Date: 07/02/2023

Relevance: GS-3: Infrastructure: Energy

Key Phrases: Just Energy Transition Partnership (JET-P), multilateral financing, ‘phase-down’ of coal, intra-generational inequity, G-20 presidency, Domestic manufacturing of clean energy components.

Why in News?

• Just Energy Transition Partnership (JET-P) is emerging as the key mechanism for multilateral financing by developed countries to support an energy transition in developing countries.
• This has taken on particular significance following the insertion of the phrase ‘phase-down’ of coal in the Glasgow Pact.
• After South Africa, Indonesia, and Vietnam, India is considered the next candidate for a JET-Partnership. India’s G-20 presidency could potentially be an opportune moment to forge a deal.

Issues that concern transitions:

• Economic inequality:
  • Energy transitions could give rise to intra-generational, intergenerational, and spatial equity concerns.
  • Transitions affect near-term fossil-dependent jobs, disrupt forms of future energy access, shrink the state’s capacity to spend on welfare programs, and thus exacerbate existing economic inequities between coal and other regions.
  • Existing JET-P deals, pay limited attention to intra-generational inequity, such as job losses resulting from a coal phase-down.
  • Among the three JET-P deals signed so far, only South Africa’s deal mentions a ‘just’ component — funding reskilling and alternative employment opportunities in the coal mining regions — to be financed as part of the initial $8.5 billion mobilization.
  • The other two JET-Ps (Indonesia and Vietnam) are focused on mitigation finance for sector-specific transitions.
• Country context of coal phase-down:
  • The emphasis by developed countries on coal phase-down, without adequate attention to the country context, disregards the crucial difference in energy transition between industrialized and emerging economies.
  • Energy transition in the industrialized world involves a natural tapering of energy consumption alongside fuel switching to clean energy sources; India’s transition requires significant simultaneous growth in energy demand.
  • The Central Electricity Authority projects a near doubling of electricity demand by 2030. A country that is likely to multiply its energy demand requires adequate supply from a diverse mix of sources. India cannot afford to put its development on hold while decarbonizing.

Path to a clean energy quest:

• India has signalled a commitment to clean energy with ambitious targets like 500GW of non-fossil, including 450 GW renewable energy (RE) capacity addition and 43% RE purchase obligation by 2030.
• These targets are supported through complementary policy and legislative mandates (Energy Conservation (Amendment) Act), missions (National Green Hydrogen Mission), fiscal incentives (production-linked incentives), and market mechanisms (upcoming national carbon market).
• These interventions show India’s serious efforts at energy transition, but additional supplementary measures are needed for a coherent JET strategy.

Actions that could further expedite India’s energy transition:

• Acceleration in RE deployment rates:
  • Acceleration in RE deployment rates to match the pace of demand growth is critical to India’s JET.
  • While RE deployment has outpaced coal in recent years, in 2021-22, coal power served one-third of the new demand.
  • Meeting India’s 2030 target requires accelerating non-fossil capacity addition from 16 GW a year in 2022 to 75 GW a year by 2030, a 22% year-on-year growth.
  • Despite sustained efforts, India missed its 2022 target for 175 GW RE capacity. The gap is largely in decentralized deployment, which is more promising for acceleration.
  • Two complementary paths to accelerate RE deployment that can have significant developmental co-benefits are:
    • Shifting energy demand patterns:
      • A low-hanging option is shifting energy demand patterns in ways that enable faster RE capacity addition: solarisation of agricultural electricity demand; electrification of diesel-powered Micro, Small, and Medium Enterprises (MSMEs); and decentralized RE for residential cooking and heating.
    • Stimulation of energy demand:
      • Stimulation of energy demand through rural productivity enhancement will further aid RE acceleration as well as help to address the rural-urban economic divide, create rural jobs, and thereby address inter-generational and spatial inequities.
• Domestic manufacturing of clean energy components:
  • It is critical to sustain a JET, build energy self-sufficiency, and tap the green jobs promise of 21st-century energy.
  • The challenge is in achieving cost competitiveness — Indian components are 20% costlier than Chinese components.
  • Giving preference to domestic components without addressing cost competitiveness may slow down the pace of deployment.
  • The way around this is to negotiate access to markets outside India as part of a JET-Partnership, to reduce the cost gap through economies of scale.
• Re-aligning the current use of coal resources:
  • It is needed to enhance efficiencies until the period of phase-down. One option is to optimize the use of coal-fired power plants closer to where coal is mined rather than based on energy demand in States.
  • This would enable coal to be used more efficiently because the transportation of coal is more energy-intensive than the transmission of electrons, and also lead to fewer emissions.
  • It would also lead to cheaper power, as transportation accounts for one-third of the cost of coal for power plants; the resultant savings could also help finance much-needed emission control retrofits.
  • It would indirectly reduce emissions due to the more efficient use of coal.
  • This policy shift opens the door to India considering a future cap on coal-powered generation capacity. Current generation capacity plus plants in the pipeline are adequate to meet India’s projected requirement in 2030.
  • Low-capacity utilization factor (58% in 2022) further allows the possibility of greater use of existing plants to match future demand.
  • By leading to cheaper and more efficient power, the coal re-alignment helps address energy security concerns, making it possible to even consider a future coal-based power capacity cap.

Conclusion:

• These measures will not only address equity concerns across various dimensions but also create new job opportunities, achieve emissions reduction, and prepare the country for deeper decarbonization through a future coal phase-down.
• With India holding the G-20 presidency, it has an opportunity at hand to negotiate a deal for itself while also shaping international cooperation on just energy transitions.
• India must develop a coherent domestic just energy transition (JET) strategy to negotiate a financing deal that addresses its unique set of socio-economic challenges.

Source: The Hindu

Mains Question:

Q. What are the key challenges and strategies for India in achieving a just energy transition, and how can these be addressed in the context of India's overall energy policy and development goals? Explain.