Sun, wind, and nuclear: How India plans to sustain rapid growth while becoming greener
To support its rapid economic growth, India, the world’s most populous country – which surpassed the UK as the fifth largest economy in 2023 and which aims to become third largest by 2030 – requires energy.
Speaking to RT’s Let’s Talk Bharat recently, India’s minister of petroleum and natural gas, Hardeep Singh Puri, stressed that energy is vital for achieving Prime Minister Narendra Modi’s goal of making India a $25 trillion economy (from the current $4 trillion) by 2047.
India has been ramping up energy consumption, mainly relying on oil. However, Puri noted, while fossil fuels will remain key for at least the next two decades, the country is actively investing in increasing renewable energy generation, including solar and wind, biofuels, green hydrogen, and nuclear energy.
Modi’s third term in office will play a crucial role in the transition to renewable energy. India aims to achieve 500GW installed capacity of renewable energy by 2030 – but will need to increase capacity by 50GW annually. Not an easy task.
So far, India’s renewable energy installed capacity stands at 193GW including hydropower, and around 140GW excluding hydropower.
The renewable energy landscape in India is diverse, comprising wind power (46.42GW), solar power (84.27GW), biomass (10.35GW), small hydropower (5GW), waste-to-energy (0.59GW), and large hydropower (46.92GW).
The country aims to achieve 280GW of installed solar power capacity, 140GW of installed wind capacity, and 22GW of installed nuclear power (from around 6.78GW at present) by 2030. India is also focusing on green hydrogen, aiming to produce 5 million tonnes by 2030.
Recommendations by the Institute for Energy Economics and Financial Analysis (IEEFA) to the government in May 2024 state that an annual installation rate of around 50GW is imperative to achieving the 2030 target.
“To put this into perspective, in the 2023-24 fiscal year, India added only a little over 18GW of renewable energy capacity. Investments into the renewable energy sector also marginally declined from $11.7 billion in FY 2022-23 to $11.4 billion in FY 2023-24. Consequently, the country must accelerate its efforts, requiring more than 2.5 times the installation compared to the previous fiscal year,” the IEEFA recommendation reads.
The Ministry of New and Renewable Energy anticipates that most of the renewable energy will come from solar and wind. It mandates tenders of 50GW every year until the 2028 financial year, adding that if successfully implemented, India will add another 250GW of renewable generation capacity by 2030, taking the country beyond the 500GW target.
Roadblocks
The country has a long way to go. There are several key challenges, including land acquisition, availability of transmission infrastructure, policy uncertainty, high cost of financing, and payment delays from electricity distribution companies, according to a report by the Center for Science and Environment.
Ruchita Shah, an electricity policy analyst at London-based energy consultancy Ember, talked to RT about the land acquisition problem for the expansion of solar and wind energy projects. She said increasing project deployment and conflicting land usage are posing challenges to renewable energy (RE) capacity installation for wind projects, as the resource availability is restricted to eight Indian states.
“RE projects have been facing delays in commissioning due to the unavailability of evacuation and transmission infrastructure,” Shah said. “There is also a great deal of policy uncertainty as some Indian states are yet to update their RE policies.”
Additionally, according to her, the government’s move to impose import barriers, such as the Approved List of Models and Manufacturers, has created indirect uncertainty in the sector. “Incentives such as exemption on interstate transmission system charges are expiring soon and there is a lack of long-term clarity,” Shah told RT.
She added that payment delays from electricity distribution companies have been a bottleneck as they default in clearing their dues against electricity procured from renewable energy project developers, but there has been some improvement in the last few years.
Vibhuti Garg, the South Asia director at IEEFA, says it is necessary to reduce import duties, make an Approved List of Models and Manufacturers, lower the goods and service tax, and develop a special tax credit mechanism to reduce the costs of renewable energy projects.
Budget and green energy goals
Addressing some of the challenges outlined by experts, the government made several announcements regarding renewable energy expansion and climate resilience in its latest financial budget for 2024.
It includes providing free electricity for up to 300 units to 10 million households under the PM Surya Ghar Muft Bijli Yojana – a 62-billion-rupee program ($740 million) – by installing rooftop solar plants to reduce dependence on fossil fuels, as well as promoting pumped storage projects (a type of hydroelectric energy storage) to manage the variable nature of renewable energy.
Lauding the document, Garg said, “For the energy transition, policy continuity is welcome. Further, the government will develop a policy document on appropriate energy transition pathways that balances the imperatives of employment, growth and environmental sustainability. Enhancing the availability of capital through the development of a taxonomy for climate mitigation and adaptation is a welcome move.”
She added that the government has also recognized an important piece of the puzzle – the micro, small, and medium enterprises sector – by providing them with energy audits and financial support for deploying clean energy and energy efficiency measures.
To support energy transition, the government proposes expanding the list of exempted capital goods for use in the manufacture of solar cells and panels in the country.
More than solar and wind
The government also announced plans to set up a Critical Mineral Mission for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets. It further said that 25 critical minerals such as lithium, copper, cobalt, and rare earth elements will be fully exempt from customs duties, with a reduction of the basic customs duty on two of them to promote their use in the production of batteries for e-vehicles.
“Critical minerals are building blocks for energy transition and for other strategic sectors such as electronics, defence, and telecommunications,” Rishabh Jain, the senior program lead at the Council on Energy, Environment and Water (CEEW), said. According to him, the mission announcement will encourage private and government companies to develop capabilities in the critical minerals supply chain and build competitiveness in the medium to long term.
“Indigenising and overseas acquisition of mining and building domestic capabilities to process and recycle will secure the supply chain for the domestic manufacturing ecosystem, especially for clean energy sectors such as solar, wind, EV and batteries,” he added.
Underscoring the role of nuclear energy in the green transition, the budget also outlines plans to partner with the private sector in developing Bharat Small Reactors – compact nuclear projects designed to generate electricity on a smaller scale compared to the traditional large nuclear power plants.
The latest budget also increases the budgetary allocation for the National Green Hydrogen Mission from 1 billion rupees ($12 million) to 6 billion rupees ($71.6 million).
In order to make thermal power more efficient, it announced that an 800MW commercial plant using advanced ultra-supercritical technology will be set up under a joint venture between the National Thermal Power Corporation and Bharat Heavy Electricals Limited.
Neshwin Rodrigues, an electricity policy analyst at Ember, adds that while the budget is in line with the interim budget and talks about major investments in renewable energy for clean energy companies, there are still some loose ends.
“India now needs to find ways to reduce reliance on thermal power and with battery costs expected to further fall sharply in the coming years, can plan to phase down this reliance,” she said.
