Green agenda of Modi 3.0

With the elections wrapped up, there is now scope to dynamically balance multiple objectives in achieving net-zero by 2070

In his very first speech to party workers after the election results were announced, Prime Minister Narendra Modi talked about the unfolding “green era” and how India seeks to be a leading player in green industrialisation, green energy, and green mobility. This gives an indication of the priority that will likely be attached to a green development path.

In terms of green energy — mainly solar and wind — India already figures among the top countries in annual additions, and is working on expanding the domestic manufacturing base to support this. Every country that is trying to localise manufacturing is facing unique challenges. For instance, policy is continually being tweaked in the US to ensure that the combination of incentives and disincentives for domestic manufacturing remains compelling, while generation capacity addition is also appropriately supported. With the elections in India wrapped up and Renewable Energy Minister Pralhad Venkatesh Joshi in charge, there is now scope to dynamically balance multiple objectives and meet specified goals.

As the demand for electricity hits new highs in the face of extreme heat, there is a case for increasing the share of renewable energy at an accelerated pace. According to the latest data from the Central Electricity Authority, pertaining to April 2024, renewables (including large hydro) make up almost a fifth of the country’s generation. Solar accounts for almost half of this output, followed by large hydro and wind power.

The green mobility wave has seen a bit of a slowdown globally. Under BloombergNEF’s Economic Transition Scenario, which tracks how current techno-economic trends are expected to drive the energy transition with no new policy intervention, electric car sales are set to rise from 13.9 million in 2023 to over 30 million in 2027. Over this period, electric car sales are expected to grow at an average of 21 per cent annually, compared to the average of 61 per cent between 2020 and 2023. India is expected to be among the fastest-growing markets in the emerging economies. The entry of players like Vietnam’s Vinfast and Tesla could give a boost to the market.

Meanwhile, there may be lessons to be gained from the decision of the European Union last week to impose additional tariffs on electric cars shipped from China starting in July. The Commission said it had “provisionally concluded that the battery electric vehicles (BEV) value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers.”

The initial economic road map of India’s new administration will become clearer with the presentation of the Budget. Mr Modi reiterated the country’s commitment to net-zero emissions by 2070 at the recent G7 Summit in Italy.  

EVs and oil: BNEF estimates that EVs of all types and fuel-cell vehicles could displace almost 4 million barrels of oil per day by 2027 — more than double the current level of demand destruction. It also expects peak road fuel demand by 2027. For context, oil demand is estimated at almost 104 million barrels per day in this quarter, according to the Organization of the Petroleum Exporting Countries.

Under BNEF’s Economic Transition Scenario, oil demand would have been 6.6 million barrels per day higher in 2030 were it not for these vehicles.

While some automakers have diluted their near-term EV goals, there are multiple tailwinds supporting long-term growth: Lower-cost batteries, expanding charging networks, and new cost-competitive vehicle models. Sales of internal combustion engine vehicles have peaked in 2017, according to BNEF, and are projected to fall 29 per cent from this point by 2027.

Energy storage: A group of novel technologies that can store energy for very long hours could challenge the domination of lithium-ion batteries in energy storage. BNEF’s first Long-Duration Energy Storage (LDES) Cost Survey shows that while most of these technologies are still early stage and costly, some already achieve lower costs than lithium-ion for longer durations. Thermal energy storage and compressed air storage are the least expensive LDES technologies. Others include flow batteries, novel pumped hydro storage and gravity energy storage. LDES has a critical role to play in a renewables-led power system.

India has so far held three auctions for two-hour energy storage, which were heavily oversubscribed. They are unsubsidised but India now plans to support 4 Gw-hours of battery projects with Rs 9,400 crore ($1.1 billion) in subsidies to be allotted over multiple auctions. “The subsidy plan will draw strong interest from battery developers as the guidelines are highly favourable to them. They are not exposed to any market risk and will get full subsidy payment at the end of three years of the battery’s operation,” said Rohit Gadre, BNEF’s lead India analyst on batteries.

The writer is a New York-based senior editor – global policy for BloombergNEF, vgombar@bloomberg.net