Challenges to Just Energy Transitions in a post-COVID India
Challenges to Just Energy Transitions in a post-COVID India
Despite the worrisome uncertainties, the pandemic-driven lockdown has given climate observers a short-term relief in two ways. First, global carbon emissions are expected to decline by 8% in 2020, a historical low, the year-on-year reduction of which is six times more than what was observed during the financial crisis of 2009. Second, a steep plunge in the global energy demand, particularly for fossil fuels, has been observed with a 3.8% decline in the first quarter of 2020. The situation in India exhibits a similar trend. The country has recorded a 1% fall in global carbon emissions in the first quarter of 2020. While these temporary dips don’t imply a permanent path to decarbonisation, they open up avenues for rethinking policies towards achieving a just energy transition. A just energy transition, in simple terms, is the transformation towards resilient clean energy systems without causing any societal disruption. Leaving no person behind, a just transition considers aspects of health, gender, employment and livelihood, and equitable energy access in achieving climate goals.
The case of India, when it comes to a just and clean transition, is not free of policy paradoxes. On one hand, India has set an ambitious climate goal, with a nationally determined renewable energy target of 175 GW by 2022, and an extended goal of 450 GW to be achieved by 2030. With promising renewable energy expansion programmes starting from 100% FDI in the sector to the recent ‘must-run’ status amid the lockdown, India ranks as the third-largest renewable energy economy. On the other hand, our energy mix is still dominated by coal. So are the energy subsidy programmes that mostly favour fossil fuels. Simultaneous pushes to both the renewable industry as well as the fossil fuel industry may merely expand the energy economy and satiate consumption demand, but a clean and just transition towards low-carbon pathways will remain a far-fetched goal.
Renewables in India have grown to tremendous scales thereby facilitating just transitions. Over the years, electricity production from renewable sources has become cheaper than from coal-based power plants. Furthermore, distributed renewables which include off-grid installations and rooftop solar have shown enormous potential to achieve just transitions in India. A recent report by the REN21 accounts that the distributed renewables companies have directly employed 95,000 workers in 2017-18, and have enabled 210,000 informal jobs in India, out of which 25% of the workforce were women. By independently functioning off the grid, these add to the resilience of the energy systems.
The pandemic, however, has affected the country’s renewable energy scenario in various ways. Owing to the supply chain disruptions caused by the coronavirus pandemic, the Central government has allowed renewable energy agencies to extend their project deadlines. With the disruptions caused by the pandemic and the recent geopolitical tensions with China, the smooth supply of renewable energy components to get the projects going remains uncertain. India imports more than 80% of the PV modules from China. From 1st August 2020, the central government is likely to impose a 20% import tariff on solar cell modules. This may hinder the investments in solar power projects, and cause a slowdown in additional installations that are already declining by 43% (as of Q1 2020). Uncertainties in energy demand have further stalled newer power purchase agreements. Besides delaying the renewable energy targets of 2022, the extension of project deadlines will additionally strain the financial health of the already ailing distribution companies.
Let us now look into the coal sector. Despite the promises of renewables, coal still continues to dominate the power sector, backed by government policies and subsidies. Fossil fuel subsidies are seven times more than that for renewables and electric vehicles. The recent opening up of coal blocks for private sector participation in commercial mining implies that coal is here to stay for a longer period. Self-reliance in the coal sector comes with a lot of health and environmental costs. India has low-quality coal with more than 20% fly ash content. A 2019 CAG report observed that Coal India Ltd. has had ineffective management plans for controlling the environmental hazards of coal mining. Land acquisition and environmental impact assessments are other concerns that demand stringent policy mandates. Concerns rise on the health of the workers employed in open coal mining and other cleaning processes. Despite the concerns, given its predominance in the energy mix and the associated job-creation, a transition away from coal will drastically affect employment. Policies should thus ensure that job transition towards renewable energy projects is viable to compensate for the potential job losses in the coal sector.
Unlike the coal sector, newer explorations for crude oil blocks have almost been relatively stagnant, not because of a policy inclination towards cleaner alternatives but because of the brunt of existing oil cess and royalties. India has around an import dependency of 85% when it comes to crude oil. A 70% fall in the consumption demand of crude oil following the lockdown could result in a lower oil import bill. Utilising this situation, the significant gains can be diverted towards investments in clean energy infrastructure.
In sum, rebuilding the energy economy after the pandemic will require the following taken into consideration. First, assuming that the future energy demands will be increasingly met by the renewable energy industry, the job losses due to the shift should be compensated by creating more re-skilling and green skilling. More investments in decentralized and distributed renewables can be a plausible option to create more jobs. Second, given the heavy import dependency with China, the post-COVID scenario should realize and enhance the domestic manufacturing capabilities of solar PV modules. Third, market instruments such as green bonds should facilitate the capital needs for the growth of clean energy projects. Recently, the State Bank of India has raised $100 million via green bonds. Strengthening bond markets can thus help in achieving clean energy goals. Finally, and more importantly, reforms in the power sector should be effectively carried out to ensure equitable access. Recent policy advances such as the amendments in the Electricity Act and the launch of a real-time electricity market are commendable imperatives for a just energy access. These being said, post the pandemic, our economic recovery should not just focus on one-time stimulus packages, but should prioritize a permanent shift away from fossil fuels towards equitable clean energy infrastructures.
The author is a Master's student of International Studies at the Jawaharlal Nehru University, New Delhi.