The terms net-zero1, carbon neutrality, energy transition, greenhouse gases have gone from science to policy to common lexicon in less than a decade. As the world races to cut emissions and move to cleaner fuel sources, we break down the key issues around energy transition and discuss policy interventions globally and the various efforts by India to take affirmative action on its own climate pledges.
The Problem As We Know - Global Warming
Carbon dioxide is the main Green House Gas (GHG) whose increased concentration in the atmosphere is responsible for warming the earth and driving this climate crisis. Carbon dioxide is released when fossil fuels like coal, oil or natural gas are burnt to generate electricity, powering transportation sector and running industrial processes. Therefore, cutting CO2 emissions requires fundamental and paradigm shifts in a country's policies impacting energy, transport, and industries.
Essential Perspective
Energy lies at the heart of economic development for each country. From earliest civilizations there has been a quest to find and utilise energy sources. Historically countries have relied on traditional sources of fossil fuel such as oil, gas and coal. However, over reliance on fossil fuels has proved to be detrimental to the planet
In developing countries where millions of people still lack access to electricity, clean cooking fuel, they continue to burn wood or charcoal thereby releasing more CO2 in the atmosphere.
The urgency2 to rapidly transition to low-carbon energy sources has never been greater. There is widespread evidence of adverse impacts that climate change has on countries and communities including extreme weather events, rising sea levels, and biodiversity loss, hence there is a unanimous recognition of the need to decarbonize the economy.
International Co-operation on Climate
United Nations Framework Convention on Climate Change (UNFCCC)3 - In 1992, countries signed an international treaty, the United Nations Framework Convention on Climate Change (UNFCCC), as a framework for international cooperation to combat climate change. The treaty came into effect in 1994.
Kyoto Protocol4 - In 1997 Kyoto Protocol that legally binds developed country Parties to emission reduction targets, was adopted.
The Paris Agreement 20155 - The Paris Agreement signed in 2015 sought to accelerate and intensify the actions needed for a sustainable low carbon future. Its chief aim is to keep the global temperature rise this century to well below 2 degrees Celsius above pre-industrial levels and to make efforts to further limit the temperature increase to 1.5 degrees Celsius.
NDCs6 - Nationally determined contributions (NDCs) are at the centre of the Paris Agreement and the achieving of its climate goals. NDCs are the efforts by each country to reduce their national emissions and improve adaptation to the effects of climate change. TheParis Agreement(Article 4, paragraph 2) requires each Party to prepare, communicate and maintain successive nationally determined contributions (NDCs) that it intends to achieve.
Net-Zero-That Elusive Goal
The IPCC Fifth Assessment Report of 20147 stated that limiting global temperature change means limiting the cumulative of the CO2 emissions in the atmosphere. It also states that to eventually stop global warming the net anthropogenic additions of CO2 into the atmosphere have to reach zero. Post the Paris Agreement, Sweden8 became the first country to enshrine a mid-century net-zero target in law by way of a Climate Act. UK became the first G7 country to legislate for net zero by 2050 by passing the Climate Change Act9. The Climate Change Act commits the UK government by law to reducing greenhouse gas emissions by at least 100% of 1990 levels (net zero) by 2050.
Net Zero also known as carbon neutrality is a stage where the greenhouse gases emitted by human activity is completely neutralized, by achieving reduced emissions and implementing methods of absorbing CO2 from the atmosphere.
The Energy Trilemma – Balancing Energy Reliability, Affordability and Sustainability
As the world grapples with the pressing need to address climate change, the energy landscape is undergoing a profound transformation from fossil fuels to renewable energy sources. However, amidst this din of transition, another critical consideration looms large and that is ensuring energy security.
The International Energy Agency (IEA) defines Energy Security10 as the uninterrupted availability of energy sources at an affordable price. Energy security has many aspects: long-term energy security mainly deals with timely investments to supply energy in line with economic developments and environmental needs. On the other hand, short-term energy security focuses on the ability of the energy system to react promptly to sudden changes in the supply-demand balance.
Despite the clear imperatives of energy transition, ensuring energy security remains a paramount concern for governments and industry stakeholders alike. Energy security encompasses various dimensions, including availability, affordability, and reliability of energy supply. Dependence on imported fossil fuels, geopolitical tensions, and vulnerabilities in energy infrastructure pose significant risks to energy security.
Renewable energy sources such as solar, wind, bio-mass, bio-fuels and hydroelectric power, offer viable alternatives to fossil fuels, offering cleaner and more sustainable sources of energy. However, transitioning to renewable energy sources introduces new challenges to energy security. Unlike fossil fuels, which provide a stable and predictable source of energy, renewables are inherently variable, dependent on weather conditions and geographic location. This intermittency can lead to concerns about grid stability and reliability, particularly in regions with high penetration of renewable energy.
Consistent and predictable policy intervention by the governments can ensure steady growth of the renewable energy sector as a whole.
Government of India in 2023 highlighted11 some significant steps to promote renewable energy in India, which are as follows:
- Permitting Foreign Direct Investment (FDI) up to 100 percent under the automatic route,
- Waiver of Inter State Transmission System (ISTS) charges for inter-state sale of solar and wind power for projects to be commissioned by 30thJune 2025,
- Declaration of trajectory for Renewable Purchase Obligation (RPO) up to the year 2029-30,
- Laying of new transmission lines and creating new sub-station capacity under the Green Energy Corridor Scheme for evacuation of renewable power,
- Notification of standards for deployment of solar photovoltaic system/devices,
- Setting up of Project Development Cell for attracting and facilitating investments,
- Standard Bidding Guidelines for tariff based competitive bidding process for procurement of Power from Grid Connected Solar PV and Wind Projects.
- Government has issued orders that power shall be dispatched against Letter of Credit (LC) or advance payment to ensure timely payment by distribution licensees to RE generators.
- Notification of Promoting Renewable Energy through Green Energy Open Access Rules 2022.
- Notification of "The Electricity (Late Payment Surcharge and related matters) Rules (LPS rules).
- Launch of Green Term Ahead Market (GTAM) to facilitate sale of Renewable Energy Power through exchanges.
- National Green Hydrogen Mission approved with an aim to make India a global hub for production, utilization and export of Green Hydrogen and its derivatives.
- Notification of prescribed trajectory for RE power bids to be issued by Renewable Energy Implementation Agencies from FY 2023-24 to FY 2027-28. Under the trajectory, 50 GW/annum of RE bids to be issued.
India is the third largest importer of oil and a bulk of its supply comes from Russia and the Middle-East. Any prolonged upheaval in the region has a cascading effect not only on India's import bill but also on its energy security. Moving away from fossil fuel needs a calibrated approach however, in the absence of a viable transition fuel or bridge fuel, the adoption of cleaner sources of energy becomes not just imperative but also poses a challenge of doing so quickly. Amongst the many sticking points the key factors that need addressing include:
- Creating strong evacuation infrastructure for evacuating the targeted 500 GW of renewable energy to enhance grid infrastructure and reliability. With significant solar and wind energy capacity being integrated into the power systems there are concerns about grid stability. While the Central govt is doing its share, state governments too need to step up and create suitable policy environment for creating evacuation infrastructure.
- Robust Enforcement of Renewable Purchase Obligation (RPO)
- Increasing the limit of Rs. 30 crore12 for lending to renewable energy projects
- The Reserve Bank of India (RBI) has already categorised renewable energy sector under priority sector lending13 for loans up to a limit of₹30 crore. The power sector has been experiencing transition with increasing penetration of renewable energy in the energy mixthereby making it crucial to have funds allocated to the RE sector for lending to keep up with the steep renewable energy target.
- While the RBI is mulling over bringing EV infrastructure14 and possibly solar panel15 within its priority sector lending scheme, it is equally important to explore innovative financing mechanisms and alternative funding avenues to provide access to cheap and long-term funding to finance renewable energy projects especially for construction and implementation phase to boost debt capital availability for the sector.
Conclusion
Investments in energy storage, smart grid technologies, and demand-side management can enhance the flexibility and resilience of the energy system, mitigating the challenges posed by renewable intermittency.
Striking a balance between energy security and energy transition requires a multi-pronged approach that integrates policy frameworks, technological innovation and international cooperation.
Footnotes
1. https://www.ipcc.ch/sr15/chapter/glossary/
2. https://www.weforum.org/agenda/2023/01/we-have-everything-we-need-to-speed-up-the-energy-transition-davos-2023/
3. https://unfccc.int/process-and-meetings/what-is-the-united-nations-framework-convention-on-climate-change
4. https://unfccc.int/process-and-meetings/the-kyoto-protocol/what-is-the-kyoto-protocol/kyoto-protocol-targets-for-the-first-commitment-period
5. https://www.un.org/en/climatechange/paris-agreement
6. https://unfccc.int/process-and-meetings/the-paris-agreement/nationally-determined-contributions-ndcs
7. https://www.ipcc.ch/report/ar5/syr/
8. https://www.government.se/articles/2021/03/swedens-climate-policy-framework/
9. https://www.legislation.gov.uk/ukpga/2008/27/contents
10. https://www.iea.org/topics/energy-security
11.https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1989807#:~:text=Launch%20of%20new%20schemes%20and,Scheme)%2C%20Production%20Linked%20Incentive%20Scheme
12. https://pib.gov.in/PressReleasePage.aspx?PRID=1897041
13. https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11959#Renewable_Energy
14. https://www.business-standard.com/economy/news/centre-considering-inclusion-of-evs-in-priority-sector-lending-category-123082600748_1.html
15. https://energy.economictimes.indiatimes.com/news/renewable/solar-panel-makers-may-get-priority-sector-lending-tag/103774354?utm_source=top_news&utm_medium=tagListing
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