By Kumar V Pratap
One is bombarded with data these days on why India should really join the net-zero or carbon-neutral coalition of nations, implying that, by 2050, the net carbon emissions of these nations would be balanced by carbon sequestration and removal to the identical extent, hence contributing net-zero carbon to the atmosphere. This would support the world retain the rise in temperatures to inside 1.5oC of the pre-Industrial Revolution temperature, thereby stopping catastrophic climate transform. Europe, Japan and South Korea have announced net zero by 2050, and China prior to 2060.
While the objective is laudable, we have to have to examine no matter if it is in the national interest. The energy generation capacity in the nation is about 380 GW, of which about 62% is thermal (primarily coal, 53% of total). India is abundant in coal, and the celebrated Hechsher-Ohlin theorem tells us that a country’s competitive benefit should really be based on its abundant resource. Adopting a net-zero carbon objective by 2050 would imply abandoning action based on this theorem and, consequently, might be a sub-optimal tactic.
There are several conventional factors why we should really not subscribe to net-zero by 2050. Though India is the third-biggest carbon emitter in the world, right after China and the US, Indian per-capita carbon emissions are an eighth of these of USA and significantly less than a third of China. The created nations have made use of the emissions route to improvement, whilst India is nonetheless building. Any pre-mature adoption of the net-zero emissions target will imply that a vast proportion of India’s population would continue wallowing in poverty for generations to come.
Finally, any substantive compensation mechanism from the created world to the building world in terms of finances and technologies has not materialised. So, it might be unethical for the created world to insist on premature adoption of net-zero targets by India.
India is currently amongst the extremely handful of nations which are effectively on their path to reaching their voluntary Nationally Determined Contributions (NDCs) as component of the Paris Accord (Conference of Parties 21, or COP 21, Paris, 2015). This involves decreasing the carbon intensity of its GDP by 33-35% compared to 2005 levels by 2030. Also, the non-fossil fuel capacity of the total electrical energy capacity of the nation would have to go up to 40% by 2030 and the nation has accordingly planned for renewable capacity of 450 MW by that year.
As solar energy achieves grid parity and more [the latest solar auctions are priced at Rs 1.99 per unit (NTPC, Torrent Power, Al Jomaiah Energy and Water Company, and Aditya Renewables) and round-the-clock (RTC) renewable power at Rs 2.90 per unit (ReNew Power) compared to average cost of supply of power in India of Rs 6 per unit], the renewable power (RE) transition in the nation is currently assisting reach India’s voluntary obligations aimed at stopping disastrous climate transform. It would also support in enhancing the expense-competitiveness of the Indian economy as the value of RTC renewable energy is about half of the typical expense of provide of energy in the nation.
However, this relentless rise of renewables has thrown up a quantity of challenges, which would come to be more acute as the proportion of RE in the total electrical energy mix increases. One of the most critical of these challenges is the rising economic unsustainability of the energy distribution sector, dominated by the public sector distribution firms (discoms).
As competitors in energy distribution increases simply because of the coming of age of RE, the biggest and the ideal shoppers of the discoms would get started to supply energy from the RE sources, utilizing open access in energy distribution, simply because that would be more expense powerful (DMRC is sourcing about a third of its energy needs from Rewa solar project utilizing open access). This would lead to decreasing demand of energy from the discoms (RE also has ‘must run’ status owing to its zero marginal expense) and commensurate reduced capacity utilisation (plant load element is currently under 54% presently) in the energy generation sector.
However, given that the discoms have currently entered into extended-term energy acquire agreements with primarily thermal and coal-based energy creating firms, they would have to spend the fixed expense of energy, additional adversely affecting their financials. This would lead to more stranded thermal energy assets, adding to the non-performing asset (NPA) challenge of the banks, the expense of which would in the end devolve on the government.
In this situation, what should really be the optimal tactic for the nation as far as adoption of net zero emissions by 2050 is concerned? Continuing with coal-initial tactic (simply because of our resource endowments) would imply loss of expense competitiveness and rising economic unsustainability of the sector. Also, there would be rising challenges to financing new coal-based energy plants by economic institutions owing to environmental, social and governance (ESG) considerations. On the other hand, pushing more RE (say, tidal energy and offshore wind) based on subsidies would make the discoms more financially unsustainable.
Therefore, the optimal tactic might be to cease all subsidies for all sources of energy (such as significant hydro, exactly where the capital fees are estimated at more than Rs 10 crore per MW) and let industry forces take charge. If this suggests that more RE comes onstream, simply because of its rising expense competitiveness, with consequential adverse effect on standard coal-based power—in Britain, the share of electrical energy generated by coal fell from 40% in 2013 to 2% in H1 2020 (The Economist)—so be it. This tactic would also imply that there is no forced adoption of net-zero commitments by 2050 by India.
Currently joint secretary, ministry of home affairs, and former joint secretary (infrastructure policy and finance), division of financial affairs, ministry of finance