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Can energy and innovation drive new growth in India?Legacy, Sanguinity, Prosperity
Arunabha GhoshCEO, CEEW
Nineteenth Annual Conference on Indian Economic Policy: Priorities for the New GovernmentStanford University3 June 2019
© Council on Energy, Environment and Water, 2019
CEEW – Among South Asia’s leading policy research institutions
Energy Access Renewables
Low-Carbon PathwaysIndustrial Sustainability & Competitiveness
Risks & Adaptation
Power Sector
2|
Technology, Finance, & Trade
Centre for Energy Finance
Four energy transitions
SOURCE: Bery, Ghosh, Mathur (2017)
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Traditional to modern Rural to urban
Growth to sustainable growthDeeper integration into global energy markets
Legacy
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Facing the oil headwinds head on
SOURCE: macrotrends.net; Ghosh (2018)
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• Understand trends• US production• Peak demand
• Iran
• Need buffer for subsidies• ₹15132 crore FY17• ₹23452 crore FY18• ₹26400 crore FY19 ??
• Don’t cut taxes for the privileged
India and global energy markets
SOURCE: Bery, Ghosh, Mathur (2017)
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Energy security is not energy self-sufficiency A complex quest for adequate quantities of energy resources, at prices that are affordable and predictable, while minimising the risk of overseas supply disruptions and ensuring sustainability of the environment and of the energy system for future generations.
Focus areas for India SAFE PASSAGEInvest in building fleet capacityStrengthen security partnerships in IOR
ASSURED SUPPLYDeveloping capacity for energy diplomacyCritically evaluate overseas investments
SECURE STORAGEBuild domestic storage capacityCooperative arragements for storageInstitutional capacity to manage reserves
FUNCTIONAL INSTITUTIONSTransparency; dealing with supply shocks; collective security; arbitrate disputes; pooling resources; sharing best practices
EXPLOITING MARKET POWERMoving from a price taker to price influencer.
Without fixing the power sector, the future looks uncertain
SOURCE: UDAY Tri-partite MOU and UDAY Dashboard; PFC Report; CRISIL
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• Total outstanding debt of discoms: ₹4.3 lakh crore (as on March 2015)
• High loss states: Rajasthan, Tamil Nadu, Uttar Pradesh
• Bonds (for 16 states)– Bonds to be issued: ₹2,69,056.35 crore – Bonds issued: ₹2,32,163 crore (approx. 86%)
• AT&C Losses (for 26 states)– Target: 15%– As of March 2019: 18.29%
• ACS – ARR Gap (for 16 states)– Target: ₹0 / unit (zero)– As of March 2019: ₹0.26 / unit
• Tariff Revision (for 27 states)– As of March 2019: 25 states
Sanguinity
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9| Image: istock
Ending energy poverty?
Image: Jaun Rizvi
ACCESS 2015 & ACCESS 2018
• 2015: First ever use of the multidimensional framework to evaluate energy access in India– Bihar– Jharkhand– Madhya Pradesh– Odisha– Uttar Pradesh– West Bengal
• 2018: Largest panel-data on multidimensional energy access in the world
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6 States | 54 Districts | 756 Villages | 9,072 Households | 5 million Data points
118 million have moved out of absolute electricity poverty
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64%
42%37%
84%74%
62%
Connected to the grid Grid as the primary source oflighting
Tier 1 or above
Prop
ortio
n of
rura
l hou
seho
lds
Access to electricity in six states
2015 2018
Source: CEEW (2018)
But long way to go, as only 20% of rural households are in top-two tiers
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63%
27%
7%3%
2015
38%
43%
14%
6%
2018
Tier 0 Tier 1 Tier 2 Tier 3
Electricity Access Evolution
Source: CEEW (2018)
Quality and reliability of supply remain main issues for Tier 0 HHs
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49%
8%
31% 30%32%
6%
32%
47%
0%
10%
20%
30%
40%
50%
60%
Capacity Duration Reliability Quality
Prop
ortio
n of
rura
l hou
seho
lds
Bottlenecks in electricity access faced by Tier 0 households
2015 2018
Source: CEEW (2018)
Duration of supply has improved, but reliability remains a concern
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5%
21%
50%
30%
21%
40%
5%8%
52%
29%
22%
42%
0%
10%
20%
30%
40%
50%
60%
Capacity Duration Reliability Quality Legality Affordability
Prop
ortio
n of
rura
l hou
seho
lds
Bottlenecks in electricity access faced by Tier 1 households
2015 2018
Source: CEEW (2018)
160 million have gained access to clean cooking energy
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Tier 078%
Tier 115%
Tier 25%
Tier 32%
2015
Tier 044%
Tier 135%
Tier 215%
Tier 36%
2018
Tier 0 Tier 1 Tier 2 Tier 3Source: CEEW (2018)
LPG is the driver for all the change, but a long way to go
16|
LPG connection and its use as a primary fuel has increased two-fold
22%14%
5%
58%
37%
19%
LPG use LPG as primary fuel LPG as only fuel
Prop
ortio
n of
rura
l hou
seho
lds
LPG adoption and use in rural areas of six major states
2015 2018
Source: CEEW (2018)
Affordability remains the biggest challenge to adopt and use LPG
Source: CEEW (2018)
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95%88%
72%
42%
92%87%
45%
28%
High connection cost High monthlyexpenses
LPG distributor notavailable in the
vicinity
Lack of Awareness
Prop
ortio
n of
hou
seho
lds n
ot
havi
ng a
n LP
G c
onne
ctio
n
Reasons for not having an LPG connection in 2015 and 2018
2015 2018
Source: CEEW (2018)
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1/4th
have come our of absolute electricity poverty, but only 20% in top-two tiers
1/3rd
have gained clean cooking energy access, but only 6% in top tier
Reliability and quality of supply remain the big concerns
Affordability of LPG and fuel stacking continue to be the biggest challenges
19| Image: istock
Tapping every ray of the sun?
Image: Abhishek Jain/ CEEW
Electrification to increase energy system resilience
SOURCE: Bery, Ghosh, Mathur (2017)
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• A range of generation options are required, whichever scenario is followed
• Five of the seven scenarios show significant future generation coming from renewables (wind and solar)
Electricity mix ….. today and tomorrow
SOURCE: Chaturvedi et al / CEEW (2018)
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Source 2010 2015 2020 2025 2030 2035 2040
Biomass 1% 0.5% 0.2% 0.2% 0.4% 0.4% 0.3%
Coal 67% 77.0% 72.1% 66.5% 59.7% 53.1% 47.1%
CSP 0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.3%
Gas 12% 4.1% 5.9% 4.2% 3.2% 2.4% 1.7%
Geothermal 0% 0.0% 0.3% 0.5% 0.4% 0.4% 0.3%
Hydro 14% 10.5% 8.3% 6.5% 5.1% 4.1% 3.5%
Nuclear 3% 3.1% 5.0% 5.5% 5.5% 5.3% 5.1%
Oil 0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PV 0% 1.0% 4.5% 10.4% 16.9% 23.4% 29.7%
Wind 3% 3.8% 3.8% 6.1% 8.8% 10.8% 12.1%
TOTAL 100% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
India’s renewable energy journey
1 Source: Central Electricity Authority & Ministry of New & Renewable Energy2 Source: CEEW Analysis
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0
5000
10000
15000
20000
25000
30000
35000
40000
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 Dec-18
MW
India's solar and wind installed capacity1
Wind Solar
• Policy push on solar since 2014-15 has driven sharp increase in solar installed capacity
0
2
4
6
8
10
12
Dec-
10
Apr-
11
Aug-
11
Dec-
11
Apr-
12
Aug-
12
Dec-
12
Apr-
13
Aug-
13
Dec-
13
Apr-
14
Aug-
14
Dec-
14
Apr-
15
Aug-
15
Dec-
15
Apr-
16
Aug-
16
Dec-
16
Apr-
17
Aug-
17
Dec-
17
INR/
kWh
Solar Tariff Low Wind Resource Potential Tariff
High Wind Resource Potential Tariff
• Solar and wind tariffs have stabilised below USD c 4/kWh
Commencement of competitive wind tenders
Solar and wind tariffs in India2
Investment requirements ….. to fund a revolution
23| 1 Source: BNEF (2018); Chawla (2016)2 Includes large hydro investments
RE Investment Flows Average 2013-2017(USD Billion)
2017(USD Billion)
India1 10.0 10.9
Global2 321 334
2.7
10.713.1
15.417.6
19.721.7
4.28.3
13.613.3 13.0 12.1 10.6
7.0
19.0
26.628.6
30.6 31.8 32.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2016 2017 2018 2019 2020 2021 2022
Billi
on U
SD
Annual investment needed in India’s solar sector
Distributed Rooftop Projects Medium and Large Scale Projects
Total Investment
Emerging economies receive only a small share of foreign funding
SOURCE: Ghosh and Chawla (forthcoming); BNEF (2016)
24|
94%
60% 61%81% 81%
67%
35%45%
62% 58%
4%
38% 32%
18% 14%
21%
63% 46%32% 41%
0%
20%
40%
60%
80%
100%
120%
China UnitedStates
Spain Brazil India Germany UnitedKingdom
Italy France Canada
Perc
enta
ge S
hare
Asset Financing by Funding Origin (Domestic v/s Foreign)
Domestic Foreign unknown
Factors determining returns on RE investments
Source: CEEW Analysis
25|
Anatomy of an RE tariff: risk perceptions determine costs of finance
SOURCE: CEEW (2017)
26|
Greater market concentration; solar parks become attractive
27|
0%
20%
40%
60%
80%
100%
2014 2015 2016 2017
Market concentration in solar energy generation
Share of top 5 firms in sanctioned solar projects
Share of top 10 firms in sanctioned solar projects
Source: CEEW and IEA (2018)
0%
20%
40%
60%
80%
100%
2014 2015 2016 2017
Market concentration in wind energy generation
Share of top 5 firms in sanctioned wind projects
Share of top 10 firms in sanctioned wind projects
45%
34%
21%
Share of projects at solar parks (2014-2017)
International IPPs
Indian IPPs
Indian State-owned Power Producers
0%10%20%30%40%50%60%
2014 2015 2016 2017
Solar investments by international IPPs
Share in solar park projects
Share in non-solar park projects
28|
Creditworthiness of offtakers strongly impacts investment
As per Ministry of Power’s Fifth Annual Integrated Rating for State DISCOMs, 2017
• Preference for creditworthy central offtakers for solar and wind projects• Creditworthy state DISCOMS account for the majority of state offtakers
0%20%40%60%80%
100%
2014 2015 2016 2017
Share of solar projects by offtakers
Centre Centre & State State Third-Party
0%20%40%60%80%
100%
2014 2015 2016 2017
Share of wind projects by offtakers
Cente State Third-Party
48%
13%
27%
12%
Share of sanctioned projects with state distribution companies by utility grade
A/A+ B+ B C/C+
What gets built and used: who bears integration costs?
29|SOURCE: Chaturvedi et al / CEEW (2018)
What gets built and used: who bears integration costs?
30|SOURCE: Chaturvedi et al / CEEW (2018)
Indian coal power has ~2X GHG emissions of gas-based generation
SOURCE: CEEW, ExxonMobil, IITB (Forthcoming)
31|
32| Image: istockImage: Abhishek Jain/ CEEW
Source: Ghosh (2018)Image: Unsplash
Renewing our vows on renewables
No backsliding Continue raising ambition
No lost electrons• Focus on integration
No failed contracts• Tackle risk perceptions
No false binaries• Manufacturing versus deployment• Coal vs RE OR Efficient TPPs + RE
Prosperity
33|
34|
Lower-carbon industrialisationfor the fastest growing major economy
Image: istock
Using our roofs?
Image: Unsplash
State of the rooftop solar sector
21%
43%
16%
20%Commercial
Industrial
Public
Residential
Note: All values as on 31st March 2018 Source: Bridge to India, MNRE
35|
Total rooftop capacity installed in India:
2.5 GW
Low adoption in the residential sector despite the availability of significant technical potential
34%
11%
55%
Total rooftop capacity installed in Delhi:
103 MW
Why rooftop solar – Prospect for Delhi
Source: CEEW Analysis
36|
28794720 5925 7016
02000400060008000
2001-02 2010-11 2014-15 2018-19
Peak Demand (MW)
New DISCOM-led business models
Source: Kuldeep, Saji, Chawla / CEEW (2018)
37|
1.a For the roofless: Community solar – upfront payment 1.b For the roofless: Community solar – subscription mode
2. For the creditless: On-bill financing model 3. For all: Solar partners model
38| Image: istock
Low-carbon industrialisation for the fastest growing major economy?
Favourable renewable profiles, low electrolyser CAPEX, and low power costs could make “green steel” commercially competitive
Source: CEEW and IEA (2018)
39|
• Optimistic scenario– Electrolyser CAPEX = $
615/KW– Solar LCOE = $ 0.029/KWh– Wind LCOE = $ 0.043/KWh
• Under the optimistic scenario the Green H2 based production is 18% higher than the conventional method
Low Carbon Economy Carbon Tax = USD 40/ tonne CO2
19111
499 517480406 200
400
600
ReferenceScenario
Carbon Tac OptimisticScenario +Carbon Tax
Existing Carbon Tax BF-BOF + LowCarbon
Economy
Green H2 Method BF-BOF Method
ACO
S ($
/ton
ne)
40| Image: pixabay
Sustainable mobility for a country on the move?
Avoid, shift, improve…
Image: Karthik Ganesan/ CEEWSource: Ghosh and Ganesan (2019)
41|
• Metro + bus vs bus: 12-35 minutes saved at peak hours for > 10 km journey
• But each minute saved could cost between ₹0.5 and ₹2
Image: Arunabha Ghosh
42| Image: Arunabha Ghosh
Where did we lose out?
43| Image: CC WikipediaImage: istock
Resource efficiency to make in India?
Critical minerals: CEEW scenario_2030
Source: CEEW Analysis
44|
Critical minerals: Potential impact of recent ambitious EV targets
Source: CEEW Analysis
45|
Can India lead?
46|
Confronting our demons
47|
• Legacy– Resilience in international energy markets– Reform in domestic power markets
• Sangunity– Energy access will demand attention to detail to improve consumer experience– Renewables is a risk and reward game now; need to renew our vows on renewables
• Prosperity– Untapped sources of growth on the back of India's multiple energy transitions– Hard-to-abate industrial sectors need bets on new energy technologies– Understand global supply chains to design indigenisation policies– Urbanisation presents opportunities to integrate residential, commercial and transport– Resource efficiency has to be at the core
• Innovation is needed not only in technology but also in policy, markets and behaviour
International Solar Alliance: A new kind of energy partnership
SOURCE: PTI; www.isolaraliiance.org
48|
Recognizing that sustainable development, universal energy access, and energy security are critical to the shared prosperity and future of our planet, and acknowledging that clean and renewable energy needs to be
made affordable for all, we do hereby declare our intention to support India’s proposal to launch an international solar alliance as a common platform for cooperation among solar resource rich countries lying
fully or practically between the Tropics of Cancer and Capricorn.
49| Image: CC Wikipedia
Imagine
Image: Wikimedia
Thank youceew.in | @CEEWIndia
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