SDG 7 - Affordable and Clean Energy

UNDP Goal 7: Affordable and Clean Energy: India's journey to Green Power

Authors:

Akshat Khandelwal

Ashok George

Krishna Agarwal
Pranav Bhatt

Shshank Pandey

Virag Shah

Group 6, Section C, PGDM (BM) 2019-21

In 2016, the number of people who had access to electricity increased to 87 percent taking the number of people without electricity access below 1 Billion. Yet as the population grows and world economy develops the demand for energy will increase at an exponential pace and it is imperative to meet this demand with clean energy extracted from sustainable sources. The current scenario of over-reliance on fossil fuels needs to be altered to curb the drastic changes to the climate that have been triggered by several decades of unbridled pollution.

In order to achieve the SDG 7 by 2030, it is vital to invest in renewable sources of energy. Though strides have been made in solar, hydro and wind energy, we need to improve energy productivity and ensure equitable access to electricity for all. Currently, the energy sector is the biggest contributor to climate change as it produces about 60 percent of all greenhouse gases. In 2016, renewable energy accounted for a little over 20 percent of the total electricity generation in the world, signifying the enormity of the task to reach the ultimate goal of 100% renewable energy production.

The world has made notable progress when it comes to energy access as 153 million people gained access to electricity each year in the last decade. But efforts need to be sustained as there is a long way to go. As per a World Bank report published in May 2019, 650 million people will still be left without electricity access in 2030 if efforts are not stepped up towards achieving this goal.  

Relevance of Affordable and Clean Energy to India

As India aspires to become a global superpower in the next few decades, it is imperative to significantly increase electricity production from renewable sources. Access to energy for each person is essential because reliable and affordable energy services are considered as a precursor to improved quality of life. Energy is essential for provision of health care, sanitation, clean water and other useful services which are vital for any country’s economic development.

India has always faced deficit in electricity production with demand far outstripping the demand. At the same time, the dominant source of electricity continues to be fossil fuels. Thermal power accounts for 64 percent of the installed capacity with renewable sources apart from Hydro making up 21 percent. Unlike developed countries, nuclear power contributes a meagre 2 percent to the installed capacity due to safety concerns related to nuclear reactors and lack of uranium reserves in India. Moreover, actual electricity generation data paints a different picture where 77 percent of the gross generation is contributed by thermal power and only 9 percent by renewable sources.

India achieved 100% village electrification in 2018 but there is a huge ground to cover when it comes to ensuring access to electricity to each individual household. There are still nearly 30 million households which lack a power connection and access needs to reach each one of them to ensure that the positive effects of economic development reach the last mile and lead to upliftment of the most marginalized sections of the society.

As per a World Energy Outlook (2016), more than 800 million people in India rely on traditional biomass cookstoves to meet their cooking energy needs. This causes household air pollution that leads to over one million premature deaths across the country every year. This issue particularly affects the women of the household as they are exposed to the fumes while cooking while also spending a significant amount of time collecting fuelwood. Though the government has come up with schemes such as the PM Ujjawala Scheme to provide LPG connections to all rural households and has successfully provided over 8 million connections, there are many users who do not go for the paid refill and resorted back to biomass cookstoves.

Business Implications and Responses

According to a study by the Business and Sustainable development Commission’s document titled “Better Business, Better World”, Clean Energy is a sustainable Development Goal with an incremental market opportunity of $1200 billion in 2030, making it the 4th most impactful SDG from a business perspective. It is preceded by a similar goal in Energy efficiency at 3rd which shows the relevance and scope of energy related solutions. 

Clean Energy holds a huge direct business value for power generation, transmission and distribution companies. Recent developments like Germany setting a target to close all coal based generation by 2038, starting with closing units in 2020, India’s National Thermal Power Corporation (NTPC) changing its name to NTPC to dissociate itself from conventional energy generation while starting to venture into Hydro, Solar and alternative sources of energy are indicators that economies and corporates are trying to find value in sustainable energy. India seeks to become a leader in solar generation and 5 of the upcoming 10 largest solar farms are coming up in India.

Solar generation has already achieved and exceeded grid parity in India, i.e. solar energy sells below the average grid price which is incentivising generators and consumers alike. Developments in energy storage technology can counter the variability of solar generation and make solar energy more accessible even in seasons like monsoon. A huge application is visible in captive generation where businesses meet their own power needs through rooftop solar units which are termed as captive generation units. The Government subsidizes such renewable generation initiatives making them less capital intensive in the beginning, which interestingly is the main fear behind investments in renewable power generation. Net metering arrangements allow owners to sell surplus solar energy back to the grid and actually earn over the savings on electricity that they make. Captive generation and net metering have taken off spectacularly in South and Central India and can be emulated in other places.

Whether or not to classify hydro generation as renewable is a contentious issue. Earlier large hydro plants (installed capacity > 25 MW) were not classified as renewable sources of energy mainly because of their heavy ecological and social impact in terms of river flow management and displacement of population. However, the Union Government brought all hydro plants under the category of renewable sources with a memo dated 7th March 2019. This increased the share of renewables in India’s power generation to 33% from 20.6% overnight but more importantly accorded the subsidies and benefits of investing in renewable generation to all hydro projects. It can now be easier for hydro developers to get suitable RoI on their projects as the energy can be sold to discoms through their Renewable Purchase Obligations which increase the demand for renewable energy. Hydro generation will be an important component of the Union’s target to increase renewable generation to 175 GW by 2022. Thus such impetuses are required to encourage investors like NHPC, NTPC, JSW Energy, JPL, Tata energy etc. to invest in hydro generation. 

Businesses get direct and indirect benefits from investing in clean energy goals. The Clean Development Mechanism allows for sale of carbon credits by carbon positive companies to carbon negative companies and can be a good alternate source of revenue. In the current day and age, investor sentiment is also affected by a company’s commitment towards clean energy initiatives. Listed companies are required to document their expenses on such initiatives in their Annual Report. With sustainable development gaining importance rapidly, it is worthwhile to invest in clean energy as its benefits accrue to the business along with the ecosystem.

Analysis and Suggested Path Ahead

Apart from the public sector firms, various private firms have also ventured into the sector. Rather than thinking clean energy as a need of the hour, it is seen as a business opportunity. Something which can be harnessed and be used to make big bucks for the company. Even if the company is not venturing into production of energy for resale, it is producing energy from renewable sources for its own consumption to reduce its carbon footprint. Most of the companies have an aim to commit to sourcing 100% green electricity by 2030.

Companies such as Reckitt Benckiser have joined the RE100 initiative, a collaborative, global initiative, uniting organisations to drive for change and increase availability, demand and delivery of renewable energy. As a result, over 30% of its manufacturing sites are currently using energy from renewable sources.

Axis Bank has witnessed a reduction of 10.45% of global carbon footprint owing to the installation of 2 MW solar energy for its own operations and have achieved an energy saving of 9452 MW by its efficiency measures.

Astra Zeneca has seen a reduction of 6% (in scope 1), 54% (in scope 2)) and 0.4 %(in operational Greenhouse gas) from its 2015 baseline. It has 61% of its electricity imports from renewable sources and 7% of its fleet of logistics and supply chain are electric.

JP Morgan & Chase  had announced earlier this year to facilitate $200 billion in clean financing by 2025 and to source 100% of our global power needs from renewable sources by 2020. Currently it is sourcing 22%.

Airtel has been able to reduce its carbon emissions per rack at the data centres by 33% in the past 3 years by incorporating renewable sources powered network infrastructure. It has deployed over 3200 solar enabled network towers and saved about 1200 tons of paper by implementing e-bill initiatives.

Companies such as Schwing Stetter, a heavy equipment manufacturing company based out of Chennai,has set up a 100KW solar rooftop plant for harnessing solar energy (which has reduced its carbon footprint by 26%) and is planning to set up another 500 KW plant which will effectively reduce its dependency on conventional sources (Thermal) to zero.

One of the main factors behind such initiatives by the companies is the reduction of cost to install such plants owing to the government subsidies and initiatives. Installation cost of such systems have fallen from Rs 60000/KW in the year 2014 to Rs 48000/KW presently. Also if a company is purchasing renewable energy from the state, it costs around Rs. 4.5/unit (inclusive of all regulatory costs.). On the other hand, thermal power still costs around Rs 6/unit , bought from the state grid of Tamil Nadu.

Earlier this year, Tim Cook, CEO of Apple Inc. announced that every single apple store, data center and corporate offices around the United States is 100% powered by renewable sources and is planning to do for its centers in other countries. The power comes from apple solar farms which are set up across the states like the famous one in Reno, Nevada. This announcement has generated a huge wave among the established entrepreneurs in India and worldwide who are also now committed to do the same for their companies.

Beer makers, United Breweries, famous for its line of Kingfisher brand, has put up solar panels in its breweries generating 43% of its power needs from it. Hindustan Coca-Cola Beverages or HCCB, biggest bottling partner of coke in India, has met its target of generating 40% of its energy consumption from renewable sources

To address the major problem of clean transportation, government has increased the policy support to the firms producing EV by setting up battery charging infrastructure and providing subsidies on production (like solar subsidies for setups up to 12 gigawatts). Recently witnessed, Indian Oil Corporation and NTPC have come together to set up charging stations in Greater Noida and are providing free charging to promote the cause.

Post 2012, Government of India has tried to reduce its dependence on fossil fuels and move towards cleaner fuels. Recent ultimatum by Department of Public Enterprises and Economic Affairs to the public sector units to either purchase or produce renewable energy of their buildings and other operations are in line with the government’s mission for a cleaner India. In the period 2012-16 NTPC was adding 10-20 GW of coal power plants, but it has significantly dropped to 5 GW. This shows the government has scrapped the plans for its coal powered plants and has started focussing on renewables.

Indian railways, one of the major consumers of power, has started installing solar panels on roofs and has plans of being 100% green railway network. Similar initiatives are also taken up Airport Authority of India in using renewables at the airports.

Owing to the recent spending in the renewable sector, India has emerged as the leader in investments for a cleaner country. It aims to have 40% of its energy consumed from renewables by 2030 and is well on track to achieve the same. With added initiatives by the private entities for the mutual benefit the future looks bright. But still there is a long way to go. Switching to cleaner energy takes time and a lot of investments.

To conclude, the change is slow, but it is happening. 

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