Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

Is Renewable Energy the game changer

The Ukraine crisis has had a profound impact on the way countries think about energy security. The dependence on gas from Russia in many parts of Europe and the knock on effects on global energy prices soaring 50% has pushed the world to explore alternative sources of energy. This uncertainty about energy security has prompted some countries to accelerate their Renewable Energy (RE) transition bolstering the global commitment to Climate Neutrality to tackle climate change. This could change the landscape of RE roadmap in the forthcoming years. And India has a huge opportunity to lead the way to demonstrate
that RE is not just a function of cost, but a driver to push sustainable growth.

The Bloomberg New Energy Finance Report estimates that for a green scenario where we are on a pathway to achieve COP26 commitments, wind and solar power would need to generate roughly 50% of the world’s energy needs by 2050 whilst coal powered electricity plants need to drop to just 10%. This would mean countries across the globe have to define policies and stringent measures to be ‘climate neutral’. The European Green Deal (EGD), led by the European Union has taken a positive measure to commit to 100% RE by 2050. They have further committed, as per the Renewable Energy Directive, that EU members must have 40% of RE by 2030. This impacts the global outlook and the target has created a snowball effect for nations, given the changing pattern of RE investments across the world. Many nations already have RE contributing more than 20% of their total energy supply, with some generating over half their electricity from renewable sources.

In the decade ahead, while we see some nations embrace the use of RE aggressively to ensure greater energy security, there will be a continued need to have steeper climate pledges and adopt strategic targets in order to meet the commitments made in COP26.

Rinika Grover, Head Sustainability and CSR – Apollo Tyres Ltd

Compared to a few years ago when investments in RE technology was viewed as an expensive luxury outlay and its affordability limited to only a few wealthy nations, today these kinds of expenses appears to be far more tenable in view of changes in attitudes around climate change as well as more recent energy security concerns. Additionally, the return on investment now seems far more tangible. Today, around 30% of the world’s electricity comes from RE, and it is envisaged to increase further given the investments in RE are higher by developing countries. All this is being driven by steady improvements with
increasing economies of scale and reduction in costs. For example, the costs for electricity from utility-scale solar photovoltaics (PV) fell 85% between 2010 and 2020 illustrating this shift and is one such example of change in investment patterns.

As we look closer home, this narrative gets firmer. Studying India’s trajectory and the steep growth in RE capacity, today we as a nation are amongst the top three nations investing in renewable energy. This is substantiated in a number of high profile green initiatives. For example Cochin International Airport Ltd (CAIL) is leading a pathway that will contribute to a power surplus and not just power neutral. Similarly, Indira Gandhi International Airport, which operates entirely on hydro and solar energy, resonating the commitment made at the COP26 Summit in Glasgow to achieve net-zero carbon emission by 2070. The ambitious target of installing 500 GW of RE capacity by 2030 now seems viable. India’s economy is
definitely bouncing back post COVID, and an increase of more than 125% in investment, a record high of $14.5 billion in FY22 serves as a sort of evidence.

However, the ramp up of the RE investments in comparison to current levels requires a further significant push, given the carbon intensity of India’s power sector is still above the global threshold level. Fossil fuels such as coal and oil are still the bedrock of its economic development and it delineates the country’s challenge. The energy consumption has doubled since 2000, amplifying India’s emissions making it the third largest emitter of CO2.

With the ongoing extensive development plans in the country, one approach to reduce our reliance on dirty fuels would be through an introduction of forward looking policies, which can be vital for RE expansion. In this domain, Europe has always led the path by being an early adopter, with its energy policies encouraging RE growth. A trend that was cascaded worldwide and now most countries around the world have some form of energy policy that seeks to encourage renewables. India, with a population of over 1.4 billion and a focus to provide clean, affordable and sustainable energy to all its citizens, has established numerous policy measures in place to accelerate the shift to cleaner energy.

A more recent transition that resonates with the ambitious plans of RE generation has been the investment in green hydrogen and its subsequent policies implemented to accelerate its production. This positions India in the top six countries lauded for their commitments in this source of energy. It is seen as a ‘quantum leap’ to make the country a global hub for green hydrogen production and export. Touted as the trendiest form of clean energy, this energy source is used as a highly efficient store of energy and potential replacement for gas in heating and industrial processes. The transition to green hydrogen lately has led to the prediction, that it would account to about 25% of the global energy use by 2050, given it
supports the carbon abatement plans perfectly.

Alongside our transition to green hydrogen, there are schemes that encourage use of green energy. The Perform, Achieve and Trade (PAT) Scheme, incentivising certain sectors in the industry to use green energy is one such legislation, and soon it is likely to be applicable for the Automobile and allied industries in its successive PAT cycles. Further, the much awaited Energy Conservation Act, which is likely to be passed, would also set RE targets for Industry. These legislations would certainly nudge the Industry to invest further in RE. The ripple effects of all these upcoming changes can be felt in the Tyre Industry whereby, the supply chain, in particular the OEM’s, have outlined their expectations for a greener finished
product. Most OEM’s have introduced a mandatory requirement in their process to showcase the RE commitment as a prerequisite before submitting a Request for Quotation (RFQ). These expectations compliment and would transform our RE landscape.

Its no doubt that the current commitments would reduce India’s reliance on energy imports, however the implementation of RE is still one that is fraught with pitfalls. For instance, there are still a few formidable challenges that impede the pursuit of green hydrogen such as its storage, transportation and costs of production and hence making it less lucrative for adoption by the industry.

That said, the first milestone of a RE generation of 500 MW by 2030 for India is a step towards our wider commitment of Net Zero by 2070. We accelerated this journey in the last decade but are still in very nascent stages, requiring significant investments and innovation in the domain. There is a further need to triple the current rate of investment in RE in order to meet the overall commitment. Recently the initiative, ‘One Sun One World One Grid’ with a clear objective of providing clean energy through interconnected worldwide green grids, is lauded as an instrumental leap to support the transition. Perhaps the bill for this will be significant too.

The transition to greener energy has begun, but one that requires a lot more in investments to a diverse energy mix rather than a stand-alone solution. Most notably is a system that benefits the citizens which is both affordable and sustainable for them!

Authored by

Rinika Grover, Head Sustainability and CSR – Apollo Tyres Ltd

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members