Group 1_A SDG 7: Affordable and Clean Energy

“The golden thread that connects economic growth, social equity and environmental sustainability is energy”, the UN general Ban Ki-moon.[1]

The statement enunciates and categorically emphasises the importance of UN Sustainable Development Goal 7 or affordable and clean energy. The growing need of universal electrification and clean energy provision could not have been more profoundly felt that in the present pandemic situation. With energy forming the backbone of all communication channels and wellbeing, 789 million people lacked electricity access and further 2.8 billion people were devoid of clean cooking fuel in 2018 as per the report by IRENA.[2]

The SDG 7 describes five “outcome targets” which are:

       . Universal Modern energy access
       . Increase the percentage of renewable energy globally
       . Doubling the energy efficiency improvement
       . Promoting investment and R&D in clean energy
       . Improving energy services for developing countries

The limited accessibility of energy to a large world population widens the gap between having and have-nots. Lack of electricity can be directly linked with wellbeing, education, healthcare, poverty and many such pressing issues.

With the energy sector being the major contributor of greenhouse gases (73.2%)[3] achievement of SDG 7 directly links with the climate change mitigation targets under SDG 13 and Paris Climate Change Agreement. Only 11% of the global energy needs were met from renewable technologies in 2019.[4] Hence, strong impetus on renewable energy promotion with improved efficiency through constant research and development are key objectives.

The growing public policy debate of energy democracy has increased local participation and awareness about renewables. Also, the strong international financial support towards renewable energy development in developing countries has jumped significantly in the past decade rising from around $10 billion in 2010 to $21.4 Billion in 2017.[5]

The Relevance of the 7^th SDG to India

India is the third-largest consumer of energy in the world; in 2019, India's energy consumption was equal to 916 million tons of equivalent[6]. Just above 70% of this is derived from non-renewable sources such as coal and petroleum. These sources of energy contribute to global warming via the emission of Carbon dioxide as well as severely impact the air quality by releasing pollutants such as Sulphur dioxide which damage the lungs of human beings. Along with these apparent issues, another significant problem posed by these sources is their inefficiency. The efficiency of coal-based power plants in India is said to be at 32.8%[7], which is one of the lowest globally. This inefficiency also affects India economically since India relies on imported coal as well as oil and is unable to use these resources efficiently. When it comes to access to modern energy, 3 billion people in the world still use unhealthy and polluting fuels to cook food[8], a significant portion of this population comes from India.

The outcome goals under the sustainable development goal for affordable and sustainable energy targets many of these issues. So, while complying with one of the SDG's, India can unlock its latent economic potential and improve the living conditions for its citizens by modernizing its energy infrastructure. Moreover, India is one of the leading manufacturers of equipment for producing solar energy, along with this several solar power generation start-ups in India attract funds from foreign venture capitalists. Focussing on solar energy which addresses multiple outcome goals of the 7^th SDG such as increased efficiency and increasing the contribution of renewables will also help in attracting FDI cash inflows. Hence the 7^th SDG holds great relevance for India, both economically as well as socially.

Business implications and responses

Businesses are one of the key stakeholders to achieve SDG 7 as they seek to manage their energy requirements more efficiently. For instance, the cost of solar energy has dropped by 80% in the last decade, which makes this as an attractive source of energy for the companies to accomplish cost savings [9]. Many companies are adopting the following 3 key strategies for transitioning to clean energy:

• RE100 (100% Renewables) – Transition to 100% renewable electricity
• EP100 (Energy Productivity) – Ratio of economic output to energy consumption [10]
• EV100 (Electric Transport) – Switch to electric vehicles and install charging capacities

The business implications on various industries and their responses for SDG7 are given below.

Power & energy industry

 Energy consciousness among citizens, government and businesses have brought major implications on power produce globally. To increase the electricity coverage by making it cheaper, and reducing its carbon footprint, companies need to undertake major

Figure 1: Implications of the value chain of the power industry

improving energy productivity, reducing costs and expanding existing infrastructure. Governmental goals like India’s goal of reaching 175 GW of renewable energy by 2022 have reinforced the need for transitions. The value chain in the power industry and implications on it are demonstrated below

Responses: Major steps taken by corporates include the following

1. Minimise downtime to provide reliable power 24*7
2. Increased the share of renewable energy in their portfolio
3. Planning of building micro grids particularly solar microgrids to make power cheaper and accessible to everyone[11]

Automotive industry 

The automotive industry is a major contributor to pollution and hence has major implications. Companies need to improvise in the following three processes

 

Figure 2: Focus areas for the automotive industry

 

Responses: Companies in this industry responded by

1. Investing in developing Electric vehicle infrastructure. 

2. Shifted from the older BS III engines to BS-IV engines as mandated by government

3. Joined RE100 campaign and started to move towards 100% renewable energy target[12] 

Construction and Real Estate Industry

The role of construction and real estate industry is essential to achieve SDG 7 due to the risks posed to the environment. The building sector constitutes around 40% of global energy consumption.[13] For instance, buildings in Europe are the single largest energy consumer. The sustainability reports of the real estate companies (in EU) rank SDG 7 as the 3^rd most important sustainability goal for them.

Green building is the most common way with which many real estate companies are planning to achieve SDG 7. The International Renewable Energy Agency recommends solar systems in the home to reduce electricity costs.[14] With zero carbon emissions, the impact of renewable energy on the environment is negligible and ensures cheaper and clean energy to people.

Figure 3: Ranking of SDG by Real Estate Companies based on their SRs

Food and Agriculture Industry

The 2030 Agenda for SDG makes the food and agriculture industry a key player to combat climate change. However, many modern food systems require high dependence on fossil fuels. To support SDG 7, the Food and Agriculture Organisation of the UN[15] has taken the following steps:

1. Supply solar-fridges, solar-freezers to small-scale fishers

2. Supply solar water pump to farmers

3. Tackling post-harvest losses in Asian countries 

Consulting and Financial Services

The consulting and financial services industry is also playing major roles in aligning their strategies to achieve SDGs. For instance, NatWest Group was one of the Founding Signatories of the UN Principles for Responsible Banking. It committed to aligning their strategies to the 2015 Paris Agreement and the UN SDGs. The global bank joined RE100 and committed to 100% renewable energy for all of its electricity by 2025[16].

Global consulting firms such as Kearney is leading in conducting research to understand the sustainability trends of the future. As per them, stringent environment norms are forcing the energy companies to invest in new technologies and achieve a cleaner energy options[17].

Analysis and a suggested path ahead

Importance of analysing SDG Goal 7:

Energy access at affordable rates has multiplier effects that drive economic growth, sustainability goals and social equity. It is the first carbon-neutral global management consulting. Focussed efforts towards achieving set targets ensuring access to affordable, reliable, sustainable, and modern energy would result in developing capacities and capability to support the growing populace[18]

The Gap:

KEY METRICS	CURRENT STATUS	TARGET
Renewable energy capacity	136 GW	175 GW by 2022
		450 GW by 2030
LPG connections (PMUY)	72 million	80 million

Critical drivers:

Based on our readings and research, the gap between the current and desired key metrics can be covered by focussing on the following key drivers[19]:

Figure 4:  Key Drivers - SDG Goal 7

1.      Government Policies and co-investment

Long term changes can effectively be driven by the central and state governments – the largest spenders in the economy. These investments and policies should focus on driving building better power purchase agreements, competitive allocation of energy contracts, normative industrial standards and potential benefits for achieving SDG goals for institutions.

Co-investments are necessary to boost investor confidence and better tackle financing and revenue risks faced by stakeholders.

2.      Modern Renewables – Solar, Wind, Water, Biomass, Geothermal etc.

Small-scale modern renewable solutions present an off-grid, decentralized solution to last-mile electricity access. These small-scale offerings reduce the high upfront capital costs required for large scale plants.

Large scale modern renewable plants have the benefit of lower costs due to economies of scale and function at higher efficiencies and critically lower environment costs as compared to their conventional counterparts.

3.      Technology and Energy Efficiency

Technological breakthroughs help bring down the cost of production making cleaner sources of energy more competitive. Rising efficiency levels lead to cost savings improving the rate of return numbers for projects.

4.      Investor megatrends

The flow of foreign and domestic smart money into renewable projects in India – an attractive opportunity given the scale and under penetration, eases funding pressure on the Government.

Increased private participation also drives greater competition and efficiencies. Further, any potential roadblocks are better resolved if there is better alignment and communication between state and private players.  

5.      Risk Management – Revenue, Financing and Macro risks

Energy initiatives are majorly infrastructure projects with high Revenue (The DISCOM crisis), Financing (High cost of debt) and Macro (Oil prices) risks. Hedging and managing these risks have a critical bottom-line impact.

 

Suggested path ahead

Achieving SDG 7 will require a large investment into renewable off-grids in countries where access to clean energy is still limited.

1. Structural problems in Electricity generation and distribution:

State governments enter into contracts with small scale producers of electricity using renewable means such as solar energy, however, an issue which persists across states in the country is the non-payment of dues by the state governments. The discoms owed a total of Rs 1,38,479 crores to the power producers (small & big) which is a staggering amount. [20] This risk prevents new companies from setting up such ventures and also drives up the cost of capital for these ventures. Addressing this will help in modernizing the energy infrastructure as well as increase the share of renewables.

2. Promote research and development of new technologies:

The government can foster active collaboration between educational institutions and industrial houses. International collaborations like International Solar Alliance (ISA) should facilitate research in renewable technology, energy efficiency and cleaner fossil-fuel technology. Developed countries like the USA, Germany and France can enable technology sharing and assist its implementation in developing countries, along with financial support. 

3. Political Willingness:

The success of the SDGs also depends on the alignment of the political processes of the country. Although the finances required for achieving SDG 7 still remains a critical factor, the government’s inclination towards it will also play a major role. For instance, new laws and policies favouring the promotion and adaptation of SDG 7 can go a long way in achieving this goal. [21]

References:

[1] Secretary-General to Global Development Center: ‘Energy is ... (n.d.). Retrieved December 10, 2020, from https://www.un.org/press/en/2012/sgsm14242.doc.htm

[2] Tracking SDG 7: The Energy Progress Report (2020) (irena.org)

[3] Sector by sector: where do global greenhouse gas emissions come from? - Our World in Data

[4] Renewable Energy - Our World in Data

[5] SDG Indicators (un.org)

[6] U.S. Energy Information Administration - EIA - Independent Statistics and Analysis. (n.d.). Retrieved December 10, 2020, from https://www.eia.gov/international/analysis/country/IND

[7] Pti. (2015, February 21). Efficiency of India's coal-based power plants way below global standards: Study. Retrieved December 10, 2020, from https://economictimes.indiatimes.com/industry/energy/power/efficiency-of-indias-coal-based-power-plants-way-below-global-standards-study/articleshow/46324242.cms?from=mdr

[8] Goal 7: Affordable and clean energy. (n.d.). Retrieved December 10, 2020, from https://www.undp.org/content/undp/en/home/sustainable-development-goals/goal-7-affordable-and-clean-energy.html

[9] SDG 7: How business is acting as a market shift for renewable energy - The Climate Group Blog. (n.d.). Retrieved December 10, 2020, from https://www.edie.net/blog/SDG-7-How-business-is-acting-as-a-market-shift-for-renewable-energy/6098653

[10] The Climate Group. (n.d.). Retrieved December 10, 2020, from https://www.theclimategroup.org/

[11] https://www.tatapower.com/pdf/sustainability/sustainability_report-2018.pdf

[12] https://www.tatamotors.com/wp-content/uploads/2018/09/05090438/sustainability-report-2017-18.pdf

[13] Goubran S. On the Role of Construction in Achieving the SDGs. J Sustain Res. 2019;1:e190020. https://doi.org/10.20900/jsr20190020

[14] Green building: Improving the lives of billions by helping to achieve the UN Sustainable Development Goals. (n.d.). Retrieved December 10, 2020, from https://www.worldgbc.org/news-media/green-building-improving-lives-billions-helping-achieve-un-sustainable-development-goals

[15] http://www.fao.org/3/I9900EN/i9900en.pdf

[16] RBS commits to using 100 per cent renewable energy for all electricity. (n.d.). Retrieved December 10, 2020, from https://www.rbs.com/rbs/news/2018/09/rbs-commits-to-using-100-per-cent-renewable-energy-for-all-elect.html

[17] https://ungc-production.s3.us-west-2.amazonaws.com/attachments/cop_2019/472596/original/UN_Global_Compact-_Communication_on_Progress_2018_FINAL.pdf?1552600755

[18] SDG 7: Affordable and Clean Energy. (n.d.). Retrieved December 10, 2020, from https://in.one.un.org/page/sustainable-development-goals/sdg-7/

[19] Iea. (n.d.). Modern renewables – SDG7: Data and Projections – Analysis. Retrieved December 10, 2020, from https://www.iea.org/reports/sdg7-data-and-projections/modern-renewables

[20] Pti. (2020, November 08). Discoms' outstanding dues to power gencos rise 28% to Rs 1.38 lakh crore in September. Retrieved December 10, 2020, from https://economictimes.indiatimes.com/industry/energy/power/discoms-outstanding-dues-to-power-gencos-rise-28-to-rs-1-38-lakh-crore-in-september/articleshow/79108768.cms?from=mdr

[21] SDG 7 – Governing the path towards Sustainable Energy for All. (n.d.). Retrieved December 10, 2020, from https://www.2030spotlight.org/en/book/1883/chapter/sdg-7-governing-path-towards-sustainable-energy-all

Sustainability Reports of Companies:

1.Kearney: https://www.kearney.com/documents/20152/12302575/Kearney+Sustainability+Report+2019.pdf/

2. RBS: https://investors.rbs.com/~/media/Files/R/RBS-IR/results-center/annual-report-2019.pdf

3. Filpkart: https://stories.flipkart.com/category/sustainability/