The climate crisis and why an energy transition is tough

While India must move toward clean energy, this does not mean accepting IEA prescriptions. These underplay the massive cost of relying upon renewable energy

The climate crisis is an existential threat to humanity. The United Nations Secretary-General described the Intergovernmental Panel on Climate Change Working Group’s report as nothing less than a “code red for humanity”. The report has triggered a debate about the energy transition to a low carbon economy. The International Energy Agency (IEA) called upon countries to achieve net-zero emission by 2050.

In a sun-drenched country, solar power will remain an important component of the energy basket. (AFP)

This debate is taking place against the background of a sharp hike in electricity prices in Europe, and coal shortages in China and India. This will come up for discussions in the forthcoming Glasgow summit on climate.

An energy transition on this scale has never taken place in history. Since the industrial revolution, economic growth was predicated upon the burning of hydrocarbon resources. The age of coal has lasted for more than two centuries. The oil age was ushered in more than a century ago. The pathway suggested by the IEA report would require 90% of electricity generation by 2050 by renewables, with the rest to be provided by nuclear power. The transition process is sought to be curtailed further by suggesting “peaking” of emissions by 2030-35. This will entail breaking out of the historical paradigm in a compressed time frame of a few decades.

The slowing down of the winds over the North Sea in early September, coupled with rising gas prices, resulted in a sharp increase in electricity prices. This has underlined the fragility of the British and German models and also called into question the assumption underlying IEA’s recommendation to increase the share of renewables in the electricity generation mix to 90% by 2050.

Wind accounted for 24% and 23.7% of electricity generation in the United Kingdom and Germany respectively in 2020. Renewables are an intermittent source of power. They need to be backed up by an alternate source of energy when the sun is not shining and the wind is not blowing. This “balancing” power is supplied by gas in Europe. The drop in wind power led to increased demand for gas at a time when the supply situation was tight. This provided the setting for the crisis, which is continuing. Even before the current crisis broke out, Germany had the highest electricity tariff in the world. According to Bloomberg, the cost of renewable power to German consumers reached $38 billion in 2020.

The IEA report has suggested no new investment in oil and gas production or new coal mines. The problems caused by the temporary shortage of coal in China and India show how difficult this task is. Coal accounts for 71% of India’s electricity generation. While developed countries stress the need to phase out coal, they have retained fossil fuel as a major source in their energy basket. The share of fossil fuels in Germany and the UK is 40.5% and 37.7%. The percentage of gas in Germany’s energy basket would go up with the Nordstrom II pipeline coming on stream.

While acknowledging that carbon space is part of the global commons, the concept of net-zero leaves the implementation to the individual Member States. The developed countries, together with China, have already exhausted 80% of the carbon budget. They would continue to appropriate a disproportionate share of the meagre carbon space remaining. Based on announced cuts, the per capita consumption of different countries will vary widely in 2030 – US (13), Canada (12) China (9), Japan (7), EU (5.1), and India (4) tons.

In a sun-drenched country, solar power will remain an important component of the energy basket. The government’s decision to increase the renewable capacity to 450 GW by 2030 is a step in the right direction. But increasing systems cost as the share of renewables in the grid increases places a limit on its size. An MIT study in 2018 pointed out that without the contribution of nuclear power, “the cost of achieving deep decarbonization targets increases significantly”. While India must move toward clean energy, this does not mean accepting IEA prescriptions. These underplay the massive cost of relying upon renewable energy.

The renewable tariffs have fallen to around ₹2.5 per unit. But according to a report by the Forum of Regulators, renewable power costs an additional amount of ₹2.12 per unit on account of balancing cost and stranded thermal assets. This makes renewables expensive.

India needs a diverse energy basket, of which a key pillar must be nuclear. The average tariff for nuclear power in 2019 was ₹3.47 per unit. Nuclear power is part of the Clean Energy Standard of the US. Japan’s new Prime Minister Kishida announced in Parliament, “It’s crucial that we re-start nuclear power plants.” The share of nuclear power in electricity generation in India (3%) is far behind those of other major economies – the US (20%), EU (20%). China proposes to increase the share of nuclear to 1%. The growth of nuclear power will require major policy intervention. It should be included in India’s clean energy matrix and given “must-run status”.

DP Srivastava is a former ambassador and coordinator, VIF Task Force on India’s Energy Transition

The views expressed are personal