The narrative of our rapid transformation to a renewable energy-powered planet is suddenly dominating headlines.
In India too, news of a shift away from coal power and towards clean energy has been doing the rounds. The Bloomberg New Energy Finance New Energy Outlook 2017 report released last week estimates that renewables will comprise 49% of India’s power generation by 2040. Solar and wind energy prices are also plummeting in India after a series of record low bids in auctions across the country and are seemingly competing with coal-fired power plants.
The government is planning India’s energy future based on the goal of 175 gigawatts of renewable energy capacity by 2022 and according to the draft National Electricity Plan released late last year, we will have a capacity of 275 GW of renewable energy by 2027.
However, this optimism of a swift transition to green energy is premature and doesn’t take into account the hidden costs and difficulties of transitioning from fossil fuels.
Is it the right goal?
While there has been a plethora of analysis on whether India will meet the 175 GW goal by 2022 – the overwhelming consensus is that it will not, as the current capacity stands under 60 GW and the country is adding less than 15 GW per annum – few have stopped to ask if such a goal is even desirable.
The record low renewable energy prices also masks the facts. First, renewable energy continues to be generously subsidised in India, so there is no fair basis for arguing that it is cheaper than coal or other fossil fuel. Second, particularly in the case of solar power, the prices are so low that they are unsustainable.
The low bids pose significant risks over the lifetime of the project, which are being ignored in the race to gain a foothold in a booming solar industry – in short, this is a bubble. The falling prices are mostly a result of the significant drop in manufacturing cost of Chinese-made solar panels, meaning the Indian solar energy industry relies heavily on cheap Chinese imports.
This poses many problems. The financial basis of these projects will be threatened if the Chinese government alters its policy of offering generous subsidies to its domestic manufacturers. The reliance on imports is also hurting Indian solar panel manufactures, who are now aggressively lobbying for government support from foreign competition, which, if realised, will drive up prices.
Thirdly and most importantly, the metric of Rupees/KWh or Levelised Cost of Electricity, which reflects the full life-cycle costs of a power-generating technology and is used to compare electricity prices, is a flawed measure for evaluating intermittent electricity sources such as solar and wind energy, which add significant integration costs to the grid.
The basic problem of wind and solar generation is that it cannot run all the time as it is dependent on the availability of the energy sources. For instance, in India, the peak power demand is at 6 pm, when solar energy is not available.
As the share of intermittent renewable generation increases in the grid, managing variable renewable energy will become increasingly complicated. The draft electricity plan estimates that renewable energy generation will contribute about 20.3% of the total energy requirement in 2021-’22 and and 24.2% by 2026-’27 respectively, if targets are met.
However, in countries like Germany, where renewable energy penetration is relatively high, operators find it difficult to maintain grid reliability despite significant grid interconnectivity within Europe and infrastructure systems that are far ahead of India, where the primary grid-balancing mechanism is load-shedding.
Germany also has one of the highest prices for electricity in the world, with the renewables revolution paid for by consumers.
To manage the rising share of renewable energy in the grid, thermal power plants will have to be ramped down, so that the grid can take in power from renewable sources whenever available. However, thermal plants cannot be shut down completely, because when solar and wind energy are not available, alternatives will be needed to provide more power to the grid. Lowering the output of thermal power stations affects their profitability, as they lose out on revenue. This unavoidable presence of financially struggling thermal power plants will therefore become inevitable in a high renewable energy system, as seen in the case of Germany.
The other way to manage the intermittent nature of renewable energy is greater connectivity between regions, so that excess power from one region can be transferred to another. However, increasing inter-regional connectivity and strengthening transmission lines is expensive. Lastly, if the share of renewables in the grid increases beyond a certain level, the grid will reject it and it will be wasted. This is already happening in Tamil Nadu, for instance, which has a high renewable energy share.
Meanwhile, even as the government is pursuing an ambitious renewable energy goal, progress on electrification continues to be dismal. India now has a power surplus, which may sound like good a thing but it isn’t. Vast areas of the country continue to lack access to the grid, which artificially lowers the power demand. Pushing for intermittent and expensive renewable energy sources at all costs is a perverse bet on the future of the faceless many who lack basic and cheap power.
Renewable energy should not become a goal in itself. The advantages offered by wind and solar power need to be weighed against a host of other considerations such as cost, grid dynamics, the social contract of electricity provision and other related challenges, such as land acquisition. This is not an argument in favour of coal power – far from it. India needs to take ambitious action on climate change and phase out coal power plants. This will also boost its leadership credentials in the international arena at a time when the US is ceding ground – having exited the Paris Agreement in May – and help tackle other critical issues, such as air pollution.
Phasing out coal while sustainably increasing the share of renewable energy in the grid requires a three-point plan.
First, India needs to increase nuclear power share in electricity generation as it is economical and also supports our climate action goals. The Union Cabinet’s decision to build 10 new indigenous nuclear reactors is welcome, but this is just a start.
Alongside nuclear plants, investing in natural gas infrastructure such as pipelines, regasification terminals (to turn liquified natural gas back to vapour) and Combined Cycle Gas Turbine plants (in which a gas as well as a steam turbine is used and which is said to be more efficient) is critical. Diplomatic efforts to secure gas imports must run in parallel. Replacing coal power plants with Combined Cycle Gas Turbine plants, that perform well with respect to helping integrate renewables and have half the emissions of coal is an important step to a future low carbon grid.
Lastly, the government needs to stop importing cheap and low-quality Chinese solar panels. While that may drive up costs in the short term, it is likely to help develop a healthy domestic solar panel industry and invite sustainable bids from project developers in the long run. Additionally, dynamic auctions for renewable energy with transparency in bids and market information is important and will ensure rigour in project bids, restoring confidence in India’s green energy future.
Switching from coal to gas, scaling up nuclear power and building a sustainable domestic renewable energy industry are sensible goals for an ambitious climate and energy policy. Transforming the mammoth electricity grid, when faced with significant infrastructure and economic challenges, is unfeasible. Changes in our energy system will be complicated and slow, given that we are yet to even fulfill the basic requirements of round-the-clock-energy access for all.
For a high share of renewable energy in India’s future power grid, investments into improving grid reliability and ancillary services, scaling up flexible baseload sources (that can provided the minimum amount of electricity needed at all times), and fixing the electricity market to introduce spot pricing and other mechanisms are urgently required. A dose of realism need not dampen ambition but can instead help ground it in more informed policy-making.
Aniruddh Mohan is a Humboldt Foundation International Climate Protection Fellow for 2017-’18 and research fellow at Tandem Research.