Access to affordable, reliable and sustainable energy is a global priority and has critical implications for other development targets, including economic growth, poverty alleviation, infrastructure development, employment generation, climate change, better health and protection of natural ecosystem services. Energy is an important area of policymaking in India. It is the cornerstone for the country’s economic growth, infrastructure development and improvement in the standard of living. Power generation represented 49 per cent of India’s primary energy demand in 2017, and it is expected to rise to 56 per cent by 2040. India’s power demand is set to increase multifold owing to greater economic activity, electrification through schemes such as the PradhanMantriSahajBijliHarGharYojana (Saubhagya), and increased domestic consumption, mobility and cooling requirements. While India is self-sufficient at present, it is expected to significantly expand its installed power capacity to meet these demands in the future.
Although conventional low efficiency coal-based power dominates the Indian electricity grid, additional power capacity is expected to come from a mix of relatively higher efficiency coal-based, nuclear and renewable energy technologies. Currently at 85.7 GW, renewables contribute 17 per cent to the total generation in India, growing at a CAGR of 15 per cent since 2010-11. India has set a renewable energy target of 175 GW by 2022, which includes 100 GW of solar, 60 GW of wind, 10 GW of biomass and 5 GW of small-hydro power. In its nationally determined contribution (NDC), India has committed to increasing the share of non-fossil-based installed power capacity to 40 per cent by 2030. More recently, the country has updated its overall renewable energy target to 450 GW.
While the impacts of modern electricity such as increased economic opportunities, improved indoor air quality and better education outcomes are technology agnostic, different power generation technologies have different costs and benefits. Renewable energy is a relatively clean source of power generation, which provides benefits in the form of health improvement, employment generation, skill development, energy security and water availability, climate change mitigation and climate resilience. However, renewable energy may also entail certain trade-offs, such as increased diversion of agricultural and forest land, particulate matter emissions from the combustion of biomass, and ecosystem impact from the diversion of rivers for hydropower in addition to the technological costs of integrating variable and intermittent renewable energy.
It is critical to consider the impact of energy policy planning and implementation on sustainable development in the Indian context. India is highly vulnerable to climate change and is estimated to have the highest economic impact of climate change globally. Given the lock-in period of deployed energy systems and technologies, energy policy choices have long-term implications for sustainable development goals. Even though the energy sector alone cannot address these issues, it has the potential to contribute to these desired sustainable development outcomes, which include health improvement, job creation and water availability. Hence, a systematic evaluation of the socio-economic and environmental costs and benefits can enable informed choices, planning and implementation.
In a recent working paper titled “Assessing the Sustainable Development Impacts of Renewable Power Technologies in India: An Economic Returns Framework,” the World Resources Institute (WRI) has developed a methodological framework for identifying and assessing the relevant socio-economic and environmental impacts of renewable energy technologies and estimating the economic rate of return (ERR) as a comparable metric to support decision-making processes in India’s energy sector.
In the paper, WRI has worked on average benchmark data available at the national level and considered the marginal costs and benefits from renewable energy deployment. These illustrative estimates show that ground-mounted solar power provides the highest economic return to society across different input scenarios, whereas wind power generates the lowest economic returns. The analysis does not provide conclusive estimates for small-hydro and biomass power generation due to their high upfront capital costs and operational costs, which increase over the lifetime of these installations.
The estimates from the analysis highlight the key economic drivers for power generation based on renewable energy technologies. The authors have suggested that these estimates provided in the paper can be improved with context-specific technology data, location-specific socioeconomic and environmental data, and improved methodologies for assessing and valuing impacts. The estimates represent an ex ante impact of sustainable development, and the actual costs and benefits realised depend on the ways in which deployment and operations are carried out, the availability of finance and resources, and changes in technology parameters. The framework presented in the paper can be used to assess impacts across the value chain of power generation.
Conclusion and the way forward
Based on ERR estimates for renewable energy in India, the benefits of technologies such as solar and wind outweigh their costs, thus strengthening the case for renewables. The research also emphasises the importance of incorporating renewable energy costs including grid integration costs, their impact across the renewable energy value chain, and the potential benefits that may not be assigned an economic value as key considerations in future decision-making and planning.
At the same time, although an ex ante assessment of renewable energy deployment indicates the potential costs and benefits, there is also a need to consider its indirect impact on socio-economic and environmental well-being. This would entail the identification of potential indirect impacts that could reinforce losses. These include the loss of tree or forest cover beyond what is required, the indirect economic or operational activities that occur in the area over the lifetime of the installations and the loss of livelihoods for landless, unskilled agricultural labour as renewable energy installations will divert the agricultural land. Further studies may identify methods to incorporate such impacts and improve renewable energy decision-making and implementation.
Although the research uses current power sector norms to provide national-level estimates, the results emphasise the importance of the regional context and the availability of location-specific data in estimating the costs and benefits of renewable energy technologies. Therefore, as a next step, a state-level analysis should be carried out in India to provide better insights and specific policy recommendations for improved renewable energy planning and deployment.