Background Note on ‘India’s Renewable Revolution: Towards a Cleaner, Cheaper Electricity System

India’s per capita electricity consumption is still very low, at just 900 kWh versus a world average of 3000 kWh. Throughout the history of economic development, the convenience and versatility of electrical energy had made it crucial to the betterment of human lives and the progress of national economies. In the 1920s, when electricity was being extended to all households of the United States, one Tennessee farmer commented on this transformation, saying: “The greatest thing on earth is to have the love of God in your heart, the next greatest thing is to have electricity in your home”. No country has developed to high levels of income per capita without providing large supplies of affordable and reliable electricity to its citizens.

India still has some way to go in this regard, although tremendous progress has been made in recent years. The electricity deficit has reduced from 10% in FY09-10 to just 0.6% in FY18-19. On the basis of the huge policy push of the Saubaghya scheme, India has achieved 100% village electrification, and is close to repeating this feat for household electrification.

However, the sector is still beset with some challenges. The gap between the Average Cost of Supply (ACS) and Average Revenue Realised (ARR) remains stubbornly high, despite the efforts of the Uday scheme. Outstanding dues from retail suppliers stood at 0.4% of Q1-Q2 GDP, as of October 2018. Aggregate technical and commercial losses remain high. In addition, the power sector contributes the highest share of India’s rapidly growing CO2 emissions from fuel combustion, as well as significant shares of local air pollutants.

Continuing the progress of recent years, and putting the electricity sector on a more sustainable, cleaner path, will require concerted action on a number of policy fronts. Fortunately, with dramatically falling costs of renewable energy, it could be possible for India to leapfrog into a cleaner and cheaper electricity system. By 2030, the costs of electricity from wind and solar are expected to fall to as low 1.90-2.30 R/kWh, more than 50% cheaper than the costs of electricity from new coal plants (4.85 – 6.98 R/kWh).

However, cheap renewable kWhs are not enough to transform the system toward high shares of solar and wind. Solar and wind electricity are intermittent and produce only when the sun is shining and the wind is blowing. Ensuring that supply meets demand in real time in a high renewables electricity system requires nothing more than a paradigm shift. The electricity system needs to become significantly more flexible. Flexible power plant operation, shifting of demand to times of high renewable electricity availability, and battery and pumped storage hydro will all be required in order to integrate high shares of variable renewables into the grid.

Can India undertake this paradigm shift, or will its renewables story stall in the face of the challenge of grid integration? To answer this question, TERI launched the Energy Transitions Commission India Project, the first results of which will be presented at this plenary session.

Key Questions

1. What supply capacity mix could be envisaged for 2030, and how high could the share of variable renewables be?
2. What would be the challenges associated with this supply mix, particularly in terms of the grid integration of variable
3. What technical options exist to ensure the grid integration (e.g. flexibilization of thermal plants, storage) and what do we expect to be their cost and scale in the coming years?
4. What are the policy priorities in the coming 2-3 years for India to realise this transition to a high share of renewables?