India's green energy sector is set to get a boost from the country's target of achieving carbon neutrality by 2070, giving the drive to transition to cleaner forms of energy a new impetus. However, it is not small task by any stretch of imagination, requiring massive efforts both on policy and regulatory fronts and an enormous amount of financing to put plans into action.
“The clean energy sector will most definitely see a push, considering the ever-growing energy requirements,” says Mayur Misra, co-founder and chief executive of Corrit Energy and Infra, a solar energy services company in India. “The net-zero target is going to transform how the country produces and consumes energy.”
The country's prime minister Narendra Modi unveiled the country's net-zero plans at Cop26 in Glasgow last week, with some critics saying the 2070 target fell short of expectations. The US, Europe and the UK have pledged to be carbon neutral by 2050, and China has pledged to achieve the same by 2060.
However, some say Mr Modi's plan is a relief as India has finally set a target date for net-zero, given that it is the third-largest emitter of greenhouse gases in the world after China and the US.
The country's energy needs are set to grow rapidly over the coming years amid an expanding economy and increasing urbanisation that has created an enormous challenge for New Delhi to balance its appetite for energy with environmental concerns. This dilemma, in the past, has led to hesitance from Indian policymakers to put a firm target for carbon neutrality, despite mounting pressure from other countries to do so. Trillions of dollars will be needed for investments for the transition and there are still doubts if Asia's third-largest economy will be able to achieve carbon neutrality by 2070.
Mr Modi has made “a bold promise” with the net-zero date, Sahen Karamchandani, a chartered wealth manager, says.
“While it is a good ambitious concept to discuss, it is also difficult to put into action,” he says. “India will require massive technical development in a short period of time to achieve zero carbon emissions.”
The country will also need "a massive social transition in which many jobs across industries, such as coal mining, power plants and the auto industry, will be at risk”, Mr Karamchandani says.
A net-zero commitment could be seen by some quarters as “gambling with the future growth of India”, he warns.
However, Mr Misra says that the target is "challenging but not impossible to attain".
“It will take time, if we all do our part, such as switching to electric vehicles, increasing the use of public transportation, investing in clean energy, halting deforestation, and so on, we will gradually get closer to the goal.”
The International Energy Agency (IEA) estimates India's energy demands to expand more than any other country over the next 20 years. By 2030, it is expected to overtake the EU as the world's third-biggest energy consumer.
Many believe this only makes it all the more important for India to further develop its renewable energy sector and several experts are upbeat about prospects of the green energy sector in the wake of India's net-zero announcement at Cop26.
“Clean energy industries will surely get a boost [from the announcement],” says Vishal S Budhia, managing director, Steam House India, a Gujarat-based company, which helps industrial units to bring down their emissions through steam and power solutions. “Many industries have already started showing interest in shifting to greener energy.”
Mr Modi at the Glasgow conference also said that India would increase its renewable energy capacity to 500 Gigawatts by 2030 and meet 50 per cent of its energy requirements by then through non-fossil fuel sources.
“These new announcements put forth a clear ambition of the Modi government to tackle climate change more aggressively,” Fitch Solutions said in its latest research note.
These developments “pose an upside risk to our outlook for renewable growth in the market”, it said.
“We expect to see attempts to alleviate the issues regarding supply chains, manufacturing and project development that have long plagued renewable proliferation,” according to Fitch.
Given India's burgeoning power needs, however, the country will remain “highly reliant” on coal, which is a major pollutant and accounts for some 70 per cent of India's electricity generation, the ratings agency adds.
Even before its new net-zero commitment, India in recent years has been firmly focused on growing the use of renewable energy, as it aims to reduce its dependence on costly fossil fuel imports, improve its energy security and cut emissions.
The country in 2016 ratified its pledge under the Paris Climate Agreement to reduce its emissions intensity.
Recent coal shortages and a rise in crude oil prices have pushed fuel prices in India to record highs in recent months, highlighting the urgency to accelerate its move towards alternative energy sources.
Solar power is the major form of clean energy that is being used in India at the moment and the country is also working on building its wind energy capacity. There's also an increased focus on developing the green hydrogen sector.
According to previous targets, the Modi government had set a goal of producing 175GW of renewable energy capacity by next year. However, Fitch says it will fall short, with 116GW of installed capacity by the end of this year. It cites “ongoing challenges” including “bureaucratic, financing and logistical delays and the country’s underdeveloped and inefficient grid system”, as having held back the development of renewable energy capacity.
Such hurdles are deeply entrenched and they are not likely to disappear anytime soon, despite the country's ambitions, Fitch says.
Analysts say changing India will not be an easy task.
“We have 50 years to achieve this goal, but realistically this will require a drastic shift in how the country generates and consumes energy, how we travel, eat and produce, as well as how much pollution is produced by our automobiles,” says Mr Karamchandani.
Ultimately, citizens will also have to make changes to their lifestyles for India to achieve its aim, he adds.
Mr Misra says that individuals will need to be made more aware of the amount of energy they consume, and there will also be more pressure on industries to go green.
As part of plans to bring down its emissions, India has been trying to encourage the use of electric vehicles, but so far, uptake of electric vehicles has been very slow, largely due to a lack of charging infrastructure and their price tags.
However, with the net-zero target in place, there could be more emphasis on development of the required infrastructure for EVs, analysts say.
Momentum already appears to be building. The country’s largest fuel retailer and refiner Indian Oil Corporation on Wednesday announced plans to set up 10,000 EV charging stations over the next three years.
However, a massive amount of domestic spending and financing for green projects with foreign assistance is needed for India to achieve its goals.
The government, in the current financial year to the end of March, earmarked 15 billion rupees ($200m) to the Indian Renewable Energy Development Agency and 10bn rupees to the Solar Energy Corporation of India for expansion.
“A lot of funds will be required in this transition – for capital expenditure and implementation,” says Mr Budhia. “The government is already charging coal [tax], and we believe government will extend help to such industries very soon and big business houses of India have already announced their investments [in green energy].”
India has also been vocal about the need for climate funding from wealthier nations to help developing countries make the switch to renewables. Mr Modi at Cop26 called on developed countries to make $1 trillion of funding available to developing nations to facilitate the transition.
“The technology required for this objective is quite expensive,” says Mr Misra. “We need Western countries to step up and assist in making our world greener. India's drive to reach net-zero emissions is just getting started.”