Challenges posed by Renewable Energy Projects in India

GS Paper 3

 Syllabus: Indian Economy/ Environment Conservation

Source: TH

 Context: The challenges posed by renewable energy development, particularly in the context of solar parks, underscore the complex intersection between sustainable energy goals and local socio-economic and environmental concerns.

India’s Renewable Energy Status:

India is the world’s third-largest emitter of greenhouse gases. In the fiscal year 2023-24, India added over 18 GW of renewable energy capacity, a 21% increase from the previous year, led by solar (approx. 13 GW) and wind (approx. 2 GW) installations. Total installed capacity has risen from over 76 GW in 2014 to approx. 179 GW by October 2023, nearly 2.34 times higher.

India aims to install 500 GW of renewable energy capacity by 2030, significantly up from the previous 450 GW target.

Examples of large-scale solar Park in India:

Large-Scale Renewable Energy Parks: Positive Impacts

1. Steady Income for Landowners: Farmers in areas like Pavagada, Karnataka, gain a reliable annual income by leasing their land to solar parks.
2. Renewable Energy Production: These parks play a vital role in India’s renewable energy output, reducing reliance on fossil fuels and supporting the country’s goal of achieving Net Zero emissions by 2070.
3. Employment Opportunities: The development of large-scale renewable energy projects creates job opportunities locally, fostering employment growth in the regions where they are established.

Challenges Posed by the Renewable Energy Projects:

Regional Divide in Renewable Energy Projects:

 According to the Central Electricity Authority’s report on Optimal Generation Capacity Mix, by 2030, solar and wind will make up almost 51 per cent of total generation capacity and almost 31 per cent of all generated power. If these projections materialise, they are likely to have major fiscal consequences for the coal-rich states of the East (where the majority of poor people live)

The concentration of RE assets in West and South

India’s massive RE build-out so far has largely benefited western and southern states. In August 2023, 92.5 per cent of all grid-connected RE generation came from eight states(Central Electricity Authority).

The main reasons behind this are;

1. Higher insolation and wind density: Instrumental in the generation of solar and wind power respectively.
   • Eg: Rajasthan for solar power and Tamil Nadu for wind power.
2. Favourable state finances: Coal-rich states lack diversity in terms of revenue sources and experience higher fiscal strain.
   • Eg: States like Jharkhand and Odisha depend a lot on coal royalties.
3. Investment environment: Southern and Western states have better fiscal and budgetary condition that promotes investor confidence.
4. Land availability and cost of RE: According to Bridge to India, a renewable power consultancy, the lack of easy availability of renewable resources and land together are the main hindrances in the growth of renewable energy in the eastern region.

Impacts on the revenue of coal-rich states

1. The decline in royalties: Coal royalties as a proportion of overall state revenue will decline as coal growth starts slowing later this decade
2. Increase in cost of power: The cost of power procurement will increase as new RE contracts are layered on top of existing commitments for firm power.
3. Increase in power import: Grid-scale energy storage technologies are unlikely to be adopted at a large scale by the end of the decade. Since most coal-rich states have limited grid-scale RE-deployment, they will have to import more power from other states.
4. Worsen budget deficits: Declining royalties and increasing imports could worsen the budget deficits of RE-poor power-importing states by almost 66 per cent on average(beyond the norms of the FRBM Act, 2003).
5. Displacement of RE integration costs: By giving inter-state transmission waivers to an entire generation of new RE projects, the integration costs of the energy transition are displaced onto state PSU balance sheets without necessarily facilitating compensatory investment in upgraded transmission capacity, which can better manage the variability of the new RE projects.
6. Global market dynamics: International demand for cleaner energy sources could influence India’s energy export market. States with significant renewable energy assets may benefit from such global dynamics, potentially affecting the overall economic landscape.

Way forward

Conclusion

Green industrial policy should not be the exclusive privilege of historically well-endowed states. Otherwise, the energy transition will simply be yet another drain of resources from India’s least developed to its most developed regions. Policy measures that support both the decline of traditional energy sources and the rise of renewables will play a key role in managing these transitions effectively.

Insta Links:

Perspective- India’s Green Energy Transition

Prelims Link: