Hello and welcome to this week’s edition of Lights On, a newsletter that brings you the key stories on energy and climate change in South Asia.
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This week I wanted to try something new. One of my pet peeves when it comes to the international coverage of Indian affairs is how its clean energy progress is always oversimplified. India’s big promises are always taken at face value and an increase in capacity is too often equated with how much energy reaches homes. It’s not that simple.
So here goes my myth buster.
A climate optimist’s darling
- India likes to aim high with its promises, especially in the field of renewables
- The reality is more nuanced: Progress is there, but tech and markets are not ready to deliver dirt-cheap clean energy
India’s booming solar sector is a comforting story for climate optimists dispirited by a steady growth in global emissions that a pandemic can barely dent, and temperatures that keep breaking new records year on year. And India does have ambitious goals, at least on paper. By 2022, the plan is to have 100GW of solar installed, as part of a portfolio of 175GW of renewable sources. Last November, the government also upgraded its targets to achieve 55% of installed renewable sources by 2030. This is an additional 15% above the Paris pledge, which aimed for 40% of its energy mix to be from solar, wind, biomass, waste to energy and small hydro by the same year.
However, the figures that don’t make headlines around the world are less encouraging. As of the end of March, India’s cumulative capacity sits at 35GW, suggesting that the chances of it meeting the Paris goal are pretty slim.
Baby steps - A girl cleans a solar street light in her village of Tinginaput, in India. Source: Abbie Trayler-Smith / Panos Pictures / DFID UK
It’s true that solar in India is cheap - the agency IRENA estimates that in 2018 the installation of utility-scale solar, the big solar plants feeding into the grid, were the cheapest in the world, and 27% cheaper than those commissioned in 2017. And investors are racing to offer the lowest possible electricity tariffs for newly developed projects. In 2018, ACME Solar, one of the country’s major developers, quoted a record low 2.44 Indian rupee (about $0.032) per kilowatt-hour (kWh) for a 600 MW solar project auctioned by the government owned Solar Energy Corporation of India (SECI). This is a notch below the current standard tariffs that hover between 2.50 and 2.87/kWh.
A risky gamble
A tariff that astonished the country’s energy community, one so impossibly good that it was, in fact, impossible. Citing the hardships brought by the coronavirus crisis, ACME canceled the agreement with SECI, not without an acrimonious legal battle. And while a pandemic surely falls under the ‘force majeure’ category, the bid was unrealistic to start with, according to Indian observers. “India is more or less a price taker, it’s not really driving any market force, including interest rates”, says a senior energy professional who asked to remain anonymous. “The solar panels are mostly imported, the electronics are imported and the plant’s structure depends on steel price,” he says.
To be able to offer record low tariffs, a solar developer needs to have enough financial resources to cover potential shortcomings once the unit is up and running, or a fully operational supply chain and the right manpower already in place. More importantly, it must believe it can complete the project well ahead of schedule and start cashing in right away, my source says.
In this case, prices of solar panels going up and India’s foreign exchange falling significantly in less than one year may have scuppered what was already a very tight bid, my source explained, and led the developer to use the pandemic to get out.
Such a hypothesis would be supported by a study out this week, which highlights the successes of the Indian solar industry but notes that in the current market conditions, tariffs below 2.5 rupees/kWh are not financially viable.
Round the clock energy on the cheap
If you are reading this newsletter from outside India you may not be aware of this, but India’s clean energy transition is peppered with aggressive bets that don’t materialise - starting with its visionary but unrealistic Paris targets. Actual progress may prove to be slower than promised, but this policy of shooting for the moon is also generating real momentum.
Slowly but surely - India’s renewable progress. Source: Our World in Data
Round the clock energy supply is the next frontier for Indian renewables, and investors are already promising to deliver electricity from such projects at a very attractive price. ReNew Power, India’s largest renewable energy company, just won a bid for a 400MW renewable project, committing to utilize 80% of its capacity every year - while conventional renewable plants generally use about 40% of their potential output.
If this works, it would help solve a major weakness of renewable infrastructure — its intermittency. Wind power can only be generated when the turbine’s blades rotate, and solar panels are only useful when the sun shines. But a system that combines wind, solar and other clean sources such as hydropower with large scale storage is able to dispense energy whenever you want. ReNew Power offered a starting tariff of 2.9 rupees/kWh (about $0.04 cents) for the first year, a price that would gradually increase over time.
“It’s a premium service, so it needs a premium price,” says Kashish Shah, a researcher at the Institute for Energy Economics and Financial Analysis in Australia (IEEFA). The current price offered is lower than the equivalent tariff for thermal power coming, for example, from a coal plant. Once again, this raised eyebrows. Large batteries are still super expensive in India and the price promised is just too low - in fact, experts say that it should be double the current rate to be viable. Plus, Shah says, ReNew Power has not specified what mix of technologies will be used, and if it expects to make a profit at all.
But Shah is also an optimist. He says that “ReNew Power is taking that initial risk to gain experience and be better prepared for the times when batteries will be cheaper”, calling this “cost of learning by doing”. A trial and error approach that, for all its flaws, is driving India’s slow but steady energy transition.
Hot in the region
In the middle of a heatwave this section’s title reads like a depressing pun: today it’s ‘only’ 39C in Delhi but these days 45C highs are not uncommon.
If you want to know what’s up with this hot spell — and why this year is different — I recommend this explainer on The Indian Express, written by Anjali Marar - Why the present heatwave in North India is unusual. Surprise surprise, climate change plays a part.
And an Indian company has come up with a new refrigerator powered by farm waste, abundant in the countryside. It could be just what we need right now.
Ice age: Off-grid ways to turn down rising heat for the poor - Thin Lei Win, Reuters
Hot from the world
The remarkable power of the prickly pear - Miguel Trancozo Trevino, BBC Future Planet
It’s not going to solve energy poverty, but this feel good story is a nice break from the inevitability of fossil fuels, and an inspiring tale of low-tech innovation. We need those too.
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