In addition to the above, the power purchase agreements (PPA) for wind and solar have been competitive with other sources. In H1 CY2021, the weighted average the U.S. price for solar PPA auctions was $31/MWh while for onshore wind it was $37/MWh as compared to wholesale electricity price of $34/MWh for the same period. The government has also been providing incentives like tax credits (investment tax credit) to enhance the economic feasibility of renewable power plants. Moreover, as conventional power plants become old their operating costs increase significantly thereby dis-incentivising the operation of these plants. As a result, the case for wind and solar power plants is strong and the U.S. has experienced a remarkable explosion of innovation and entrepreneurship in clean energy.

United Kingdom

The exponential growth of offshore and onshore wind farms in the U.K. has been a testament to the government’s efforts. Electricity generation from wind power has increased by more than 7 times in the last decade in the U.K. It has the largest offshore wind farm — located off the cost of Yorkshire. According to a news source, wind power in the country’s energy mix hit a record 50.7% in Dec 2020 with an annual average contribution of 25%. The government is targeting generating one-third of the country’s electricity from only offshore wind farms by 2030.

However, concerns around reliability of wind energy have surfaced as the U.K. witnessed a significant decline in the generation of wind-based electricity due to unfavorable weather conditionsin 2021 which led to an energy crisis. The contribution of wind power declined to 15% in Q3 2021 compelling the government to bring back gas and coal fired power plants online to control the price volatility — the price shot up to $553/MWh in September 2021 due to double whammy from low wind power generation and higher commodity prices.

This incidence in the U.K. has sparked a debate around reliability of renewable power vs. nuclear power. Moreover, it emphasises the importance of pairing battery technology with renewable electricity generation to store excess power if renewable has to play a significant role in the structural energy shift away from fossils.

India

India’s renewable power generation capacity has posed a CAGR of 17.3% between FY16-20. Being a tropical country and a land where sun is worshiped, the obvious major source of renewable powerfor India has been solar. As of 2021, India has approximately 159 GW of renewable installed capacity with a target to reach 500 GW by 2030, out of which solar would contribute 55% of the capacity. Given the current installed solar capacity of approximately 50 GW, we can expect the focus on solar power to only increase over the next 10 years — 225 GW of 340 GW renewable capacity installation is likely to be of solar.

In order to promote Make in India for solar cells and modules, the government has imposed 40% duty on imported cells, wafers, and modules. Moreover, production linked incentive (PLI) scheme has been introduced to provide government support for setting up solar PV modules manufacturing units.

Ministry for New and Renewable Energy (MNRE) has: (i) awarded ‘must-run’ status to renewable power plants to promote the distribution companies (DISCOMs) to buy renewable-based power; (ii) removed tariff ceiling in PPA auctions which were earlier placed by DISCOMs,to improve economic feasibility of setting up renewable capacity; and (iii) set-up state wise Renewable Purchase Obligation wherein each state DISCOM is required to purchase a minimum amount of renewable power.

However, amidst these and many other policy actions taken by the government, several challenges including poor financial health of DISCOMs leading to delay in payments to power generation units, land acquisition hurdles, issues in maintaining grid stability, etc. plague the development of the sector. As always is the case with India, policy implementation remains the key.

China

China surpassed the United States as the top greenhouse gases emitter in 2005. In 2013, Asian Development Bank reported that 7 out of 10 most polluted cities in the world are in China. A major reason for this is coal-fired power plants in China which cater to nearly two-thirds of China’s electricity consumption. As a result, in 2016 the government banned construction of coal-fired power plants for two years. However, when the ban lifted, construction of new plants ramped up again. In 2020, China built over three times more new coal power capacity than the rest of the world combined . Even today, China is generating 30% of total global emissions.

However, China aims to achieve carbon neutrality by 2060. In order to do that, it not only needs to rollout renewable power plants and electric vehicles but also tackle emissions from industries. As a roadmap for carbon neutrality in 2060, China plans to increase electricity generation from renewables seven-fold, accounting for 80% of power mix by then. This will not only boost the labour market but also ensure better productivity and higher life expectancy.

A long way to go

At the UN Climate Change Conference (COP26) held in October 2021, several nations discussed the need to tackle climate change and achieve net zero emissions target. 197 countries signed the Glasgow Climate Pact wherein they agreed to report the progress towards climate ambition next year in COP27. However, China and India softened the language of the agreement at the last minute from “phasing-out coal power and inefficient subsidies for fossil fuels” to “phase down coal use”. This left many members along with COP26 president Alok Sharma disappointed.

Figure 5: Carbon emissions (in billion tonnes) by various countries

renewable electricity

Patel Redefines KPI’s Green Agenda

Fossil-clean energy mix can ease transition pains