4 June 2020, NIICE Commentary 5211
Pooran Chandra Pandey
India is the world’s third-largest producer and the third largest consumer of electricity with more than 400 million people lifted out of the poverty line over the last decade. There has been a consistent rise in demand for the power consumption across the nation’s rural, urban and semi-urban areas, necessitating far-reaching changes in the country’s power sector reforms since 2015. The national electric grid in India over the years has come to have an installed capacity of 368.79 GW as of 31 December 2019. Renewable power plants, which also include large hydroelectric plants, constitute 34.86 percent of India’s total installed capacity. During the fiscal year, 2018-19, the gross electricity generated by all utilities in India was 1,372 TWh and the total electricity generation (utilities and non utilities) in the country was pegged at 1,547 TWh. The gross electricity consumption in 2018-19 in India was 1,181 kWh per capita. In fiscal year 2015-16, electric energy consumption in agriculture was recorded as being the highest (17.89 percent) worldwide with the country being a predominantly agrarian economy, contributing approximately 3 per cent of its gross national product (GDP).
Since 2015, India has started its power sector reforms under the new political dispensation, and currently has a surplus power generation capacity but lacks adequate distribution infrastructure. To address this, the Government of India launched a program called “Power for All” in 2016. The program was accomplished by December 2018 in providing the necessary infrastructure to ensure uninterrupted electricity supply to all households, industries, and commercial establishments with funding made available through a collaboration between the federal government and its constituent states.
India’s electricity sector is dominated by fossil fuels, in particular coal, which during the 2018-19 fiscal year, produced about three-quarters of the country’s electricity. The government, however, has consistently been making honest and transparent efforts to increase investment in renewable energy. The government’s National Electricity Plan of 2018 also states that the country does not need more non-renewable power plants in the utility sector until 2027, with the commissioning of 50,025 MW coal-based power plants under construction and addition of 275,000 MW total renewable power capacity after the retirement of nearly 48,000 MW old coal-fired plants.
Surge in Installed Captive Capacities
The installed captive power generation capacity (above 1 MW capacity) associated with industry-owned plants is 58,000 MW as of 31 March 2019. In the fiscal year 2018-19, 175,000 GWh was generated. Diesel power generation sets of 75,000 MW capacity (excluding sets of size above 1 MW and below 100 kVA) are also installed in the country. Besides, there are a large number of diesel generators of capacity less than 100 kVA to cater to emergency power needs during power outages in all sectors. The fact that India still depends heavily on coal-powered electricity projects due to large availability of this asset and price advantage for a large number of people living at the bottom of pyramid predominantly in developing and middle-income countries; including India with sparing exception to some of the developed economies. The debate around how can countries slowly and gradually transition to clean energy largely required to keep the climate and environment-related issues under control for well being of people and largely driven by multilateral treaties such as Paris Climate Treaty and Sustainable development Goals with implications on bilateral trade and commerce issues between two nations as trade barriers.
India’s Progress on Energy-Mix
The good news in India, however, is that the country is moving fast toward clean energy regime by working on a mixed energy use other than managing its biofuel focusing on renewable energy and civil nuclear energy in collaboration with US, Russia, France and Japan in its efforts to comply with Paris Climate Treaty provisions and to honour other multilateral and bi-lateral regimes and arrangements. India’s renewable energy sector has been growing vigorously for the last decade. As of 31 March 2018, India had grid-connected installed electricity generation capacity of about 69.02 GW from non-conventional renewable technologies and conventional renewable power or major hydroelectric power capacity of 45.29 MW. India has also invited bids for installation of a further 115 GW, to achieve a total of 175 GW total installed capacity of non-conventional renewable power by 31 March 2022. The government has set up a fund of USD 350 million to finance solar projects.
Policy Measures Leading Cost Savings
India’s focus besides its transition to clean energy has been on adopting several policy measures that are aimed at producing more power due to the growing demands and also opportunity to export the surplus power to neighbouring nations in the region including through energy and commodity exchanges. Some of the key measures adopted in this arena include subsidized distribution of 210 million LED bulbs across the country, saving about 2 billion USD with resultant reduction in carbon emissions, revision in e-mobility policy including building charging infrastructure, storage, the transition to Bharat Stage VI variant petrol and diesel (the cleanest fuel) for cars estimated to bring down the emissions by 20 percent immediately and new measures aimed a levy of environmental taxes on carbon emissions generating billions of dollars for exchequer and promotion of renewables by those with barren land with sweeping policy changes and financial subsidies. Under Domestic Efficiency Lighting Programme, the government wants to replace all the 770 million incandescent bulbs sold in India with LED bulbs. This will result in the reduction of 20,000 MW load, energy savings of 105 billion KWh and Green House Gas (GHG) emissions savings of 80 million tonnes every year. These measures combined together are estimated to bring over USD 30 billion to the national exchequer and also resulting in lowering up to 30-35 percent of carbon emissions, shining India’s case to strengthen its Paris Climate obligations to the gold standard.
Way Forward
These measures are primarily aimed at reduction in carbon emissions, bringing the cost of energy consumption down while serving a large domestic consumer base, transition to clean energy sources, access to renewable, export of surplus energy, the building of green grids and establishing energy exchanges to be able to hedge the power for future utilization. India has been meeting set goals with success in rolling out its policies and ensuring its implementation both at the federal and sub-regional basis. These efforts are singularly directed at meeting nation’s obligations to multilateral treaties like Paris Climate Treaty, Sustainable Development Goals (SDG-07) and other bilateral trade and commerce regimes signed by the country with its trading partners as non-tariff barrier mechanisms. These efforts and mechanisms adopted by India are likely to succeed in meeting its international obligations and potentially prove as a good case practise for replication both in Asia and beyond.
