Energy security and net-zero are not just buzzwords but signal the future of the energy market globally, and at every level. More broadly as the world undergoes disruptions not just in supply chains but within governments themselves, the future of energy looks drastically different from what it was, implying that discussion around the origin, supply and distribution of energy need further deliberation. With that in mind, it becomes critical for geographies, individuals and organizations to closely contemplate net-zero strategies.
In an exclusive in-depth analysis, lead experts Nitin Prasad, Chairman, Shell Companies, India and Dr Vibha Dhawan, Director General at The Energy and Resources Institute (TERI) explore the future of energy and carbon markets in India as they share analysis, and delve into key insights representing the current scenario, future implications and possible outcomes for the evolving energy market in India.
Nitin Prasad begins by shedding light on energy security and the transition to a low carbon, sustainable and equitable future for energy companies. He stresses that net-zero is the core of the company strategy with a target of 2050.
“There is a transformational change that is different in many different aspects of doing business. From the governance side, its about going to our shareholders and asking about sustainability and the energy transition. It’s about linking emission targets with executive pay.
And we believe that putting ourselves forward and putting a clear target in terms of being a net-zero company by 2050 and addressing not just scope one and scope two emissions, but also focusing on scope three emissions, which can be over 85% to 88% of our emissions, is an important part of the role that we must come back and play moving forward. Now for us, this is about a transformational change in many different aspects of how we do business. And the starting point is the governance side. So, this is about going to our shareholders once in three years and asking for approval for our sustainability and our energy transition plan. This is linking emission targets on an annual basis to executive pay. This is making the wholesale governance changes on how we run the company, which is an important sort of the first step in terms of what we get there.
The second step is, of course, taking forward our product portfolio in terms of how we do business. And that has a lot to do in terms of how we approach the market and work with sectors and customers to decarbonize them and the products and solutions that we develop that will enable them to come back and do this. By 2030 we will have two and a half million charging points. But it’s not just providing electricity to cars, but it is also about providing electricity into the home and then back that up with 100% renewable electricity that we will make through offshore wind projects or other solar or wind renewable projects that are there. And that is just the electricity space. We must create a product portfolio that provides options and flexibility to customers and consumers going forward. And then there’s a third piece to this one, which is also quite important. And these are large, we call them enablers.
What also matters is the right talent, the right sort of leadership, the right behaviors, and the organizational culture in terms of looking at every opportunity that exists for us to look at circularity and other sustainability aspects. We are all chief sustainability officers that must look at the opportunity, at digitalization and its implications.
Since you mentioned the Prime Minister and the commitments in India as the President of Teri, what are your thoughts on how India could decarbonize its energy system by 2050 while continuing to make economic progress?”
Dr Vibha Dhawan: The first step for adopting any technology is a commitment from the government side, which means the commitments made by PM in the COP, including decarbonizing by 2050. With the significant steps made by the government, companies are interested in green energy. Power generating energy through renewable means and so on costs money. Capex investment in the scale is viable enough for the energy company and the consumers.
But initially, they require that kind of support from the government. You rightly mentioned that India is a country we need to develop, which essentially means that our energy requirements are also going to increase soon and indirectly, that also shows that while on one end we are promised by 2050 it will all be renewables. Overall, our carbon footprint might also increase with increased development. It’s vital to have governments invest in infrastructure. Capex is required for renewables. And the system should be sustainable for the buyer of that energy. Given the disruptions taking place across the world, we need to look at meeting the immediate energy requirements of India. The production of equipment needs to be produced within India. We need to go local, produce indigenously, and small and medium enterprises will also have to play an important role in it.
Policy development needs to strategy. India’s investment in the R&D sector is negligible. We only spend about zero, 7% of our GDP on R&D. And the private sector contributes about 37% to R&D, 7%. This is negligible compared to countries like China and US, Japan, and Germany, where it’s more than 70%.
Capacity building and technology are also vital and require all stakeholders’ willingness to adopt. Bringing in new technology is not the only race but also upskilling workers is going to be a challenge. Here, public-private partnerships play a huge role along with other government initiatives like Skill India. Particularly, when it comes to adopting new energy concepts like green hydrogen.
So, energy companies perhaps will have a tremendously greater role to play when we are talking about the net-zero world. Far from a comfort though, when it comes to saving humanity. How do energy companies such as Shell take on that challenge?
Nitin Prasad: Energy companies need to change going forward, and there will be an evolution of the role that we play in society. We were enablers of development and progress by providing energy for many, many decades. But now we need to evolve to transformative collaboration, to facilitation, to come back and see how do we create the partnerships with the different parts of society to be able to come back and accelerate not just the development of these new technologies, but the adoption and pace and commercialization of the new technologies going forward? That means, for example, that we need to become much more adept at coalition building. Working with the energy transition committees, globally, in terms of coming and bringing a much more informed debate and dialogue about what looks like, we must be able to facilitate the development of new industries and sectors.
And some of the sectors that need to transition require the whole value chain, all the different players to come together. We need to restructure the whole value chain in a manner that is both sustainable and circular, but equally doesn’t create an effective break in the chain by not sharing the economic needs across the entire chain. We must look at supporting innovation, for example, as we support startups in India through our Shell E Four program. And this is about how we bring the next generation of capability and accelerate their development going forward.
In India, we noticed that 15% to 20% are from industrial emissions. We took on this challenge to figure out how to work with leading companies to begin the decarbonization process. Looking at the implications of the system models and the implications and dependencies to create a model that is sustainable.
But found that government is key to any development. What do you think are the top two or three big items from a policy point of view that the government must take on?
Dr Vibha Dhawan: Teri has a center of excellence with Mahindra on sustainable buildings. Here our goal is to look beyond just the building design, Graha accreditation, and more into the type of raw material that goes into the building construction, glass, glazed tiles and so on. Yes, here the entire value chain is taken into focus. We also must face the reality that there are certain sectors where steel and cement require a different quantity of energy, hence renewables may not work for them. Eventually, hydrogen may play a greater role. Yet, in sectors like steel where the demand will increase, government support is required to meet its growing demand.
And we also must look at the role of small and medium enterprises. We are talking about there are about 63 million MSMEs which employ 60 million people and contribute to about 30% of GDP. And therefore, the micro, small and medium enterprises are rightly regarded as the backbone of the Indian economy and thus becomes the most crucial stakeholder in the energy transition.
It is financial health. I’ll say it’s quite poor and most of them are still running on losses. The electricity demand perhaps is not expected to increase significantly under the business-as-usual scenario in coming years. One way to ensure that these comps can make adequate returns on their investment in electricity infrastructure is to stimulate increased electric demand and especially during off-peak hours. In this way, there is a steady demand for electricity and whatever is produced either through the pole or otherwise through renewable that is consumed. In a Teri study, we found that electricity consumption can increase by estimates of 25% to 130% across different end-users, representing a real opportunity to expand electricity production and consumption. As a research Institute, Teri has actively contributed to its research projects, policy consultations and implementation. We are working in various fields of energy environment, climate change and sustainability.
Nitin Prasad: Thank you, and finally, I concur that there is a need for transformation of the power markets. Be it green hydrogen, there is a need to recognize flexibility to purchase and buy and sell renewable electricity. Otherwise, green hydrogen is not really green. It will be some other color if you’re not careful. In terms of bioproducts, and circularity, we need to understand how we manage plastics, agricultural and municipal waste, and their conversion into value-added products. Europe has Vera, and China and Australia have their own platforms forward, its time India recognizes its need for a carbon market. Generating carbon credits is vital, along with creating transparent pricing.