Despite challenges, India's plans for energy sector are ambitious. It needs proper execution

“Do you wish to see the future of energy?” asks Hardeep Singh Puri, Union Minister of Petroleum and Natural Gas, during an interaction with Business Today. “Well, it’s right there!” As the afternoon sun clears up the leftover January fog, a row of solar panels gleam on the roof of his sprawling bungalow in New Delhi’s Lutyens zone. “India’s energy transition in some respects is a sui generis case. The country has to ensure the transition to green and sustainable energy without affecting energy availability and affordability,” he emphasises.

The panels on the roof of Puri’s official residence serve as an apt metaphor for India’s ambitious target of achieving net zero emissions by 2070. The country is looking at getting there by meeting 50 per cent of its electricity requirements through renewable energy, which is the highest among G20 economies.

India has made significant progress in this direction. By November 2021, it had successfully installed 156.83 gigawatt (GW) of green energy, or over 40 per cent of the target capacity (390.8 GW) of 2030—a full nine years ahead of schedule. A confident Raj Kumar Singh, Union Minister of Power, New & Renewable Energy, claims that India is now all set to breach the revised projection for 2030. “I will tell you right now that 65 per cent is an understatement as our established capacity today is 170-odd GW of non-fossil. We have about another 80 GW under construction. That makes it 250 GW!”

“Combating the ongoing climate crisis needs strong global cooperation to accelerate the transition to cleaner energy resources,” says Anil Chaudhry, Zone President and CEO & MD of Schneider Electric India. Referring to India’s current presidency of the G20, he believes that it will provide significant opportunities for the country to accelerate and demonstrate the actions being taken to meet its clean energy commitments. “India is exhibiting one of the fastest transitions to renewable energy,” says Chaudhry. Adds Praveer Sinha, CEO & MD of Tata Power: “From launching the International Solar Alliance in 2015 to setting a target of reaching net zero emissions by 2070, India is on the path of transformation. The 2030 goals that may seem very daunting and difficult are achievable, with support and commitment from all stakeholders.”

Over the next few years, Sinha expects to see movement on newer technologies, including battery storage, green hydrogen and small modular nuclear plants leading the growth of clean energy in the country.

Energy Security

Amid reports of India already having overtaken China in population, both Puri and Singh would be mindful of the actions being taken by their ministries today, laying a firm foundation in ensuring the country’s energy security. This is required to meet the prerequisite of rapid urbanisation, expansion of transportation infrastructure, increase in industrial production and a growth in electricity consumption in the decades to come. India, the world’s fifth-largest economy, imports nearly 85 per cent of its oil and 45 per cent of its gas requirements every year. And ever since the start of the Russian military action in Ukraine a year ago, Puri is often found aggressively defending India’s purchase of Russian oil at several international forums. “If you have friends who are willing to sell us oil at a lesser rate, we will buy from them,” he tells BT in a lighter vein. In FY22, the country witnessed a 100 per cent increase in its oil import bill to $119 billion on the back of a recovery in global demand and the Russia-Ukraine conflict.

With an aim to reduce its oil import dependence, the central government intends to increase the country’s exploration acreage to 0.5 million sq. km by 2025 and 1 million sq. km by 2030. The 99 per cent reduction in no-go areas or places where exploration activity was prohibited earlier has resulted in freeing up 0.91 million sq. km area for hydrocarbon exploration. “If you are 85 per cent import-dependent, you have to increase your exploration and production dramatically. We are setting up a National Data Repository (NDR) so that large companies can come and participate in energy exploration in the country’s sedimentary basins,” says Puri. Not just that, work is also underway on creating a cloud-based and artificial intelligence/machine learning (AI/ML)-powered NDR 2.0.

The government is also looking at augmenting blending of ethanol, made from sugarcane and other agri commodities in petrol. Plans are afoot to increase ethanol blending to 20 per cent by 2030, from the current level of 10.17 per cent. Besides, the Ministry of Petroleum and Natural Gas has asked oil marketing companies Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation to start preparations for a switchover to green hydrogen from grey hydrogen for hydrodesulphurisation (a process by which sulphur is separated from fuels). Puri refers to a 2017 meeting he had with then-acting US energy secretary Grace Bochenek after being newly inducted into the Union Cabinet. “She made an unusual request of ‘one, for one, for one’. When I asked her to elaborate, she said 1 kg of green hydrogen for $1 for 10 years; that made me reach out to our oil companies. I asked them how capable were they of bringing down the price to $1?”

Ashish Gaikwad, MD of Honeywell Automation India, a leading integrated automation and software solutions provider, believes that all such new initiatives under sustainability are not only helping in the cause of making the country energy sufficient but will also strengthen the economy. “What could be better than [that] for a country like ours, which is dependent on supplies from outside for a large portion of its crude oil requirements? Other than being a tricky situation for our energy security, it also takes a toll on our foreign exchange. If we reduce our import bill on that account, it is going to benefit the economy and make the rupee stronger as our trade balance improves,” he says.

The country’s ambitious renewable energy targets are already acting as a catalyst for the transformation of its power sector, according to International Energy Agency (IEA) data. Going forward, it will be equally critical to put the industrial sector on the same path, through more widespread electrification, material and energy efficiency, technologies such as carbon capture, utilisation and storage (CCUS) and a gradual shift to lower-carbon fuels, recommends IEA. However, it’s not going to be easy. Tata Power’s Sinha warns that challenges such as the over-dependency of the solar supply chain on foreign counterparts, financially ailing distribution companies, lack of transmission and distribution infrastructure, continued reliance on traditional fuels in some pockets of the country and lack of reliable electricity supply for rural consumers continue to impact the sector’s transformation.

The government has been trying to address these issues through a wide policy framework. A production-linked incentive (PLI) scheme has been announced for GW-scale manufacturing of high-efficiency photovoltaic cells and a 40 per cent anti-dumping duty has been levied on Chinese imports. In August 2022, the country’s power systems operator, the Power System Operation Corporation (POSOCO) barred 27 power distributors from buying electricity from power exchanges to meet their short-term requirements over non-payment of dues to generators. Simultaneously, the Electricity (Amendment) Bill, 2022, that seeks to bring about comprehensive reform is currently under review by a parliamentary committee. More than 93.4 million LPG connections had been released till July 2022 for below poverty line (BPL) households under the Pradhan Mantri Ujjwala Yojana (PMUY) for cooking.

The country has also been trying to bring down the cost of storage of renewable energy. “You can’t have energy transition unless you crack the storage problem. Storage has to become viable. All these developed countries that have been talking about the need for climate action and energy transition have done nothing. The largest quantum of storage set up by them is 450 MW!” says Power Minister Singh. He says the disruption caused to global supply chains in the aftermath of the Covid-19 pandemic was a lesson for the world and every effort must be made to expand them by moving away from lithium-ion to other battery chemistries. In April 2022, the Solar Energy Corporation of India, a public sector enterprise under the Ministry of New & Renewable Energy, came out with a tender for an aggregate storage capacity of 1,000 MWh, the largest such bid globally.

Honeywell’s Gaikwad is confident of India’s potential to deliver. “You will now see the announcement of giga factories… Giga factories for making solar panels, fuel cells, electrolysers and batteries; all of these components are essential for energy transition. These will be probably the world’s biggest such factories [in India] and will come about in a span of the next two to three years,” he declares.

Hydrogen Hub

On January 4, India announced the National Green Hydrogen Mission. Power Minister Singh forecasts India’s emergence as the commodity’s leading supplier. “The [production] capacity for green hydrogen will go up from 5 million metric tonnes (MMT) to at least 10 MMT [by 2030] because we had started putting in place policies such as free transmission, open access and non-applicability of cross-subsidy surcharges on renewable energy required for making green hydrogen much in advance.” He is quick to add that India can supply green hydrogen and green ammonia at prices that are less than what other countries can offer.

In the first phase of the mission, the country is going to replace grey hydrogen used in oil refining and grey ammonia used in fertiliser manufacturing for domestic use. India’s current consumption of grey hydrogen and grey ammonia stands at 18 MMT, according to government data. Referring to potential export markets for the commodity, Singh says, “Other countries need green hydrogen and green ammonia but don’t have the sun or land to produce renewable energy. But we have a competitive advantage; we have the sun, land and a thriving green energy industry.” The government would also be announcing a PLI scheme for electrolyser manufacturing. An electrolyser is used to separate hydrogen and oxygen molecules in water to produce green hydrogen.

Upbeat with India’s initiatives, Ahmad Chatila, Promoter of the US-based venture capital firm Fenice Investment Group and former CEO of Sun Edison, says that with green hydrogen the country has the potential to become a global energy supplier like Saudi Arabia. “In energy transition technologies, you need three things—human capital; land and natural resources like sunlight and wind speed; and capital. India has the first two in abundance. So, India can do 1 to 2 terawatts (TW or 1,000 GW) of wind and hydrogen. No questions there.” Already, the EU member states, Japan and South Korea have evinced interest in sourcing green hydrogen and green ammonia supplies from India. Green hydrogen and other low-carbon technologies can potentially create an $80-billion market in India by 2030, says IEA.

But it’s not going to be easy. The country will need on average $160 billion per year in investments across its energy economy between now and 2030 to meet its zero-emission goals, projects IEA. Another study by Standard Chartered puts this at $17.77 trillion by 2070. Therefore, arranging access to low-cost long-term capital will be important. Yet, despite the challenges, India’s success will pave the way for other developing economies to also aspire for a low carbon robust economic growth. Or, as Honeywell’s Gaikwad puts it, it will establish India as the global leader in “the energy transition from molecules (fossil fuels) to electrons (renewables)”. 

@manishpant22