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India has emerged as a global leader in renewable energy, with investments in renewable energy topping fossil fuel investments.After adopting its National Electricity Plan (NEP) in 2018, India remains on track to overachieve its “2˚C compatible” rated Paris Agreement NDC climate action targets.
Estimates show India could achieve the more ambitious part of its NDC goals—a 40% non-fossil-based power capacity by 2030 more than a decade earlier than targeted. Given these positive signals, there is significant potential for the incoming government to increase the ambition of India’s NDC to a “1.5˚C compatible” rating.
India could become a global climate leader with a “1.5˚C compatible” rating if it abandons plans to build new coal-fired power plants. This is an important consideration, as India’s CO2 emissions rose by 4.8% in 2018, largely driven by emissions from coal power plants.
Abandoning these plans is more than feasible when we consider recent developments such as a 50% decrease in the cost of solar power in just two yearsand several utilities shelving plans to build coal plants. For three consecutive years, renewable energy investment topped that of fossil fuel-related power investments and in 2018, solar investments exceeded those in coal. Given the price-competitiveness of solar PV, these should be India’s preferred choice of distribution companies. However, the NEP took a backwards step of including more than 90 GW of planned coal-fired capacity—and these risk becoming stranded assets.
While interventions in the electricity sector have largely been driven by strong policy commitments, action in the transport sector is governed by uncertainty. The Indian Government set up the National Electricity Mission Mobility Plan, aiming to provide incentives for adopting and manufacturing electric vehicles. This plan operates in an atmosphere of uncertainty over a broader transport strategy, with the government no longer pursuing its initial commitment to a 100% share of electric vehicles in new sales by 2030. This commitment would have been consistent with global benchmarks to reach full decarbonisation. A 100% share of electric two wheelers (not cars) seems to be the current formulation, but this is yet to be adopted as a formal target.
The recent election in India saw the incumbent government voted in with a similar mandate to the 2014 election. The government will now face the challenge of providing a strong policy platform to facilitate continued progress in the field of renewables, and adopt formal targets to encourage action in other sectors.
Our analysis shows that India can achieve its NDC target with currently implemented policies. We project the share of non-fossil power generation capacity will reach 60–65% in 2030, corresponding to a 40–44% share of electricity generation. India’s emissions intensity in 2030 will be ~50% below 2005 levels. Thus, under current policies, India is likely to achieve both its 40% non-fossil target and its emissions intensity target.
The ramp-up of renewables in India can provide access to affordable power at scale, and quickly. A 2018 report by the national coal mining company, Coal India, confirms declining future costs of solar and renewable electricity storage, which is likely to foster low-carbon investments. Investment in renewable power in India topped fossil fuels for the first time in 2017, according to the International Energy Agency. The government has signalled its intention to increase its previous 2022 capacity target for renewables from 175 GW to 228 GW.
There is still substantial uncertainty in India about coal power capacity and whether all renewables projects in the pipeline will be completed on time and integrated into the grid. In 2017, coal consumption increased by 4.8% or 27 million tonnes and the new NEP still forecasts coal-fired power capacity additions (CEA, 2018).
Expansion plans for coal-based generation have been found to be inconsistent with lower demand projections in independent studies, which is likely to exacerbate the issue of low utilisation rates of coal power plants, impacting their profitability and threatening to compound the already perilous financial position of distribution companies. Other drivers of stranding risk include coal shortages, water scarcity and air pollution regulation - as well as the competitive price of renewables.
Since 2010, the Indian Government has doubled the coal tax three times, reaching 400 rupees per tonne (around USD 3.2 per tonne) of coal produced and imported in the 2016–2017 budget. The tax is effectively a carbon tax levied at source, with the revenue feeding into the National Clean Environment Fund that provides finance for renewable energy projects. It generated revenues of USD 12 billion between 2010 -2018.
However, subsidies to coal amounted to USD 2.3 billion in 2016 alone. Removing subsidies for coal (and other fossil fuels) is an essential step to ensure effectiveness of the levied tax.
The government is also attempting to harness the potential of off-grid solar PV pumps to not only provide reliable electricity for pump sets, but also to provide additional income generation opportunities for famers.
On transport, the Faster Adoption and Manufacturing of Electric Vehicles in India scheme came into effect in April 2019, and provides incentives to purchase electric vehicles, while also including provisions to ensure adequate charging infrastructure. India’s charging infrastructure has been a point of contention, with many civil servants expressing concern at the lack of charging stations when the government announced that 500,000 civil service cars would be electric.
The Government has a variety of carbon pricing mechanisms to encourage energy efficiency in industry. A pilot system for small to medium enterprises is expected soon, and 37 companies are in the process of adopting an internal carbon price, with leaders including major cement producer Dalmia Bharat Cement Ltd.