India Balances Development against Emissions

One of the key challenges facing fast developing economies such as India is how to fuel and sustain economic growth while simultaneously reducing emissions. Like China, India is strongly opposed to setting emission reduction targets, arguing that any constraints would adversely impact economic growth, with this resistance unlikely to weaken before the current first commitment period of the Kyoto Protocol ends in December 2012. But this emission constraint resistance should not be confused with sustainable market development.

Since 2004, India has averaged quarterly GDP growth of 8.4 percent, reaching a historical high of 10.1 percent in September of 2006 and a record low of 5.5 percent in December 2004. In the fourth quarter of 2010, GDP grew 8.2 percent over the corresponding quarter in 2009, with the IMF forecasting GDP for 2011 at 8.2 percent.

In its summary for policymakers, the Energy and Resources Institute’s National Energy Map for India: Technology Vision 2030 said that, given the government’s plans for rapid economic growth, the country’s requirements for energy and supporting infrastructure will also increase rapidly over the next two decades.

Analysts estimate that to maintain this pace of growth will require India to increase its energy consumption by about 4 percent annually, with the IEA estimating that India will need to spend approximately US$800 billion on its energy sector by 2030.

Last year the Indian government published a study based on 2007 data which showed a sharp increase in industrial activity since the last assessment in 1994, making India the world’s fifth biggest CO2 emitter after China, the US, Europe and Russia.

Since 1994, emissions from electricity, cement and waste have more than doubled. India generates 90 percent of its electricity from coal, which in turn accounts for more than a third of its emissions. Yet India’s emissions are some 75 percent less than those from China and the US.

Like China, India believes the appropriate measure of sustainable economic development is carbon intensity. Its emissions relative to economic output fell by 30 percent between 1994 and 2007 and the government has set a carbon intensity reduction target of 24 percent by 2020. To meet this target India will have to become more energy efficient, will have to reduce its energy intensity and, most importantly, will have to rapidly invest in its renewable energy infrastructure. And it is making good progress.

India is among the top five countries in terms of renewable energy capacity with an installed base of over 19 GW of grid interactive renewable power, accounting for 11 percent of total installed capacity, and about 2.5 GW of renewable generation being added annually.

To support this policy India recently launched the ambitious National Solar Mission with a target capacity of 20 GW by 2020 and the aim of solar energy achieving grid parity with the cheapest coal-fired capacity by 2030. With over 400 million of its population lacking access to modern forms of energy, it also has one of the largest off-grid renewable energy programmes, with more than 1.5 million decentralized solar applications, over 4 million biogas plants, and in excess of 5 million m<sup>2</sup> of solar thermal applications installed.

According to the Energy and Resources Institute, ‘renewable energy resources play a crucial role in providing decentralised power to remote areas. Apart from continuing to provide support to renewable energy schemes, efforts should also be directed towards large-scale deployment of related technologies in order to further bring down their costs.’

Aside from solar power, India’s government has committed to significantly increasing its hydro capacity.

But it is wind power that presents India’s major growth opportunity. According to the Indian Wind Energy Outlook 2011, ‘wind power must play a key role in fuelling India’s growing economy, by delivering substantial amounts of clean and indigenous electricity’.

The report forecast that 65.2 GW of wind power could be installed by 2020, up from 13.1 GW at the end of 2010, with a potential of 160.7 GW installed by 2030. Citing last April’s Gulf of Mexico oil spill, ongoing unrest in the oil-producing Middle East and North Africa region, and the Fukushima nuclear disaster arising from the Japanese earthquake and subsequent tsunami, GWEC secretary-general Steve Sawyer warned: ‘A return to old-fashioned power generation cannot be the answer, not only for environmental, but also for economic reasons.

‘Betting on the obsolete polluting technologies of the past is not a viable solution, and only renewable energy can fill the gap that will be left by nuclear power in a sustainable fashion.’

Scaling up wind power, said the report, would provide both environmental and economic benefits, arguing that wind is now competitive with conventional new-built power generation technologies such as natural gas.

But, it cautions, to realise the full potential of India’s rich renewable resources the government needs to address several challenges and barriers, including a clear renewable energy framework at national level, incentives for repowering, and rapid up-scaling of grid infrastructure to transport increasing amounts of wind power to the demand centres.

According to the World Bank, achieving India’s government’s renewable energy goals for the next decade will cost between $10 billion and $64 billion in subsidies, depending on whether the government adopts a low-diversity, low-cost renewable energy resources scenario or a high-diversity, high-cost scenario. The higher cost scenario, which would include solar, will only be viable if fossil fuel prices continue to rise and are free of distorting subsidies. Yet although the government committed to removing fossil fuel subsidies at last year’s G20 summit, the country’s deep poverty problems make this a politically sensitive policy.

For all its support for renewable energy development, and its desire to become a world renewable energy leader, the fact remains that India will continue to be heavily reliant on fossil fuels over the next two decades.

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