Viewpoint: India's Energy Transition

06 DEC,2021 | MEDC


  • Environmental economists have historically focused on the greenhouse gas externality, which arises because the cost of damages to others, now and in the future, is not borne by those who use fossil fuels. The reason for that focus is that over the past century, it has been significantly cheaper to emit carbon dioxide, than not to, when producing and using energy for socioeconomic development purposes. But technology is a game changer. The cost of producing clean electricity is steadily falling, and the cost of using clean energy may soon be lower than that of using fossil fuels.
  • India is doing reasonably well on this front. The total installed renewable energy capacity (including hydro) in the country has now crossed 150 GW. More than a third of our total power capacity is now renewable. The issue is now one of implementation … how to convert that potential capacity into actual power generation? Our energy production and consumption patterns need to be in harmony with nature, and policy should facilitate that transition.
  • The prospect of cheap green energy calls for a fundamental shift in how we think about climate policy – we need to make it more expensive to use polluting fuels like petrol and diesel, and economical to be green. Whether we actually reach a low-cost green energy equilibrium is still far from certain. However, whether we get there at all, and if so, how soon, depends on policy. Energy transitions require continuous investments in technological innovations to achieve breakthroughs.
  • With multiple market failures, efficient policies need multiple policy instruments. As all sectors of the economy are different, there is no one-size-fits-all combination of instruments that will produce optimal results everywhere. More often than not, the most efficient set of energy policies for one sector is not so for others. An efficient mix of policy instruments for each sector must be carefully crafted for addressing market failures, technological status, and institutional challenges at a nuanced level. This will take time and effort, and will necessitate consensus between the states and the Centre in some important socioeconomic areas.
  • The way ahead is to focus on core energy transitions, which means building sustainable alternatives to fossil fuels. This includes supporting the expansion of renewable energy sources such as solar, wind and hydro. It also involves accelerating the deployment of new technologies such as offshore wind and battery storage systems which enable energy from renewables, like solar and wind, to be stored and then released when consumers need power the most.
  • India has the potential to boost its renewable power generation capacities substantially. We have abundant renewable energy resources, an emerging regional power market, and, probably most importantly, policymakers committed to making a difference. The key is to publicly demonstrate the underlying technology's commercial viability, so that investments and market forces can subsequently facilitate its mass adoption. Driving deep decarbonization will not be easy, but it is worth the effort.


*Photo Credit: Google


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