of a major economy such as France8. This reinforces the role that corporates can play in enabling energy transition towards renewables across the world. Similarly, in India, the corporate sector can play its part by committing to 100 percent renewable energy.

8 IRENA, 2018. Corporate Sourcing of Renewables: Market and Industry Trends – Remade Index 2018. International Renewable Energy Agency, Abu Dhabi.

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A handful of Indian companies have already committed to 100 percent renewable energy targets as part of the RE100 campaign. Further, 60 percent of the largest (by revenue) 200 companies in India have deployed solar energy in their operations and around 30 percent have invested in utilizing wind energy. India Inc could take a proactive role by committing to spend more of their mandatory corporate social responsibility spend on renewable energy projects9. Switching to renewable energy can also contribute towards enhancing a firm’s reputation and can put them in good stead to comply with regulatory changes in relation to carbon emissions reduction and reporting. Lastly, transition to renewable energy can help future-proof a business from market volatility and third-party costs.

Conclusion A transition to an electricity system powered by 100 percent renewable energy by 2050 is possible. It will not only be cheaper to produce but will also bring about health benefits, primarily through improved air quality and economic prosperity through creation of jobs. But, the journey will be challenging. Fossil fuels are and will still be a part of the energy mix for the foreseeable future, and thus collaboration between government and industry will be needed to make this transition possible.

This Director Notes is based on some of the previously published work by Ashish Gulagi, Manish Ram and Christian Breyer.

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About the Authors Ashish Gulagi is a doctoral researcher at the Solar Economy Group, Lappeenranta University of Technology. His main topic of research is analyzing energy transition pathways towards a fully sustainable energy system for the power, industry and transportation sectors for the SAARC and Southeast Asia and the Pacific region. His special focus lies on India and its energy transition pathways with integration of rural electrification. He has completed his MSc at Lappeenranta University of technology in Energy Technology with a major in Environmental Engineering and Technology. He previously worked as a research assistant with Austrian Research Institute for Chemistry and Technology, analyzing the degradation of PV modules. His research interest lies in renewable energy and sustainability, smart grids and energy system transformation. He can be reached at [email protected]. Manish Ram is a doctoral researcher at Solar Economy Group, Lappeenranta University of Technology exploring global power systems with high shares of renewable energy. He has completed an MBA in Energy Management from the Technical University of Berlin, EUREF Campus and has been involved in the development of the renewable energy sector for over a decade. Previously he worked at Greenpeace, India as a senior renewable energy analyst. Prior to that he conducted social audits of the rural electrification scheme – RGGVY and was involved in piloting and developing low-cost solar water pumping solutions in Bihar, India. He can be reached at [email protected]. Christian Breyer is professor for Solar Economy at Lappeenranta University of Technology, Finland. His major expertise is the integrated research of technological and economic characteristics of renewable energy systems specializing in energy system modeling for 100 percent renewable energy, on a local but also global scale. His team published the most studies on 100 percent renewable energy for countries or major regions globally. His academic background is in physics, energy system engineering and general business. He worked previously for Reiner Lemoine Institut, Berlin, and Q-Cells (now: Hanwha Q.Cells). He is member of ETIPPV, IEA-PVPS, scientific committee of the EU PVSEC and IRES, chairman for renewable energy at the Energy Watch Group and reviewer for the IPCC. He can be reached at [email protected]. ACKNOWLEDGEMENTS The authors would like to thank Anuj Saush, senior researcher at The Conference Board, for his contribution to develop this report.

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