While the news is full this week of India placing a $330 billion estimate on its needs for renewable energy to 2030, the big problem for India is getting there. It has special problems because it has such a cheap labor force.
That labor force allows it to get coal out of the ground at an astonishingly cheap rate, and that certainly allows the coal plants it already operates to remain economic for their remaining lifetimes. The big frustration with the country is that it continues to build out coal plants, partially because it understands about the cheapness of its labor, and partly because it does not quite appreciate that it is in the front line of climate change.
That low cost labor force continues to be both a blessing and a curse, and multiple auction prices for renewable energy are set out of reach of all but the most ambitious solar and wind players, as India needs to match its own low local LCOE of coal with future renewables. It was virtually inevitable that India would be the last country to fully embrace renewables because of this, and so it is proving.
In a Reuters report this week, India makes it clear it can only reach 40% (from 22% today) a total of 500 GW of its energy from renewables by 2030, with that $330 billion of investment, around $80 billion of which is already committed, and another $250 billion needs to be found. Any traditional investor from outside of India has the luxury of knowing that there will be many other opportunities outside of India where a better guaranteed LCOE is offered on renewables projects, and outsiders will therefore be reluctant to invest there.
This is why some Indian auctions have been left high and dry, short of their numbers.
Reuter was quoting from the government’s own annual economic survey, which was presented to its parliament this week. Essentially the survey said that abandoning coal too early would mean Indian plant would be stranded short of their useful lifetimes which would have an adverse impact on the banking sector. If investors lost money on the coal, they would have none left to invest in renewables to argument goes.
Unless this issue is resolved politically, India will still be building coal plants right up until 2030 as well, and not switch off coal until 2050 or 2060. Given that it is about to overtake the US as the country with the second highest CO2 emissions, this is bad news and could one day see China rein in its coal investments, ahead of India and see India leap to the front of the CO2 charts globally, drawing extra international pressure and condemnation. It is hard to see a way out of this.
The economic survey also called for a breakthrough in energy storage before it can migrate aggressively to renewable power.
Because India has twice as much sunlight hitting it than most European countries, it needs to make solar the cornerstone of renewables, but it still has a weak solar infrastructure of its own and is reliant on Chinese manufacturers, although this is improving somewhat.