The real risks now are of pursuing impossible, random, and uncoordinated actions, walking back on commitments and paralysis, and numbing inaction. Even as going off unabated carbon is necessary, there are seven realities for us to deal with before we get there.
This is a transition and not a switch
Renewables are growing, but not fast enough. However, fossil fuels are not slowing down yet in absolute terms. Primary energy demand increased by 5.8% in 2021, exceeding 2019 levels by 1.3%. Between 2019 and 2021, renewable energy increased by over 8 EJ. Consumption of fossil fuels was broadly unchanged and accounted for 82% of primary energy use in 2021, down from 83% in 2019 and 85% five years ago.
Five key reasons why renewables are not growing more quickly is the high costs of delivered energy as renewable energy penetration increases, limited storage capacity and high costs of energy storage, lack of infrastructure, political and regulatory barriers and locational constraints and saturation. The truth is that these are massive system-wide changes that are inevitably difficult and need to be looked at as a transition, not a switch. Moreover, there cannot be a one-size fits all for the energy transition.
Different parts of the world will have different decarbonisation pathways
The global economy will grow substantially, and much of that growth will come from the developing world. In India’s case, energy requirements would be massive, even with conditionalities of hyper energy efficiency and frugal innovation. To drive transformation between now and 2047, installed power capacity needs to be increased by 3.5X and RE installed capacity needs to be increased 7.5X. Annual green hydrogen production needs to be 25 MMT along with actions such as 2X increase in refinery capacity, 5X increase in O&G exploration, 65% level of ethanol blending in petrol and 38% increase in share of forest cover. These are not discrete actions. For example, green hydrogen production cannot happen on the scale envisaged without very large amounts of additional renewable energy, which means even more materials, manufacturing, transmission, balancing resources. Everything is interconnected.
Decarbonisation is critically dependent on connected systems
The low carbon resources that we will depend on for growth and decarbonisation in turn depend on other ecosystems such as delivery infrastructure, materials, manufacturing, supply chains and innovation.
In future, low carbon energy systems, the electricity grids will play a critical role. Presently, only 18% of India’s energy is delivered in the form of electricity. If this has to double in the next 25 years the expansion of the networks will be massive, especially given the dependence on wind and solar projects, which require much more network capacity due to their variability and low utilisation factors. Beyond hard infrastructure, our institutions are also not quite geared up. Even within the energy and resources sphere there are so many different ecosystems such as coal, chemicals, wind and solar, etc. These ecosystems are worlds in themselves. In India, these are mostly under entirely different ministries of Government of India, each pursuing distinct and sometimes divergent policies. Perhaps for a reason these were distinct in the past given that the sources, supply chains and applications could be quite varied. However, in today’s world they are all converging.
Energy transition and geopolitics are critically interdependent
India needs to assess certain pathways to make itself less vulnerable to geopolitics. For renewable energy like wind and solar it would mean local manufacturing capabilities to avoid heavy dependence on China. This would have to be for the whole chain, ingots, cells wafers, modules, power electronics for solar. Similarly for wind permanent magnets and other elements. For energy storage it would mean scaling up off-river pumped hydro storage and removing bottlenecks to rapid development of these projects.
For batteries it would mean research into alternate materials that are less critically dependent on difficult geographies and more suited for Indian conditions, for example, Lithium Phosphate batteries. Heavy investments into recycling technologies for urban mining from battery waste materials would be necessary. Gaining access like China has to other geographies for securing critical resources will also be important.
India must stay invested in future energy technologies and their applications
Three years ago, there was hardly any serious talk about hydrogen and especially green hydrogen delivering decarbonisation for the world. It was spoken as a beyond 2050 technology. That rapidly advanced, first to 2040, then 2030 and now 2025 for commercial scaling.
India missed the solar technology development cycle and is now trying to catch up. Learning a few lessons, we have upped the game on Hydrogen and storage to some extent through PLI schemes and such. We must keep upping the tempo and build up momentum, creating an innovation ecosystem that finds ways to experiment, sometimes succeed, sometimes fail.
Equally focus on the demand side and in particular behavioural changes
The world must become “brutally frugal” in its energy consumption without sacrificing utility. This can partly come from behavioral change. Unless there is rapid reduction of energy intensity of growth, no amount of supply side decarbonisation will help – we will run out of options. Fortunately, India’s young entrepreneurs and innovators have been focusing heavily on these aspects. They make me proud and hopeful that the conundrum we have suffered on the demand side, including on user behavior, can be significantly solved.
Energy transformation is equally about social transformation
Energy transformation was always about social transformation, except that we did not recognise it so explicitly. Ever since modern energy forms where invented lives have transformed. We know that the backbreaking toil in coal mines, the smoke-filled exposure of boiler rooms that cut down lifespans was really a great blot on society. Modern energy should be used to make society a better place for everyone. When we think about future energy systems and infrastructure we must think about resilience, restoration, and adaptation.
While we seek to deal with climate change with renewables, we must be acutely conscious of biodiversity impacts of our actions or inaction. Our agricultural systems are getting as much affected as the weather systems due to the adversity on the biodiversity front. Many of these not just affect the global environment, but also local ecosystems. Finally, hard as it is, we need to remain prepared but positive. Among the unknowns are some future technologies, which can potentially solve the emergent challenges. It has happened before and will likely happen again.
The writer is Global Head of Energy & Natural Resources, KPMG
