With an aim to connect 40 million households to the grid by 2018, India is investing heavily in coal mines. But our analysis shows India is chasing a dream far removed from reality
Massive energy transition
It’s May 2030. Sunidhi Parmesh of Madhya Pradesh’s Jhabua district heaves a sigh of relief as she prepares breakfast on induction stove and packs it for her daughters getting ready for school. They have scored well this year and a large part of the credit goes to the 500 Watt (W) rooftop solar panels and 3 kilo- watt hours (kWh) battery bank she and her husband, Mahesh, installed a few years ago through a bank loan. The system harvests and stores enough to supply round-the-clock power to all household appliances, including a refrigerator, a TV and an e-scooter.
Sunidhi no longer trudges through the hillocks to collect firewood or waits for a cooking gas (LPG) refill. Her daughters study even after nightfall and can access internet anytime. Mahesh has also installed a solar water pump in his 2-acre (0.8 hectare) field for drip irrigation. Instead of paying hefty electricity and fuel bills, he now sells the excess solar power to a company—aggregator—in Delhi. There are 20 such aggregators across the national capital who now pool renewable electricity from individual households and advertise their green credentials to woo consumers. The two big electricity distribution companies (discoms) have shut shop. Instead, there is one company in each municipality to manage the distribution grid. With solar and wind becoming the cheapest sources of power, there are less takers for coal, and the Coal India Ltd (CIL) has started closing mines. Coal-based power plants now get paid by the government to be on stand-by. India revels in the democrati sation of energy as hundreds of thousands of households and businesses turn “prosumers”—they consume as well as produce electricity. To ensure universal access to basic electricity, the government offers subsidy to the poor through direct bank transfer, so that they can buy it from the aggregator of their choice.
Cut to present. The government, with the target to connect 40 million households to the grid by December 2018 and curb rising electricity prices, is investing heavily in coal mines. It wants CIL, the state monopoly, to produce 1 billion tonnes of coal a year by 2019-20; up from 554 million tonnes in 2016-17. It is looking to open new mines in the untapped 5,100 sq km coal bearing lands. New gas pipelines are being laid to make LPG available to all. In addition, an ambitious scheme—Ujwal Discom Assurance Yojana (UDAY)—is being implemented to revive discoms operating in the red.
While all these efforts portray a bright future, the fact is India is chasing a dream that is far removed from reality—the world is undergoing a massive energy transition. Over the next decades, there will be radical changes in the way we produce and consume energy. The conventional energy infrastructure being set up now would be abandoned even before their economic life is over. China is already experiencing this.
Since 2010, China has added close to 300,000 megawatts (MW) of coal power capacity. Its current capacity is about 950,000 MW—over three times that of India. However, between 2011 and 2016, the average operation hours of its plants have reduced—from 5,305 hours of the 8,760 hours in a year to 4,165 hours. This means coal power plants in China operated at less than half their capacity in 2016. A report by Oxford University released in February 2017 estimates that investors in coal power may lose US $449-$1,047 billion because the assets would not be profitable to run or would be shut down due to environmental reasons.
In the past five years, both the US Energy Information Administration (USEIA) and Inter national Energy Agency (IEA) have downgraded their forecast on coal consumption. In 2013, USEIA in the International Energy Outlook Report forecast some 33 per cent growth in the global coal consumption between 2010 and 2040. Its 2017 report forecasts stagnation in coal consumption between 2015 and 2050. IEA in its 2016 World Energy Outlook Report also predicts a halt in the growth of global coal consumption till 2040. In 2012, it forecasts an 18 per cent growth in coal consumption during 2010-2035.
So, what prompted this sudden change in the outlook of USEIA and IEA, which have consistently underestimated the growth of renewable energy. Analysing this would require one to have a thorough understanding of key forces that are influencing consumer behaviour and businesses worldwide, and thereby driving technological innovations. These driving forces reflect growing commitments across the world to achieve universal access to energy, growing demand for clean air and willingness to curb greenhouse gas emissions.
COMMITMENTS TO ACHIEVE UNIVERSAL ENERGY ACCESS
“Ensure universal access to affordable, reliable and modern energy services by 2030.” This is the 7th Sustainable Development Goal of the UN. Never in the history has so much focus been put on providing universal access to energy, especially electricity. Globally, about 1 billion people do not have access to electricity. Ensuring electricity to them requires an investment of nearly $50 billion every year till 2030. This is about 2 per cent of the annual investments made in the energy sector. Though there is a significant gap in the investments required for universal electricity access by 2030, the scale and pace of investments has increased worldwide. Electricity access investments in top 20 countries increased from $18.7 billion to $20.1 billion in just one year, during 2013-2014. Countries like Bangladesh and Ethiopia are investing 2-3 per cent of their GDP to primarily finance electricity access. Increasing amount of international finance is also being directed to support energy access. Power Africa, the US government partnership with African governments to double electricity acc ess in Sub-Saharan Africa, has announced plans to invest up to $1 billion in Nigeria. International mechanisms like Africa Renewable Energy Initia tives have been put in place to provide electricity access through renewable energy.
The bottomline is over the next 10-15 years, a large number of people will have access to electri city. India, which is home to the largest population without access to modern energy services—some 300 million do not have access to electricity and about half-a-billion primarily depend on polluting biomass for cooking and heating their homes—will have near-universal access. The government has just announced a multi-billion dollar initiative to provide electricity connection to all by 2018. All these will have huge implications on the investments we are making today.
For instance, so far, clean cooking fuel has meant provision of LPG or clean biomass cook-stoves. With improving access to electricity and advan cements in safe and efficient electric cooking stoves, electricity will be the natural choice of cooking fuel. This is what happened when universal access to electricity was ensured in developed countries.
GROWING DEMAND FOR BREATHABLE AIR
In the past five years, poor air quality in cities has also attracted global attention. Deaths and diseases due to air pollution have cost the global economy more than $5.0 trillion annually. In India, the loss to GDP exceeds 5 per cent. To clean the air, local authorities are taking desperate measures. China has stopped constructing new coal power plants in polluted zones; Beijing now regularly shuts coal power plants. In India, for the first time, a power plant—Badarpur Thermal Power Station in Delhi—was closed to make air breathable during the winters. While Paris, Madrid, Athens and Mexico City have announced plans to ban diesel vehicles by 2025, India and China are planning large-scale introduction of electric vehicles. This momentum towards clean air is triggering seismic shifts in the power as well as transport sectors.
WAKING UP TO THE REALITY OF CLIMATE CHANGE
This is the third but the most crucial driving force triggering changes in the energy infrastructure. The impact of climate change is hurting now, not only the poor but also the rich. The multiple hurricanes that have hit the US this year are estimated to have damaged hundreds of billions of dollars worth of property that will take many years to reconstruct. The simultaneous extreme rainfalls and droughts in India are hitting cities and villages alike. Heat wave fuelled forest fires are killing people in Europe and Asia. There is now an emerging consensus that action against climate change has to be taken now, and quickly.
Despite US President Donald Trump withdra wing from the Paris Agreement and failure of coun tries to pledge significant emissions cuts in Paris, businesses and local governments are setting ambitious targets to tackle climate change. More than 75 of the world’s biggest cities, forming the C40 Cities Climate Leadership Group, have pledged to substantially reduce emissions over the next three decades. In September, six top apparel companies, including Gap, Nike and Levi Strauss, joined hands with more than 300 companies from the apparel sector that have pledged to set science-based climate targets—targets that are consistent with the aggressive emissions reduction pathways outlined by the Intergovernmental Panel on Clim ate Change (IPCC).
The shift, though insufficient, is evident. In 2016, the world recorded the slowest increase in greenhouse gas (GHG) emissions since the early 1990s, except for global recession years. This is mainly due to two factors: lower coal consumption and increased generation of renewable power. In fact, global carbon emissions registered “almost no growth” from burning fossil fuels for the third consecutive year despite global economic growth exceeding 3 per cent a year.
Technological innovations triggered by these driving forces are changing the way we know the energy sector. Here are five technological trends that are set to herald the massive energy transition worldwide. India will be heavily impacted by these as it has huge potential to leapfrog to a cleaner future.
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