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Preparing for a shift in the direction to green energy in 2022

  • Category
    Economy
  • Published
    12th Jan, 2022

Context

The global price of natural gas has more than doubled in the year 2021 due to gap in demand and supplies. The friction is clearly visible in the transition towards moving to a greener energy.

Thus, there is an urgent need to prepare for a shift towards ‘green energy’. 

Background

  • Paris climate treaty 2015 aims to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. 
  • In this direction, India plans to install 175 GW of renewable energy (excluding large hydro) by 2022 and 450 GW by 2030.
  • In 2021, 133 countries pledged to a “net-zero carbon emissions date” and most governments, corporates and civic entities have shown determination to “phase down” and eventually ‘phase out’ fossil fuels from their energy basket. 
  • On the other side, a large volatility was observed in the petroleum market. Natural gas prices reached at very high levels as demand exceeded supplies. 
  • Thus, a paradox is arising where the intention to move towards greener energy is facing a resistance of the fossil fuel energy system.
  • For a developing country like India, the challenge is more acute due to the presence of limited finances.

Analysis

What is green energy?

  • Green energy is any energy type that is generated from natural resources, such as sunlight, wind or water. 
  • There are 6 main forms of green energy- Solar Power, Wind Power, Hydropower, Geothermal Energy, Biomass and Biofuels. 
  • According to the Environmental Protection Agency (EPA), Green Energy provides the highest environmental benefit.
  • Though natural gas is not a green energy, natural gas plants would be deemed “transitional” green energy sources for investment purposes if they meet certain emissions criteria and replace more polluting fossil fuel plants.

Need for a transition to Green Energy for India-

The transition towards fossil fuel based on green energy is needed, not only from the environmental perspective but also from the economic and geopolitical reasons. It is visible from the following points-

  • Reducing carbon emissions- Renewable sources of energy like solar energy or wind energy are carbon free and sources like natural gas produce less carbon emission in comparison to fossil fuels, thus a greener economy will be healthy for the environment.
  • Economic benefits-
    • Employment opportunities- It has the potential to create new sources of employment in production, and manufacturing and supply chain of solar energy or natural gas.
    • Better utilization of natural resources- India’s large barren land in the desert areas of Rajasthan and Ladakh can be utilized for the economic gains for the region and the country.
    • Saving foreign exchange- As India spends huge amount of foreign reserves on import of fossil fuels, the transition to green energy will not only save foreign reserves but will also improve energy sovereignty
  • Geopolitical benefits-
    • India has set up ambitious targets in the Paris climate summit (2015) and is also a founder of International solar alliance (ISA). Leading from the front to move towards greener energy will highlight a higher geopolitical role for India. 

Recent issues visible in transition towards green energy-

As learnt, transition towards a green economy is essential for many reasons. But the global and Indian experience in 2021 showed that there are a number of challenges in this transition.

  • Lack of adequate capital- The COVID-19 pandemic induced economic issues have impacted pockets of both developing as well as developed countries. This has impacted the capital investments in greener and renewable energy.
  • Impact of geopolitics on energy supplies- The prices of natural gas are impacted in 2021 for two reasons. First, it was due to a general gap in demand and supply. Secondly, the geopolitics over supply of gas from Russia to Europe has impacted the supply of natural gas.
  • Price volatility in fossil fuels- The fluctuation in demand and supply of fossil fuel due to pandemic as well as reduced supplies by crude oil suppliers has changed prices.

Challenges on the road towards green energy-

Apart from the recent issues, there are persistent challenges in the transition towards green energy. These challenges are-

  • Unreliable supplies of renewable energy- Supply of solar energy is not available round the year which thus, can’t be used as a perennial source of energy.
  • Lack of capital investment- The monetary support from developed to developing countries as envisaged in Kyoto protocol and Paris climate treaty has not been met. The transition for a greener future thus is a slow and long process that lacks cooperation.
  • Skewed presence of metals and minerals- The geology of the minerals and metals required for clean energy is skewed towards few nations, similar to present condition of petroleum reserves. This will create new centers of power in the medium to long run.

How India can move towards green energy (in 2022) by reconciling the paradox-

As the road to greener energy is filled with challenges, India should take slow and clear steps to reconcile the above paradox. Some steps can be-

  • Focus on global investments- The fossil fuel-based economic system will have to be redesigned and rebuilt for clean energy to achieve scale. The energy transition will be long and expensive which needs collaborative global investment towards solar, wind and bio etc.; and capture and sequester “carbon”.
  • Ensuring fossil fuel supplies- For a developing country like India, fossil fuels will dominate the energy basket in the short to medium term. This market is defined by the “fundamentals” of demand, supply and geopolitics and the “non-fundamentals” of exchange rates and speculative trade. Thus, India should nurture relations with traditional suppliers of oil and gas to ensure availability at affordable prices.
  • Strengthening strategic reserves- India is building up strategic reserves of crude oil and natural gas to ensure regular availability despite global price fluctuations. It should accelerate the build-up of the storage capacity as India is largely dependent on imports.
  • Ensuring supply of clean energy- DRC controls more than 50 per cent of the global supply of cobalt; Australia holds a comparably large share of the lithium market; and China dominates the mining, processing and refining of rare earth minerals. Thus, India’s policies should be futuristic and not result in import dependency on China.

Way forward- What more India can do?

In line with the above steps, the government can take more measures at domestic levels to promote green energy in the country. These steps can be-

  • Domestic sources of energy –
    • India should create a facilitative ecosystem for the search and development of the minerals and metals in the country so as to reduce import dependency in the long run.
  • Promote alternative sources of energy-
    • Multiple sources of energy like solar, wind, hydrogen and biomass should be promoted in isolation or in hybrid mode, so as to promote energy sufficiency.
  • Boosting domestic manufacturing-
    • India has already launched many programmes under ‘National solar mission’ to promote development of solar energy. In line with this, there is a need to promote domestic manufacturing of solar panels

Conclusion

In order to reach the path of becoming a US $5-trillion economy and a key player in the fourth revolution, India should also focus on achieving affordable and sustainable energy supply.

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