India’s transition path to clean energy is about get steeper

The voluntary pledges were made as part of the Paris pact of 2016, when close to 200 countries under the UN’s aegis agreed to set themselves targets for the reduction of carbon emissions. The power sector is India’s single largest polluter, given our heavy reliance on coal as a fuel to generate it.

While our fast-tracked renewable capacity addition is testimony to a slew of policy measures taken to spur solar electricity production, falling global prices of solar panels—they crashed by 90% over the past decade—have made a significant difference too.

Shortages across India had signalled demand and we got a robust solar response.

Today, when the sun shines, we have surplus electricity. The state-run power utilities of various states have been turning away new solar supplies even where bulk producers offered competitively priced deals bundled with storage batteries to ensure round-the-clock supply.

They may well be expecting prices to soften further, even as global warming steepens the demand path. Over the last three years, residential consumption has grown at 10% annually on the back of brisk air-conditioner sales.

Household consumers now account for almost a third of all power consumed in India. Supply shortfalls in recent times, however, have been plugged by electricity sourced from fossil fuels. This reflects a lag in bridging weather-related supply gaps from wind and solar sources.

Pumped hydro storage projects are part of the solution, but these take time. Using batteries would be faster; once expensive, they have grown cheaper and await a scale-up to tackle the ‘intermittency’ of renewables.

While state utilities will need to sign bulk deals for solar power bundled with storage, we must also enlarge our rooftop solar (RTS) capacity.

Decentralized panels mean that much less electricity is hauled across large distances, reducing infrastructure costs and transmission losses. The penetration of RTS, however, remains at a modest 16% of total utility-linked solar capacity.

Here’s the challenge. Utilities are not keen to promote RTS, as it may herald the partial exit of large household consumers, which is bad for them since they pay close to the actual supply cost.

Second, under the Centre’s scheme to support RTS installations, utilities pick up excess electricity from these consumers during the day, when power rates are low, and then provide equal supplies in the evening without any extra charge even though this power is about four times costlier; this distorts their account books.

On the other hand, for smaller domestic consumers, the incentive to install panels and sell utilities rooftop power is blunted by the heavily subsidized tariffs they pay.

While the Centre has sweetened the RTS deal with cheap loans to help rural households pursue economic activity, the attendant tariff distortions need a sunset clause.

This calls for a new roadmap that can unleash the true power of decentralized solar panels.

To achieve this, we need local market intermediaries that link up decentralized supplies in local geographic areas, so that excess daytime power can be traded efficiently and storage players can also plug in; the power exchanges we have today do not engage retail consumers.

Mass-market trading must evolve quickly for India’s energy transition to gain pace and aid inclusive growth.