May 2022

The Russia-Ukraine conflict has continued to rage for more than 90 days now, causing a major humanitarian and economic crisis, and its impact is being felt across the globe. Many countries that had just started stabilising after the disastrous economic impacts of the pandemic are again facing a challenging time, owing to global supply chain constraints, increase in commodity prices and disruptions in long-term trading agreements.

Russia has historically been one of the leading global exporters of oil and gas, and thus, this conflict has severely impacted the global energy landscape. Europe’s historical de­pen­dence on Russian gas has meant a further hike in gas prices across these gas-importing nations, which were already reeling from gas shortages.

India too has not been immune to the overall shock in energy markets. Elevated prices of crude oil and imported coal, rising costs of logistics and essential commodities as well as the flux in the rupee versus the dollar have created upheavals in the country’s growing energy sector. The renewable energy sector, too, has been indirectly impacted by all of these factors.

For instance, solar module costs have gone up due to a spike in the prices of essential commodities such as copper, aluminium and nickel and so have transportation cos­ts owing to higher oil prices. Thus, solar project costs and tariffs are likely to be impacted, especially with the imposition of basic customs duty on imports. Similarly, rising freight and raw material prices also impact the wind industry, with turbine manufacturers expecting lower profit margins. Further, supply chain constraints are driving up the prices of batteries, which is critical for India’s transition to clean energy.

However, these upheavals are expected to be short term and, overall, renewable energy growth is not expected to be impacted significantly. The conflict and the rising energy security concerns have led governments and corporates to accelerate their energy transition strategies and ramp up their clean energy investments.

For India as well, the current crisis builds a strong case for wide-scale renewable energy deployment and the creation of a clean, diversified and sustainable energy mix.

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