Renewable Expansion Key to Economic Growth Post-Pandemic
Renewables are cost-effective and reliable; will create job opportunities amid a global recession
As the COVID-19 crisis continues, governments across the world have been forced to take stringent measures to curb its spread. The pandemic has had a deep impact on economies around the world and could lead to one of the worst economic downturns in history.
The virus has impacted industries across the board, and the renewable sector is not an exception. In India, the lockdown has brought the entire economy to a standstill with declining renewable energy installations.
India installed 1,080 MW of solar capacity in the first quarter of 2020, a 43% decline quarter-over-quarter, compared to 1,897 MW installed in Q4 2019. The findings were revealed in Mercom India Research’s newly released Q1 2020 India Solar Market Update. The solar capacity addition in India in Q1 2020 was the lowest since Q4 2016.
However, according to a recent report by the International Energy Agency (IEA), while renewables are not immune to the COVID-19 crisis, they are more resilient than other fuels. The agency noted that in 2021, renewables are expected to spring back up again as currently delayed projects start to come back online. It expects 2021 to reach the same level of renewable capacity additions globally as in 2019.
Cheaper and cleaner
While being a cleaner alternative, renewable energy has now assumed greater significance than ever because of its economic viability. In the last year, the lowest discovered tariff in solar auctions was ₹2.48 (~$0.0329)/kWh while coal tends to cost more than ₹3/kWh.
Speaking on the need to opt for renewables in the post-COVID-19 world, Karan Chadha, Head of Business Development at Fourth Partner Energy, said, “In India, more than 75% of the electricity is still generated from fossil fuels. Coal-based power plants release sulfates, nitrates, mercury, and particulate matter – primary contributors to emissions and air pollution, no wonder then, we are home to seven out of 10 most polluted cities in the world. COVID-19 cannot be an excuse to pull back from the aggressive targets of 175 GW of renewable electricity by 2022 and 30% electric mobility by 2030. The ‘must-run’ status for renewables during lockdown was a good starting point; a 30-day extension of commissioning deadlines and the impetus to renewables in the bill of the draft electricity amendment act are steps in the right direction.”
“The global pandemic has economic ramifications – in India, this means any cost-reducing proposition is the smarter alternative. Renewable energy is at the cusp of this opportunity: it delivers cheaper, cleaner electricity – with the right regulatory and policy framework, it could be the way forward when compared to conventional electricity. Moreover, the number of direct and indirect jobs that will be created as a result of the construction and maintenance of renewable assets will be an added advantage at this time when increasing unemployment is a concern,” he added.
While countries across the globe are grappling to come to terms with the impact of the COVID-19 pandemic, renewable energy provides a viable alternative to avoid greenhouse gas emissions and a cheap and cost-effective way to generate power. Renewable energy is a much cheaper and the most readily available form of energy, which is set to gain more considerable significance in the times to come. Countries are now looking toward clean and low-carbon technologies to set agendas in the post-COVID-19 world.
“The need to convert ‘crisis into opportunity’ can be done by fundamentally understanding that during this time of economic slowdown, any cost-reducing proposition is the smarter alternative. Renewable energy delivers cheaper, cleaner electricity, and with the right regulatory and policy framework, it could be the way forward when compared to conventional electricity. The lower crude prices present India with a chance to rethink its subsidy mechanism – and move it from polluting fossil fuels to cleaner renewable energy sources. More affordable, less polluting, decentralized renewable systems can be the solution for uninterrupted power to India’s remote areas and to electrify schools, health centers, and small businesses,” Chadha added.
Recently, the International Renewable Energy Agency’s (IRENA) Coalition for Action comprising of over 100 companies in the renewable energy industry from across the world wrote to governments putting forth recommendations on how governments can ensure a rapid and sustained economic recovery that aligns with climate and sustainability objectives. They emphasized the role renewable energy could play in these strategies by providing reliable, easy-to-mobilize, and cost-effective electricity for essential services.
Speaking on the prospects of renewable energy in the post-COVID-19 world, Vinay Kumar P, Founder, and CEO of Varp Power Private Limited, said, “COVID -19 has caused tremendous disruption in businesses worldwide. Balance sheets of firms are under stress, and there would be an attempt to make business processes leaner and more efficient. Renewable energy, especially from solar and wind, have long edged past the point of grid parity and are now cheaper than conventional energy. This economic rationale would itself mean a fillip for renewable energy in the post-COVID-19 phase. The power sector is a lead indicator of economic growth. Going forward, we expect all incremental power capacity addition to be from renewables. Thus, investment in, and capacity roll-out of renewable is a precursor to the health of the economy.”
Investors are done with fossil fuels
Leading financial institutions have started to move away from fossil fuels, and this trend has been gaining momentum. Recently, Japan-based Sumitomo Mitsui Financial Group Inc. (SMFG) decided not to provide support to newly-planned coal-fired power projects. This is not a one-off case, and leading banks like BlackRock, the United Overseas Bank (UOB), Barclays, Standard Chartered, HSBC, and Deutsche Bank, among others, have also pulled the plug on investing in coal-fired projects. This trend will continue as investing in polluting energy sources becomes more socially and politically unacceptable in many parts of the world.
“Government-supported financial institutions need to step forward and take the lead in scaling up long-term investment into India’s renewables. India’s renewable energy sector has drawn a certain level of interest from strategic International investors and DFIs (development finance institutions) in recent months. Still, there is a need for this capital deployment to be scaled up further, especially domestically,” Chadha added.
The ensuing pandemic offers an opportunity for the Indian government to pivot from fossil fuels to favor renewable and clean energy, post-pandemic. One of the ways to give the necessary boost to the renewable sector is to provide subsidies that are being given to the conventional power sector. Currently, subsidies being allotted to the renewable sector pale in comparison to the amount being allotted to coal, oil, and gas.
While discussing the prospect of job opportunities being created by the renewable sector, Kumar said, “The construction phase of solar and wind projects, however, is very employment-intensive and, to some extent, operation and maintenance of solar and wind projects generate significant employment in our communities.”
Job security and job creation will probably be the most important factors in determining how India manages to combat the economic slowdown post-COVID-19.
“Energy transition at this stage will open up the door for renewable energy firms like ours to create thousands of jobs in the coming months. Let me elaborate – thousands of people are engaged with full-time contracts in construction of assets every year, by solar developers like us. Apart from these operations, maintenance and cleaning of solar assets result in part-time employment opportunities to several thousand people – even in remote, rural areas,” Karan noted.
Renewable manufacturing hub
Chadha addresses the need for the government to step in and enable a renewable energy boom in the post-pandemic world. He commented, “It is even more imperative now for the government to ensure a stable, long-term regulatory framework to boost investment into the renewable energy sector to honor this commitment. Ensuring the Electricity Amendment Act retains the push for a National Renewable Energy Policy, enforces stricter compliance for renewable purchase obligations, and the setting up of Electricity Contract Enforcement Authority will be the immediate steps necessary. Financial liquidity and attracting investment will matter more now than ever before.”
India is being seen by many as the next manufacturing hub for solar modules and cells. Sunil Rathi, Director, Sales, and Marketing at Waaree Energies Limited, said, “The government should look at India as the next manufacturing hub. The imposition of basic customs duty on solar modules and cells will ensure additional employment in the manufacturing sector. The commercial & industrial (C&I) segment will also provide big employment opportunities across the country.”
A clean energy future
“Clean energy is the future, and the inevitable march towards it has begun. India needs to decide whether it will follow or take the lead. Even with all the hype surrounding renewable energy, 75% of electricity in the country is still generated from coal. Besides the government, larger corporations need to start committing to a carbon free future or face the inevitable consumer backlash that will follow,” said Raj Prabhu, CEO of Mercom Capital Group.
After the lockdown, people have been able to witness blue skies and breathe clean air. There is no question in anyone’s mind as to the harsh effects of air pollution that have made many cities in India, some of the most polluted in the world. It is clearer now than at any time in the recent past that fossil fuel-based energy generation needs to end; clean energy is the future.