Economies across the world are focusing on accelerating clean energy transition. While renewables have grown apace in the past few years, the recent Russia-Ukraine war and its impact on global energy prices has led countries to lay greater emphasis on energy security, particularly utilisation of locally available renewable resources. India, which has an installed renewable energy capacity of 158 GW, is also aiming to reach 500 GW by 2030, but the road to meet the target is glutted with challenges as well as opportunities. At a recent panel discussion at the India Infrastructure Forum on May 11-12, 2022 in New Delhi, Mohit Bhargava, executive director, Renewable Energy, NTPC Limited; Dr Daniel Bradley, team leader, energy and low carbon growth, British High Commission; Pallavi Bedi, partner, L&L Partners; Himanshu Chaturvedi, Chief strategy officer, Tata Projects Limited; and Anish De, partner, global sector head, power and utilities, KPMG, deliberated on various opportunities and challenges in India’s clean energy transition. Renewable Watch presents a summary of the discussion…
Need to accelerate energy transition
Energy security and sustainability are interdependent. Energy security and clean energy transition agendas are completely inseparable, especially with the ongoing energy price volatility. With the Russian-Ukraine crisis as well as cyclical factors, international coal prices have reached $400 per tonne, while spot natural gas prices range between $35 per mmBtu and $40 per mmBtu. It has, therefore, become imperative to create a power supply system that is resilient and not affected by energy price volatility. Renewable energy offers the ideal solution in this regard as it can absorb these shocks if and when they happen in the future.
If India has to wean itself from fossil fuels, power generation companies have to step up and transition towards clean energy generation. The country’s largest generator, NTPC has already announced its shift to renewables. The public sector major has a target to have an installed renewable energy capacity of 60 GW by 2032. It aims to have a renewable portfolio as large as its thermal portfolio. Looking ahead 10-20 years from now, NTPC’s portfolio will comprise 50-55 per cent of renewable energy including hydro and the remaining from thermal sources. The company also plans to decarbonise its thermal power plant fleet, not necessarily through carbon capture but also through other fuels such as biomass-based fuels, green methanol and green ammonia, which can replace coal in boilers. In addition, it is taking steps towards energy conservation, e-mobility and waste-to-energy. Notably, NTPC is also looking at nuclear power, particularly because its role will grow in order to provide resilience and reliability to the power system since the supply of round-the-clock power at high availability at each time block is still a challenge with renewable energy.
In order to accelerate energy transition, India can take cues from global experiences. For instance, the UK has made a fast transition away from fossil fuels. The country has one of the largest offshore wind power capacities in the world and clean energy transition is the highest priority for the UK. Further, decarbonisation needs to be pursued across other sectors apart from energy as well. Sectors such as building, cement and construction also have significant potential in this regard.
Focus on green hydrogen
Green hydrogen is a potential alternative to fossil fuels in various hard-to-abate sectors such as refineries, fertilisers, and iron and steel industries. India is already a large consumer of hydrogen and its consumption is slated to grow exponentially as the economy grows. Even if we consider 20-25 per cent substitution by green hydrogen in a time frame of 20 years, electricity generation capacity of 300-400 GW will be required.
The cost of green hydrogen is a concern but it is expected to decline. The cost of green hydrogen (before the recent spurt in gas prices) was three times the price of grey hydrogen produced using natural gas. Currently, due to the decline in international oil and gas prices, the price of green hydrogen is competitive vis-à-vis grey hydrogen, at least in the short term. Even in the long run, investments in the upstream oil and gas sector are unlikely to increase, owing to the ongoing energy transition, and therefore, gas prices may not reach pre-Covid/Covid levels. If the cost of green hydrogen comes down to $2 per kg vis-à-vis $3.5-4 per kg, it will be cheaper than hydrogen produced through steam methane reforming. However, India needs to ramp up its efforts in the segment and there is a need to create industrial capacity. Current efforts on the green hydrogen front are mostly subscale and only small tenders, typically for pilot projects, have been released in recent months. There is a need for government support for creating demand as well as subsidies.
Regarding applications, green hydrogen will mostly be utilised by industries (refineries, fertilisers, steel, etc.) in the short run and probably long-haul shipping and air transport in the long run. Green hydrogen is not really an effective option for electrification, owing to lower round trip efficiency as well as a source of storage due to unfavourable economics. Notably, NTPC is running a pilot project wherein it is capturing carbon dioxide and mixing it with green hydrogen to make green methanol, which can be fired in boilers to generate electricity. The company is quite positive about the project as it would meet three of its requirements – reducing carbon dioxide emissions, using renewable energy and utilising green hydrogen. The replacement of even 25 per cent of coal with green methanol will significantly help the public sector undertaking to decarbonise its operations.
Challenges and outlook
The distribution segment is the Achilles’ heel in the power value chain. Distribution utilities are oblivious to their obligation to serve load or meet customers’ demands. Several tenders have been awarded by the Solar Energy Corporation of India but utilities have not signed power purchase agreements. The policy and regulatory regimes are full of loopholes. The draft amendments to the Electricity Act, 2003, are yet to see the light of day and many of the amendments need to be revised for greater clarity. The framework for storage and ancillary services is not lucid enough. Though a policy on green hydrogen has been notified, there is a need to provide more details to stakeholders. There is a need to uncomplicate the regulatory framework in the renewable energy sector. It is essential to open up the supply side of the power value chain, while preventing distribution utilities and regulators from posing hurdles. Further, there are major tariff barriers that need to be addressed. Several charges and taxes need to be rationalised. The policymakers’ intent should be to have greater competition, minimum regulation and proper accountability. Currently, the government is still quite deeply involved in the renewable energy market for creating demand and framing rules for auctions, which is fine to an extent, but beyond a point, the government’s increasing role may create legal hurdles.
The country has been adding 10-15 GW of renewable energy capacity every year but we need to add up to 40 GW. Further, if green hydrogen comes into play, the country would need 1,500-2,000 GW of renewables by 2047. In order to add renewable energy capacity of this magnitude, the manufacturing capacity of modules and other equipment would need to be scaled up manyfold. There is a severe shortage of modules in the domestic market today and rules have been framed to discourage imports from China. The manufacturing facilities coming up under the production linked incentive scheme will take 24-30 months to become operational.
Net, net, the country’s prospects of clean energy transition are promising but significant work is to be carried out on the ground to address various challenges.