Editor’s Note (2/20/20): At the February 19 Democratic debate, former New York City mayor Michael Bloomberg said India is more key to climate change than China. An exclusive article in Scientific American explains why: energy decisions that India makes in the next few years will profoundly affect how hot the planet becomes this century. A shimmering waterfall beckoned visitors into the India pavilion at the 2015 Paris Climate Change Conference. Inside, multimedia exhibits and a parade of panelists proclaimed that the nation’s clean energy future was fast-approaching. Prime Minister Narendra Modi went even further, announcing that his country would lead a new International Solar Alliance to ramp up solar power in 120 countries. Indian officials resolved to be leaders in battling global climate change. I had arrived in Paris after a research trip that crisscrossed India, and I struggled to square that confident optimism with the facts I had seen on the ground: heavy reliance on coal power plants, a failing electrical grid that could not handle large additions of wind or solar electricity, and a widespread attitude that India, as a developing country, should not have to reduce its carbon emissions and should be able to grow using fossil fuels as other major countries have done. Still, by the end of the conference, India and 194 other countries, along with the European Union, had adopted the Paris Agreement, which commits the world to limit global warming to two degrees Celsius. In November 2016 the agreement went into legal force, making each country’s pledge binding under international law. Despite the lofty rhetoric of India’s leaders, their vision of a clean energy future is far from assured. Even though India’s pledge set ambitious targets for solar and wind power, its overall commitment to curb emissions was underwhelming. If the government just sat on its hands, emissions would rise rapidly yet stay within the sky-high limits the country set for itself in Paris. That would be disastrous for the world. India has one of the fastest-growing major economies on the planet, with a population expected to rise to 1.6 billion by 2040. By that time, electricity demand could quadruple. If the nation does not take drastic measures, by midcentury it could well be the largest greenhouse gas emitter (it is third now, behind China and the U.S.), locked into a fossil-fuel infrastructure that would likely ruin the world’s quest to contain climate change. If it adds coal power at the rate needed to keep up with its skyrocketing demand, for example, its greenhouse gas emissions could double by 2040. Yet India is in some ways starting with a clean slate. Unlike the developed world, where the challenge is replacing dirty fossil-fuel infrastructure with clean energy, most of India’s infrastructure has not been built yet. The country has a choice to invest in power from wind, solar and natural gas rather than coal. And more efficient appliances, factories and vehicles could rein in demand, making it easier to switch to cleaner sources. Recently the government has hinted that it might improve on its disappointing Paris pledge. But for now the energy juggernaut is just plowing ahead. What would it take to get India onto the cleaner path? Which decisions could doom the planet? More Power for All Primitive and dirty sources dominate India’s energy mix. Two thirds of households continue to rely on cow dung patties, straw, charcoal and firewood for cooking and heating—nearly a quarter of the nation’s primary energy supply. Almost all the rest comes from coal and oil. Coal-fired power plants generate three quarters of India’s electricity, and half of the country’s industries burn coal to generate heat needed for processes such as steelmaking. Oil drives nearly the entire transportation sector. These fossil fuels are nominally cheap, but they exact a heavy toll. In addition to climate change, they contribute to urban smog; 10 of the 20 most polluted cities in the world are in India. Coal plants consume large volumes of water. And growing reliance on foreign coal and oil imports causes economic insecurity; India’s currency has suffered rapid devaluations during global oil crises.
FIRES ignited by cigarettes, lightning or spontaneous combustion have been burning for decades at the immense Jharia coal strip mines, relentlessly releasing toxic gases and carbon dioxide. Credit: Jonas Gratzer Getty Images
The most promising route to modern and clean energy runs through the electric power sector. As costs fall, renewable sources of electricity are increasingly cost-competitive with coal. Down the road, electricity could power scooters, cars and trucks, loosening oil’s stranglehold on transportation. None of this is easy. The grid does not even reach more than 300 million Indians. Millions more who are within reach lack reliable power because the grid is in shambles—and certainly in no condition to accept an influx of energy from solar or wind technology. In my pre-Paris journey, for instance, I watched terrible storms leave thousands of people without electricity for weeks. Despite this reality, the Modi administration has laid out a promising vision. In Paris, it pledged to increase the share of nonfossil-fueled electricity to 40 percent by 2030, up from 24 percent today. It went further in late 2016, increasing its forecast to 60 percent, a truly ambitious goal. Hydropower accounts for most of India’s nonfossil-fueled electricity today, but difficulties in obtaining permits, acquiring land and negotiating compensation for local communities displaced by dams tend to doom most proposed hydroelectric plants. Chronic construction delays also rule out a major role for nuclear reactors. To meet its 60 percent target, the government’s biggest intention by far is to expand solar and wind to 350 gigawatts by 2030. Of this, 250 GW would come from solar, which would exceed 80 percent of all solar capacity currently in existence around the world. Though ambitious, this target is increasingly realistic thanks to the plunging cost of solar power, which in India has dropped by two thirds in the past five years. A new solar plant is now cheaper than a new coal plant that burns imported coal, and by 2020 solar will be cheaper than new coal plants that use domestic coal. Finally, the government and foreign donors are investing in a national network of transmission lines called green corridors that connect sunny areas such as the Thar Desert in the state of Rajasthan to far-off cities such as Mumbai and Delhi. The government has also set ambitious targets to deploy solar power on urban rooftops as well as in far-flung villages that the grid does not reach. Indians are fond of pointing out that the telecommunications industry was able to “leapfrog” from very little landline infrastructure to a widespread mobile phone network. By analogy, they argue, India should be able to leapfrog the lack of a fully deployed power grid and adopt local solar power that does not need a national grid. Indeed, the amount of rooftop solar has almost doubled in each of the past four years. That may be, but large solar energy farms are much cheaper, and a comprehensive grid can power modern appliances well beyond the few lightbulbs and ceiling fan that a typical remote solar installation might support. All this suggests that the best strategy is to pursue both centralized and decentralized power at the same time and to extend and upgrade the grid. Meanwhile distributed solar panels and batteries, especially when networked together as a microgrid that can serve a neighborhood, hospital or data center, can make the entire system more resilient. The natural Gas Fix Still, power demand will grow faster than firms can build renewable energy. And more controllable power sources are needed to buffer the unpredictable output of rising wind and solar generation. For now battery storage is too expensive to deploy at scale. Natural gas–fired plants could solve both challenges. In the U.S., carbon dioxide emissions from energy have declined roughly 15 percent over the past decade, mostly because gas—half as carbon-intensive as coal—has been replacing coal. Natural gas generates only 8 percent of India’s electricity because domestic production is minimal, imported gas has been expensive and prior governments have preferred to rely on domestically abundant coal. But global supplies of liquefied natural gas are rising—from Australia, Africa, even the U.S.—so prices in Asia are falling rapidly.
Credit: Jen Christiansen; Source: India Energy Outlook: World Energy Outlook Special Report. Organisation for Economic Co-operation and Development/International Energy Agency, 2015
Gas plants are cheaper and quicker to build than coal plants are, and they can ramp their output up and down to offset variable wind and solar. Natural gas could also displace coal and oil for heat in industry and buildings and even as fuel for transportation, further reducing emissions. Vikram Singh Mehta, chair of Brookings India and former head of Shell India, maintains that India’s energy policy should emphasize natural gas infrastructure. India would need to invest heavily in a domestic pipeline network to transport gas and in regasification terminals to import liquefied natural gas. The Modi administration may be listening. It recently promised that neither the government nor the private sector would build any coal plants after 2022. Modi also pledged to use more natural gas. Keeping the latter promise could ensure the former comes true as well. Use It and Lose It Even with a move toward renewables and natural gas, coal and oil will dominate India’s energy mix in the near term. That is why Navroz Dubash of the Center for Policy Research in New Delhi argues that more investment in an energy-efficient economy is critical. If India becomes as efficient as some would like, it could be a shining example of a developing country that achieves economic growth without commensurate increases in energy demand, halting the rise in emissions. Although the International Energy Agency forecasts that by 2040 India, if left unchecked, will need to deliver four times as much electricity as it does now, an aggressive efficiency push could limit the increase to just twice current levels. Making manufacturing facilities more efficient could have a profound effect. Industry currently consumes more than 40 percent of India’s energy. Converting to efficient equipment and switching from coal to natural gas or electricity for manufacturing steel, bricks and fertilizer alone could save enormous amounts of energy and emissions. The country’s buildings present another great opportunity. A staggering three quarters of the structures that will be standing in 2040 have not been erected yet. Electricity for homes and businesses could spike, especially as air-conditioning spreads, so it is imperative that India’s new buildings use electricity economically. India is already a leader in using public policy to drive down the cost of energy-efficient products. A recent initiative—Energy Efficiency Services Limited, which procures equipment in bulk and distributes it at low prices—has succeeded wildly. The initiative has sold more than 200 million highly efficient LED lamps at comparable cost to conventional incandescent lightbulbs, and it has driven LED prices down below those in the West. The initiative is beginning to place orders for efficient air conditioners to spur manufacturers to innovate. If this mechanism continues to succeed, the market will drive investment in better appliances as millions of new middle-class Indians demand modern services. India could also counter rising emissions from transportation. Right now transport consumes only 14 percent of the nation’s energy because very few Indians own a car. Fuel demand could more than triple by 2040, however, spurred by rising incomes and greater desire for vehicles. Policy makers recently mandated that new vehicles be increasingly fuel-efficient. But the country could aggressively invest in charging infrastructure to make electric vehicles more attractive, helping renewable power to reduce vehicle emissions. Given that two- and three-wheelers make up more than 80 percent of India’s vehicle sales today, the government could make rapid inroads toward electrification by promoting electric scooters and rickshaws in the near term. And if urban planners can deploy effective public transit, they could reduce people’s desire to own cars. Better transportation in cities could save millions of lives, too. In India, smog and particulate air pollution—largely spewed by diesel vehicles—choke major cities such as Delhi, cost $18 billion annually in lower economic productivity and contribute to more than one million premature deaths every year. Harnessing solar energy could help relieve strained food and water systems as well. A pilot project in southern India will use concentrating solar mirrors to generate steam, which will drive turbines and distill water and run food refrigeration. The government is also aggressively deploying solar panels to power 200,000 irrigation pumps by 2019, en route to ultimately converting all 26 million pumps—which run on diesel fuel or the power grid—to solar power. Reality Check In my conversations with foreign and domestic companies, especially in the solar sector, I have been struck by a stark contrast. Companies outside India see a lucrative market that will grow at record-breaking pace. But leaders of companies inside India privately scoff. Their pessimism stems from their experience with India’s dysfunctional power sector, the lack of funding for infrastructure projects, and the contentious and at times corrupt political landscape. Quintessentially Indian obstacles block easy execution of a clean energy strategy. First, as noted, the dilapidated power grid is woefully unprepared to handle even a small rise in renewable sources, and that strain will only get worse. For example, as climate change increases drought, farmers are turning on more irrigation pumps that dive deeper belowground and, in so doing, are using more electricity. In 2012 a massive increase in pumping caused the largest blackout in human history. Already bankrupt utilities cannot afford to upgrade the ailing grid, stuck in a vicious cycle of undercharging customers for electricity, going into debt, and failing to maintain the grid or to combat rampant power theft.
MICROGRIDS can power villages that electric transmission lines do not reach. Solar panels feed a local microgrid in one village (1). Batteries store solar power for another microgrid (2). Credit: Prashanth Vishwanathan Getty Images
Second, erecting infrastructure is notoriously problematic because of scarce private financing and cumbersome regulation. This is troubling because meeting India’s renewable energy targets alone will require $150 billion in investment by 2020—far more than the government can mobilize. Again, a vicious cycle has emerged, in which banks have lent heavily to projects that have stalled (especially in the power sector) and are therefore not in good shape to invest further. They often charge exorbitant interest rates. And elusive government permits and obstacles to land acquisition can delay or doom clean energy projects. Third, governance and its thorny politics can impede sensible policies. For example, even though the Modi administration has set ambitious wind and solar energy targets, implementation rests mostly with the states, many of which have been reluctant to act. Another Modi initiative—to repeal wasteful subsidies for consumer fuels—succeeded in raising the prices of gasoline and diesel but has stalled on raising cooking gas and kerosene prices because of political backlash. And as long as natural gas is sold below market prices, companies have little incentive to invest in drilling new wells to increase domestic production. Finally, the Modi administration’s tax on coal-mining companies has raised the ire not only of coal firms but also of their customers, such as steel companies, and the governments of major coal-producing states. These powerful political forces could obstruct further increases to the tax, which is currently much lower than the cost of the pollution caused by burning coal. Strong policy changes are needed. A top priority is to rescue utilities from their backbreaking debt so they can reinforce the grid and pay for renewable energy. The Modi administration has made some progress by promising to pay off debts in return for better utility performance, such as lessening power losses in the grid, which can exceed a quarter of the power that goes into them. The administration could go further by reducing state government influence over utilities so the companies are not pressured to reduce rates for politicians’ gains. Another priority is to tighten efficiency regulations for industry. And policy makers could fast-track permits for natural gas pipelines and power plants, as well as facilities that import liquefied natural gas. They also could step up incentives for capturing carbon emissions from burning coal, as one chemical plant in southern India recently started doing. Better yet, they could move up the date beyond which no new coal plants will be built to earlier than 2022. All of this will require partnerships between the federal and state governments, as well as political courage against industry lobbies. The most effective way to build a political coalition is to make the clean energy infrastructure financially attractive, which initiatives such as Energy Efficiency Services Limited have done by encouraging local manufacturing. Help from Abroad India will not achieve a low-carbon transition alone. It will need help developing new technologies and financing their deployment. Some signs are encouraging: India has partnerships with the U.S. on clean energy research and development, with Germany on financing grid infrastructure and with multilateral development banks on deploying renewable energy. The scale of assistance will need to increase by at least an order of magnitude. Otherwise, India will most likely continue to install inefficient coal plants, guzzle foreign oil and struggle with rickety grids. Rather than hoping that India builds a low-carbon future, foreign leaders need to step up to help India make that choice. There is a strong financial incentive to do so: by accelerating India’s energy transition, countries can open a lucrative export market for their clean energy industries. And there is a larger imperative: the fate of the planet hangs in the balance.
A shimmering waterfall beckoned visitors into the India pavilion at the 2015 Paris Climate Change Conference. Inside, multimedia exhibits and a parade of panelists proclaimed that the nation’s clean energy future was fast-approaching. Prime Minister Narendra Modi went even further, announcing that his country would lead a new International Solar Alliance to ramp up solar power in 120 countries. Indian officials resolved to be leaders in battling global climate change.
I had arrived in Paris after a research trip that crisscrossed India, and I struggled to square that confident optimism with the facts I had seen on the ground: heavy reliance on coal power plants, a failing electrical grid that could not handle large additions of wind or solar electricity, and a widespread attitude that India, as a developing country, should not have to reduce its carbon emissions and should be able to grow using fossil fuels as other major countries have done. Still, by the end of the conference, India and 194 other countries, along with the European Union, had adopted the Paris Agreement, which commits the world to limit global warming to two degrees Celsius. In November 2016 the agreement went into legal force, making each country’s pledge binding under international law.
Despite the lofty rhetoric of India’s leaders, their vision of a clean energy future is far from assured. Even though India’s pledge set ambitious targets for solar and wind power, its overall commitment to curb emissions was underwhelming. If the government just sat on its hands, emissions would rise rapidly yet stay within the sky-high limits the country set for itself in Paris.
That would be disastrous for the world. India has one of the fastest-growing major economies on the planet, with a population expected to rise to 1.6 billion by 2040. By that time, electricity demand could quadruple. If the nation does not take drastic measures, by midcentury it could well be the largest greenhouse gas emitter (it is third now, behind China and the U.S.), locked into a fossil-fuel infrastructure that would likely ruin the world’s quest to contain climate change. If it adds coal power at the rate needed to keep up with its skyrocketing demand, for example, its greenhouse gas emissions could double by 2040.
Yet India is in some ways starting with a clean slate. Unlike the developed world, where the challenge is replacing dirty fossil-fuel infrastructure with clean energy, most of India’s infrastructure has not been built yet. The country has a choice to invest in power from wind, solar and natural gas rather than coal. And more efficient appliances, factories and vehicles could rein in demand, making it easier to switch to cleaner sources. Recently the government has hinted that it might improve on its disappointing Paris pledge. But for now the energy juggernaut is just plowing ahead. What would it take to get India onto the cleaner path? Which decisions could doom the planet?
More Power for All
Primitive and dirty sources dominate India’s energy mix. Two thirds of households continue to rely on cow dung patties, straw, charcoal and firewood for cooking and heating—nearly a quarter of the nation’s primary energy supply. Almost all the rest comes from coal and oil. Coal-fired power plants generate three quarters of India’s electricity, and half of the country’s industries burn coal to generate heat needed for processes such as steelmaking. Oil drives nearly the entire transportation sector.
These fossil fuels are nominally cheap, but they exact a heavy toll. In addition to climate change, they contribute to urban smog; 10 of the 20 most polluted cities in the world are in India. Coal plants consume large volumes of water. And growing reliance on foreign coal and oil imports causes economic insecurity; India’s currency has suffered rapid devaluations during global oil crises.
The most promising route to modern and clean energy runs through the electric power sector. As costs fall, renewable sources of electricity are increasingly cost-competitive with coal. Down the road, electricity could power scooters, cars and trucks, loosening oil’s stranglehold on transportation.
None of this is easy. The grid does not even reach more than 300 million Indians. Millions more who are within reach lack reliable power because the grid is in shambles—and certainly in no condition to accept an influx of energy from solar or wind technology. In my pre-Paris journey, for instance, I watched terrible storms leave thousands of people without electricity for weeks.
Despite this reality, the Modi administration has laid out a promising vision. In Paris, it pledged to increase the share of nonfossil-fueled electricity to 40 percent by 2030, up from 24 percent today. It went further in late 2016, increasing its forecast to 60 percent, a truly ambitious goal. Hydropower accounts for most of India’s nonfossil-fueled electricity today, but difficulties in obtaining permits, acquiring land and negotiating compensation for local communities displaced by dams tend to doom most proposed hydroelectric plants. Chronic construction delays also rule out a major role for nuclear reactors.
To meet its 60 percent target, the government’s biggest intention by far is to expand solar and wind to 350 gigawatts by 2030. Of this, 250 GW would come from solar, which would exceed 80 percent of all solar capacity currently in existence around the world. Though ambitious, this target is increasingly realistic thanks to the plunging cost of solar power, which in India has dropped by two thirds in the past five years. A new solar plant is now cheaper than a new coal plant that burns imported coal, and by 2020 solar will be cheaper than new coal plants that use domestic coal. Finally, the government and foreign donors are investing in a national network of transmission lines called green corridors that connect sunny areas such as the Thar Desert in the state of Rajasthan to far-off cities such as Mumbai and Delhi.
The government has also set ambitious targets to deploy solar power on urban rooftops as well as in far-flung villages that the grid does not reach. Indians are fond of pointing out that the telecommunications industry was able to “leapfrog” from very little landline infrastructure to a widespread mobile phone network. By analogy, they argue, India should be able to leapfrog the lack of a fully deployed power grid and adopt local solar power that does not need a national grid. Indeed, the amount of rooftop solar has almost doubled in each of the past four years.
That may be, but large solar energy farms are much cheaper, and a comprehensive grid can power modern appliances well beyond the few lightbulbs and ceiling fan that a typical remote solar installation might support. All this suggests that the best strategy is to pursue both centralized and decentralized power at the same time and to extend and upgrade the grid. Meanwhile distributed solar panels and batteries, especially when networked together as a microgrid that can serve a neighborhood, hospital or data center, can make the entire system more resilient.
The natural Gas Fix
Still, power demand will grow faster than firms can build renewable energy. And more controllable power sources are needed to buffer the unpredictable output of rising wind and solar generation. For now battery storage is too expensive to deploy at scale.
Natural gas–fired plants could solve both challenges. In the U.S., carbon dioxide emissions from energy have declined roughly 15 percent over the past decade, mostly because gas—half as carbon-intensive as coal—has been replacing coal. Natural gas generates only 8 percent of India’s electricity because domestic production is minimal, imported gas has been expensive and prior governments have preferred to rely on domestically abundant coal. But global supplies of liquefied natural gas are rising—from Australia, Africa, even the U.S.—so prices in Asia are falling rapidly.
Gas plants are cheaper and quicker to build than coal plants are, and they can ramp their output up and down to offset variable wind and solar. Natural gas could also displace coal and oil for heat in industry and buildings and even as fuel for transportation, further reducing emissions. Vikram Singh Mehta, chair of Brookings India and former head of Shell India, maintains that India’s energy policy should emphasize natural gas infrastructure. India would need to invest heavily in a domestic pipeline network to transport gas and in regasification terminals to import liquefied natural gas.
The Modi administration may be listening. It recently promised that neither the government nor the private sector would build any coal plants after 2022. Modi also pledged to use more natural gas. Keeping the latter promise could ensure the former comes true as well.
Use It and Lose It
Even with a move toward renewables and natural gas, coal and oil will dominate India’s energy mix in the near term. That is why Navroz Dubash of the Center for Policy Research in New Delhi argues that more investment in an energy-efficient economy is critical. If India becomes as efficient as some would like, it could be a shining example of a developing country that achieves economic growth without commensurate increases in energy demand, halting the rise in emissions.
Although the International Energy Agency forecasts that by 2040 India, if left unchecked, will need to deliver four times as much electricity as it does now, an aggressive efficiency push could limit the increase to just twice current levels. Making manufacturing facilities more efficient could have a profound effect. Industry currently consumes more than 40 percent of India’s energy. Converting to efficient equipment and switching from coal to natural gas or electricity for manufacturing steel, bricks and fertilizer alone could save enormous amounts of energy and emissions.
The country’s buildings present another great opportunity. A staggering three quarters of the structures that will be standing in 2040 have not been erected yet. Electricity for homes and businesses could spike, especially as air-conditioning spreads, so it is imperative that India’s new buildings use electricity economically.
India is already a leader in using public policy to drive down the cost of energy-efficient products. A recent initiative—Energy Efficiency Services Limited, which procures equipment in bulk and distributes it at low prices—has succeeded wildly. The initiative has sold more than 200 million highly efficient LED lamps at comparable cost to conventional incandescent lightbulbs, and it has driven LED prices down below those in the West. The initiative is beginning to place orders for efficient air conditioners to spur manufacturers to innovate. If this mechanism continues to succeed, the market will drive investment in better appliances as millions of new middle-class Indians demand modern services.
India could also counter rising emissions from transportation. Right now transport consumes only 14 percent of the nation’s energy because very few Indians own a car. Fuel demand could more than triple by 2040, however, spurred by rising incomes and greater desire for vehicles. Policy makers recently mandated that new vehicles be increasingly fuel-efficient. But the country could aggressively invest in charging infrastructure to make electric vehicles more attractive, helping renewable power to reduce vehicle emissions. Given that two- and three-wheelers make up more than 80 percent of India’s vehicle sales today, the government could make rapid inroads toward electrification by promoting electric scooters and rickshaws in the near term. And if urban planners can deploy effective public transit, they could reduce people’s desire to own cars.
Better transportation in cities could save millions of lives, too. In India, smog and particulate air pollution—largely spewed by diesel vehicles—choke major cities such as Delhi, cost $18 billion annually in lower economic productivity and contribute to more than one million premature deaths every year.
Harnessing solar energy could help relieve strained food and water systems as well. A pilot project in southern India will use concentrating solar mirrors to generate steam, which will drive turbines and distill water and run food refrigeration. The government is also aggressively deploying solar panels to power 200,000 irrigation pumps by 2019, en route to ultimately converting all 26 million pumps—which run on diesel fuel or the power grid—to solar power.
Reality Check
In my conversations with foreign and domestic companies, especially in the solar sector, I have been struck by a stark contrast. Companies outside India see a lucrative market that will grow at record-breaking pace. But leaders of companies inside India privately scoff. Their pessimism stems from their experience with India’s dysfunctional power sector, the lack of funding for infrastructure projects, and the contentious and at times corrupt political landscape. Quintessentially Indian obstacles block easy execution of a clean energy strategy.
First, as noted, the dilapidated power grid is woefully unprepared to handle even a small rise in renewable sources, and that strain will only get worse. For example, as climate change increases drought, farmers are turning on more irrigation pumps that dive deeper belowground and, in so doing, are using more electricity. In 2012 a massive increase in pumping caused the largest blackout in human history. Already bankrupt utilities cannot afford to upgrade the ailing grid, stuck in a vicious cycle of undercharging customers for electricity, going into debt, and failing to maintain the grid or to combat rampant power theft.
Second, erecting infrastructure is notoriously problematic because of scarce private financing and cumbersome regulation. This is troubling because meeting India’s renewable energy targets alone will require $150 billion in investment by 2020—far more than the government can mobilize. Again, a vicious cycle has emerged, in which banks have lent heavily to projects that have stalled (especially in the power sector) and are therefore not in good shape to invest further. They often charge exorbitant interest rates. And elusive government permits and obstacles to land acquisition can delay or doom clean energy projects.
Third, governance and its thorny politics can impede sensible policies. For example, even though the Modi administration has set ambitious wind and solar energy targets, implementation rests mostly with the states, many of which have been reluctant to act. Another Modi initiative—to repeal wasteful subsidies for consumer fuels—succeeded in raising the prices of gasoline and diesel but has stalled on raising cooking gas and kerosene prices because of political backlash. And as long as natural gas is sold below market prices, companies have little incentive to invest in drilling new wells to increase domestic production.
Finally, the Modi administration’s tax on coal-mining companies has raised the ire not only of coal firms but also of their customers, such as steel companies, and the governments of major coal-producing states. These powerful political forces could obstruct further increases to the tax, which is currently much lower than the cost of the pollution caused by burning coal.
Strong policy changes are needed. A top priority is to rescue utilities from their backbreaking debt so they can reinforce the grid and pay for renewable energy. The Modi administration has made some progress by promising to pay off debts in return for better utility performance, such as lessening power losses in the grid, which can exceed a quarter of the power that goes into them. The administration could go further by reducing state government influence over utilities so the companies are not pressured to reduce rates for politicians’ gains. Another priority is to tighten efficiency regulations for industry. And policy makers could fast-track permits for natural gas pipelines and power plants, as well as facilities that import liquefied natural gas. They also could step up incentives for capturing carbon emissions from burning coal, as one chemical plant in southern India recently started doing. Better yet, they could move up the date beyond which no new coal plants will be built to earlier than 2022. All of this will require partnerships between the federal and state governments, as well as political courage against industry lobbies. The most effective way to build a political coalition is to make the clean energy infrastructure financially attractive, which initiatives such as Energy Efficiency Services Limited have done by encouraging local manufacturing.
Help from Abroad
India will not achieve a low-carbon transition alone. It will need help developing new technologies and financing their deployment. Some signs are encouraging: India has partnerships with the U.S. on clean energy research and development, with Germany on financing grid infrastructure and with multilateral development banks on deploying renewable energy.
The scale of assistance will need to increase by at least an order of magnitude. Otherwise, India will most likely continue to install inefficient coal plants, guzzle foreign oil and struggle with rickety grids. Rather than hoping that India builds a low-carbon future, foreign leaders need to step up to help India make that choice. There is a strong financial incentive to do so: by accelerating India’s energy transition, countries can open a lucrative export market for their clean energy industries. And there is a larger imperative: the fate of the planet hangs in the balance.
