India is currently at a pivotal moment of transformation, aiming to shift towards a sustainable and low-carbon energy future with an ambitious vision. According to Climate Policy Initiative, by 2070, the country is projected to see its population surge by over a quarter billion people, along with substantial gross domestic product (GDP) growth, soaring from USD 3 trillion (2023) to around USD 27 trillion (2070). Despite having current per capita energy consumption of just one-third of the global average, the country’s energy demand is likely to increase significantly with its economic expansion.

Acknowledging the significance of addressing climate change, India has committed to achieving net zero emissions by 2070. As part of this journey, ambitious targets set for 2030 include.

  • Reaching non-fossil-fuel capacity of 500 GW
  • Meeting 50% of energy requirements from renewable energy
  • Reducing carbon intensity by 45%, from 2005 levels
  • Reducing carbon emissions by 1 billion tonnes

As we look at India today, it is moving towards becoming a global leader in renewable energy, with a significant increase in both capacity expansion and tendering for new plants, as indicated by a range of recent research reports.

INDIA GAINING MOMENTUM WITH CAPACITY ADDITIONS 

During the fiscal year 2023-2024 in India, renewable energy (RE) accounted for over 70% of the 26 GW of new power generated in the country. The total installed energy capacity in India has now reached 442 GW, with RE making up about 33% (144 GW) and hydro contributing 11% (47 GW), as reported by CEEW Centre for Energy Finance (CEEW-CEF). For the first time, the share of coal in India's total installed capacity dropped below 50%.

In the fiscal year 2024, solar energy, encompassing grid-scale and rooftop installations, remained the primary contributor to India's renewable energy capacity expansion, making up around 81% (15 GW) of the total renewable energy increase. Wind capacity saw a substantial increase, nearly doubling to 3.3 GW from 2.3 GW in FY23. Reflecting India's ambitious renewable energy objectives, renewable energy auctions surged to an all-time high, with around 41 GW of capacity auctioned in FY24.

UNION BUDGET’s ROLE IN BOOSTING CLEAN ENERGY

The Union Budget presented by Finance Minister Nirmala Sitharaman focused on “green growth”. 

Here are some of the highlights of the same:

  • The "Pradhan Mantri Suryodaya Yojna" aims to install solar panels on 1 crore houses, providing up to 300 units of free electricity per month to these households. This initiative not only promotes renewable energy but also offers substantial financial relief to households.
  • The government will develop a taxonomy for climate finance to increase availability of capital for climate action (finance for adaptation and mitigation projects).
  • An investment-grade energy audit of traditional micro and small industries in 60 clusters will be facilitated. Financial support will be provided for shifting them to cleaner forms of energy and implementation of energy efficiency measures
  • Reduction in customs duty on certain capital goods used in the manufacture of solar photovoltaic cells and modules. The duty on these goods, which previously stood at 7.5%, has been slashed to nil, effective immediately
  • A roadmap for moving the ‘hard to abate’ industries from ‘energy efficiency’ targets to ‘emission targets’ will be formulated. Appropriate regulations for transition of these industries from the current ‘Perform, Achieve, and Trade’ mode to ‘Indian Carbon Market’ mode will be put in place.
  • Additionally, allocation of Rs 851 crore to the programme for wind and other renewable energy in the Union Budget 2024-25 against the revised estimates of Rs 946.30 crore. The government will also spent Rs 600 crore on National Green Hydrogen Mission.

DECARBONISATION OF HEAVY INDUSTRIES IS A MUST

Despite significant growth in renewables from various sectors, Industries stand as the largest energy end-use sector in India, releasing 920 million tonnes of CO2 each year. Emission-heavy industries like steel, cement, aluminium, petrochemicals, and ammonia contribute to 70% of the total CO2 emissions in India's industrial sector, with steel and cement industries alone responsible for 18% of the country's total emissions.

This offers a major opportunity for these sectors to kickstart decarbonization by embracing green electrification.

In 2022, India's heavy industries like steel, cement, aluminum, petrochemicals, and ammonia consumed 175 TWh of electricity, accounting for 11% of their total energy consumption, as reported by Ember. Particularly, the steel, cement, and aluminum sectors utilized 91% of this electricity.

By 2030, the electricity demand in India's heavy industries is projected to increase by 45% to reach 253 TWh. This growth is fueled by current technologies and anticipated growth rates. To fulfill this demand using renewable energy, around 120 GW of RES capacity will need to be added, possibly resulting in a reduction of 180 Mt of carbon dioxide emissions.

Implementing advanced electrification technologies fueled by Renewable Energy could potentially slash CO2 emissions from India's heavy industries by 37% (737 Mt) by the year 2050. This change would enhance India's clean energy and manufacturing industries by boosting the demand for renewable energy sources manufacturing, encouraging power-to-fuel technologies, attracting significant investments, and generating new employment opportunities.

POTENTIAL OF BATTERY ENERGY STORAGE SYSTEMS (BESS)

As solar and wind capacities continue to rise, Battery Energy Storage Solutions will be essential for maintaining grid stability, managing peak loads, and facilitating a seamless energy transition. India’s BESS ecosystem is poised for significant growth, with estimated funding opportunities reaching ₹3.5 lakh crore and an additional ₹80,000 crore in medium-term investments, primarily focused on cell manufacturing.

Benefits of BESS

  • Grid Stability: BESS plays a crucial role in stabilizing the grid, ensuring a consistent electricity supply. Additionally, they can offer backup power during outages and grid failures.
  • Decreased Grid Dependency: BESS can lessen reliance on the grid by providing a steady energy supply. This can make energy users less vulnerable to power outages and fluctuations in energy prices.
  • Uninterrupted Power Supply: When used alongside a UPS, BESS ensures that essential equipment continues to operate without disruption during a power outage
  • Environmental Advantages: Battery Energy Storage Systems (BESS) diminish the reliance on fossil fuels and contribute to the fight against climate change. They store surplus energy generated from renewable sources such as wind and solar and release it when necessary. This practice leads to a decrease in greenhouse gas emissions, air pollution, and dependency on fossil fuels.
  • Lower Energy Costs: By storing electricity when prices are low and distributing it when prices are high, BESS can help reduce energy costs. This strategy enables businesses to avoid elevated tariff charges and lower their electricity expenses.

Supportive policies, including waived ISTS transmission fees and strict ESO/RPO requirements, are anticipated to stimulate demand throughout the BESS value chain. This surge will enhance BESS project development, cell manufacturing, and component production, paving the way for significant growth in the sector over the next decade. This transition supports global efforts to combat climate change and encourages the development of renewable energy sources. We will explore more about BESS in our next blog.

In essence, while there are challenges to overcome, the concerted efforts of the government, private sector, and local communities are paving the way for a greener, more sustainable energy future for India. The momentum building in FY2024 is a testament to the potential and resilience of the country's renewable energy sector.

Sources: Climate Policy Initiative, Ember, Economic Times, Solar Quarter, CEEW, Hindu Business Line