Guest author: Thomas Elmar Schuppe | Senior Fellow | Observer Research Foundation (ORF) & CIM Integrated Energy Expert, New Delhi
The year 2015 is going to be critical for the energy and climate story that unfolds over the decade to come. The global community has to agree on a successor to the dated Kyoto protocol that has committed its parties by setting internationally binding carbon emission reduction targets. In the run-up to the 2015 Climate Conference (COP21) there is an ongoing brainstorming process of what India might promise in Paris in December 2015 as their intended national determined contribution (INDC) in order to support the collective effort to get a grip on the global carbon footprint. India’s energy future is likely to emerge on the thin line between green and black.
First and foremost the Modi government has kicked off the new energy policy that aims for a trendsetting albeit ambitious target to almost increase the renewable energy power generation capacities fivefold to 175 GW within the next seven years. Due to the fact that renewable energy tends to be relatively capital intensive while Indian Banks are struggling under debts the funding of the renewable initiative will undoubtedly become a challenging task. Nevertheless, some first auspicious announcements, besides the government, for funding are already in the pipeline to take the plunge into the vast and promising Indian market for renewable energy in near future. India’s largest bank, the State Bank of India, has announced to extend US‑$ 12 bn of loans to support 15 GW of clean energy projects over the next five years. A loan of US‑$ 1.1 bn for rooftop solar power projects is said to be in the making with the German development bank KfW, which would come on top of already arranged loan of about € 1.38 bn to develop a “green corridor” of power lines crossing through nine Indian states. The recently established joint-venture SBG Cleantech – comprising Japan’s telecom and Internet major SoftBank as a principal investor as well as Indian Bharti Enterprises and Taiwan-based Foxconn Technology Group – is willing to invest US‑$ 20 bn in the next 10 years into green energy projects across India.
Moreover, the Minister for Coal, Power and New and Renewable Energy has announced that the GoI would like to establish India as manufacturing hub for renewables and research in accordance with the “Make in India” campaign that is designed to transform India into a global manufacturing hub. However, even if there are a number of quality suppliers and developers in India that are keen to invest and contribute significantly, it is said that, for example, domestically manufactured solar modules are not only expensive but also uneconomical due to outdated technology. The sheer size of planned capacity additions at issue in India and restricted domestic manufacturing capacity should make India as a promising business opportunity for any industry player whatsoever.
Nevertheless, beyond the limelight hogging renewable energy revolution one should not lose sight of the big picture, as coal has historically been the backbone of Indian power supply and remains on track so far with a current share of about 60 % of India’s total power generation capacities. India’s government has repeatedly reinforced the importance to make use of its abundant domestic coal reserves to drive the economic development that is important for India to eradicate poverty and provide electricity to all Indian population by the end of the decade.
Based on the huge capacity additions that might come into play the potential on carbon emissions that can be saved only by improved coal plant efficiencies are indeed remarkable. According to the chief economist of OECD’s intergovernmental energy think tank IEA, Fatih Birol, the emissions that could amount to be equal to all those from the EU’s INDC for 2030 by only increasing the efficiency of all sub-critical coal-fired power plants in the world from 35 % to about 37 %. Knowledge and technology transfer as well as financial support can be assumed to be vital. One striking example of international collaboration as to that is the Indo-German Energy Programme IGEN that was launched in 2003 between partners like GIZ and KfW with BBE and CEA, MoP and MNRE. In a recently finished program a hundred Indian power plant engineers were trained in the use of a special software tool for the optimisation of thermal power plants. This resulted in an average improvement in operating efficiency of 1.2 %-age points that was achieved from 27 coal units (with a total capacity of 6.6 GW). This refers to annual saving of 1.6 mt CO2 or 1.2 mt of coal per year, corresponding to an overall annual saving of about Rs 500 crore (Euro 70 million). Since these results were achieved only by 4 % of the total installed capacity of India’s coal fired power plants an upscaling to all plants would lead to a significant and lasting reduction of carbon emissions provided by a low-cost investment.
The bottom line is that going green and black (for the time being) for India’s energy future both involves a huge knowledge and technology transfer as well as financial support. On the other hand, both green and black opens up wide options to enter into a market with incredible investment opportunities. Especially German industry knowledge is at the forefront as well in renewable energy but also huge experiences exist in coal power technologies. Not for no reason the cited power optimisation product is provided by STEAG Energy Technologies.
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