By Dr Rahul Tongia
India has some of the most ambitious targets for renewable energy in the world. The first phase plans a quadrupling of renewable energy in just seven years to achieve 175 GW by 2022. This disproportional growth of renewable energy is not unique to India just that India’s targets and even volumes achieved in recent years are second only to China’s. Coal-based generation capacity, which grew at a pace double electricity demand between 2011 and 2016, leading to effectively a surplus, has flatlined.
There are two aspects that explain the growth of RE in India. The first has been a global wave that India has ridden where solar power is now the cheapest new build. The second is a concerted push by the centre with extensive large bids for solar farms.
How do we sustain this?
Most of this excitement has been for variable RE (VRE), where the levelized cost of energy (LCOE) is the cheapest. The good news is short-term targets (175 GW) can be integrated into the grid relatively easily. However, in the long or even medium run, VRE will not suffice, and India will require a combination of changes to how its grid operates as well as storage technologies. India is no different from other countries except its grid is heavily coal-based and also lacks sufficient price and other signaling mechanisms for helping choose the best additional form of power going forward.
Some of the changes required at a grid level include updates to the ancillary services norms that today rely on surplus capacity from coal power plants to ones that allow not only all technologies to participate, but also allow them to participate in multiple markets. And even more basic need is to add simple Time of Day (TOD) pricing for bulk Power procurement which is missing for 90% of electricity in India. With the right signaling, India will unleash innovation across not just storage but also smart grids and Demand Response, as well as incentivize more flexible fuels like hydropower or even natural gas.
It’s never too late to plan for a smarter future – after all EVs should charge with RE, not coal. This will require leapfrogging to things like Smart Grid-Tie Inverters for solar, ones that can allow reactive power support and other features that enable rooftop solar to scale to a large fraction of local power flows, without straining the local network.
In addition to operational or technological needs, given occasional pushback by incumbents, countries must have norms for limiting and measuring when RE is ever curtailed – where, and why (technical vs. economic reasons). RE is very capital-intensive (with no fuel costs), and domestic capital is unlikely to be sufficient. Global capital also offers the promise of vastly lower financing, but systemic risks, especially counterparty risks with the DisComs, have remained a major bottleneck. As such issues resolve, which may take additional time thanks to pressing challenges post-COVID, India will need proper frameworks to price RE correctly recognizing system-level issues beyond LCOE. A possible framework valid across countries for this is given below.
Source: “Renewable Energy “versus” coal in India – A false framing as both have a role to play”, R. Tongia (2018). Brookings India Policy Brief, October 2018
This shows an economic calculation without values of externalities. In addition to costs changing over time, what the rest of the grid does also matters, especially for system-level costs, which are not shown. The future is unlikely to be as discrete as shown.
Looking ahead
No one knows what the New Normal will be in a post-COVID world. Many analysts expect the rise of nationalization or nationalism, at the very least framed in terms of domestic security and resilience. This will mean a big push towards Make In India. Today, almost all solar panels are imported, mostly from China. Given the scarcity of liquid capital, there may be a push to utilize existing assets even more than would otherwise have been planned. Combined with an economic downturn, this may delay some of the high trajectories of RE.
However, the specifics of the targets and their timeframes aren’t so important. It doesn’t matter if India takes one year more or less to achieve 175 GW of RE – it’s still impressive. More than targets, India should focus on enabling frameworks that encourage innovation, new technologies, and sustainability.
“Most of the build in India has been grid scale and not “rooftop” or behind the meter, at least not yet. Even if it appears too soon based on limited deployment, countries need to plan for resolving issues of whole-sale vs. retail, also dubbed the Utility Death Spiral. Else, you’ll face resistance from the utilities, such as definitional fights over gross and net metering.”
No matter how ambitious or heroic India is in its targets, and even if it achieves them on track, this is unlikely to change the global carbon emissions trajectory anywhere near levels required to keep warming below 2°. When we normalize emissions per capita, we quickly see that India hasn’t been a major transgressor, and it would be unrealistic to expect it to shoulder the burden of future change alone. Even if India plateaus coal within the decade, or even plans to phase it out, it won’t be sufficient. Thus, global effort should be on cleaning up any use of coal in India instead of wishing it away. This requires thinking beyond carbon to the larger ecosystem including land, water, and air pollution.
Instead of mandate for a certain quantum of solar, signaling against externalities like carbon or pollution would allow a more flexible and perhaps cost-effective portfolio approach to improve sustainability. The question isn’t RE versus other tools such as efficiency, digitalization, smart grids etc. We need all of the above working in concert.
India also offers lessons for how every country is different. Very cheap hardware (by some measures cheapest in the world) doesn’t mean lowest cost power. First, cost of capital matters enormously. Second, countries must not chase the chimera of cheapest and lose out on quality. Lastly, India exemplifies how each country is different based on legacy issues, geography, consumer mix, and alternatives. Most of the build has been grid scale and not “rooftop” or behind the meter, at least not yet. Even if it appears too soon based on limited deployment, countries need to plan for resolving issues of whole-sale vs. retail, also dubbed the Utility Death Spiral. Else, you’ll face resistance from the utilities, such as definitional fights over gross and net metering. This may be rational but it still creates roadblocks in the transition. Incentives and policy should ensure that RE isn’t viewed as a zero-sum game, and we can harness globally best technologies and finance.
Dr. Rahul Tongia is a Fellow, Brookings India, and leads studies on energy and sustainability. He is also an Adjunct Professor at Carnegie Mellon University, and was the Technical Advisor of the Govt. of India’s Smart Grid Task Force.
