Energy transformation priority in the budget, Energy News, ET EnergyWorld

The interim and now regular Budget 2024-25 reflect India’s growing ambition on climate change. It has announced a series of concrete initiatives and measures to “fulfil our commitment to achieve net zero emissions by 2070”. These reflect the urgency of achieving net zero emissions through action now, not sometime in the future, as 2070 is a long way off. These announcements cover a wide range of segments. Each of them requires transparent stakeholder consultations and the development of pragmatic programmes and early action by government agencies.

Initially, there was a provision for Viability Gap Funding (VGF) for the development of 1 GW of offshore wind capacity. This is a forward-looking approach because it recognises that if we have to completely move away from fossil fuels for energy, then it makes sense to develop the technical capacity to install offshore wind now. This will be learning by doing, price discovery and a sense of the potential for the cost curve to move down. So if necessary, scale-up can be done quickly. It also reflects a realistic view that our electricity demand will increase many times over as we move towards a developed economy and that the potential for renewable energy development should not become a constraint in the future.

For the same reason, nuclear power, a source of zero-emission energy, is envisaged to play a greater role for Viksit Bharat. The budget envisages setting up of Bharat small reactors, R&D for development of Bharat small modular reactor and R&D for newer technologies for nuclear power. These are additional initiatives to complement the ongoing efforts to operate a breeder reactor on fast reactors and in the future to enable the utilisation of our abundant reserves of thorium.

It was then announced that “a policy will be introduced to promote pumped storage projects for electricity storage”. Given that solar energy will account for the largest share of our 500 GW of spare fossil fuel capacity by 2030, rapid development of large-scale grid storage is essential because we need electricity at night. The government needs to steer the process with an investor-friendly policy framework, as it did under Solar Mission. Moreover, success in setting up storage would reduce the cost of providing reliable power, as the need for new thermal capacity used solely for power at night would fall. India could become a world leader in developing large-scale grid storage, which is required for full decarbonisation of electricity.

A scheme to provide rooftop solar panels to 1 crore households, from which they can get up to 300 units of free electricity per month, has been launched. It has already received 1.28 registrations and 14 lakh applications. India is a pioneer in the world in providing free electricity to households of weaker sections of society. Democratic policies are likely to lead to expansion of the scheme to cover all poor households. The government has a golden opportunity to leverage the scale of the scheme and its freedom to impose conditions on public procurement to get private investment in the country to manufacture full value-added solar panels, from polysilicon to bars, wafers, cells and then modules, and supply them to the government for implementation of this scheme. Mass competitive public procurement should give us lower prices and a competitive industrial structure. We would achieve a breakthrough in solar panel manufacturing in this decade and become fully self-reliant, Atma Nirbhar, so critical for energy security. Another major benefit of this scheme would be that Discoms would save money. Their actual cost of supply, especially in rural and semi-urban areas, to the households of the weaker sections is much higher than the revenue they earn because the tariffs in the various States are lower than the cost of supply to this class of consumers. The scheme would lead to a standard rate at which Discoms would buy such decentralised solar power. This in turn could create a huge potential market where, without any government subsidy, market forces would evolve various business models ranging from mere leasing of space to actual investment by farmers in installing solar panels in the kilowatt range in rural areas. Farmers’ income would increase and scattered employment would be created. The Finance Minister in the previous Budget speech had envisaged that farmers would install solar panels and sell the electricity to Discoms. For this to happen, a trigger is required, which is a rate at which this electricity would be purchased from all farmers by the Discoms and which would give a reasonable return.

60 clusters of micro and small enterprises would provide financial support to shift to cleaner energy and increase energy efficiency. This would be followed by another 100 clusters. This would be transformational in terms of reducing carbon emissions per unit of production. Then, “a roadmap would be formulated to transition ‘hard to reduce’ sectors… to ‘emission targets’”. This is an important initiative that comes in the context of progress in the hydrogen mission. It could take Indian industry to the technological frontier. Not easy, but doable. A constructive partnership between industry and government would generate consensus on feasible roadmaps and necessary policy instruments. This opens up the possibility for India to leapfrog and become a green hub for low-carbon manufacturing.

“Energy Security – Energy Transformation” is one of the priority areas announced in the Budget. The government will “publish a policy paper on appropriate energy transformation pathways…” Many of the building blocks for mapping viable pathways have been mapped out. Getting broad consensus among all stakeholders, developing appropriate and affordable policy instruments and then moving towards lower carbon pathways would be difficult. This would certainly facilitate India’s journey towards becoming a developed economy, which has to be a green economy in this century.

Published on July 30, 2024 at 01:58 PM IST

Join a community of over 2 million industry professionals

Sign up for our newsletter to receive the latest news and analysis.

Download the ETEnergyworld app