Social cost of renewables should be kept under check: Economic Survey II

Lauding the efforts of the government in achieving the goals of the Paris Climate Change agreement, the Economic Survey 2017 emphasises the urgent need to shift focus towards sustainable energy access for the deprived. While the Survey supports the renewable energy growth in the country, it has warned against several perils of having too much renewable energy.

It says the social cost of renewable energy is thrice that of coal at Rs 11 per unit. This, it says, is imperative to be noted as India progresses aggressively in renewable energy capacity addition so as to not burden consumers.

“While investments in renewable energy are crucial for India to meet its climate change goals, such investment be made at a calibrated pace looking into the total cost accrued to society,” it says.

The Survey highlights the detrimental effect of rising renewables over coal-based capacity and increasing NPAs. It says a high proportion of renewables will render a part of the assets in conventional energy plants idle or result in them being used at a much lower capacity.

“The stranding of assets can have implications for the banking system depending on their exposure to the sector. In a situation where the banking system is already facing a stressed assets problem, stranding of assets could have considerable impacts,” it says.

The CEA notes that 49 per cent of households still use firewood for cooking and similar is the case with access to electricity. “Access to energy is intertwined with various other economic and social developmental objectives such as poverty alleviation, health, industrialisation, education, provision of communication infrastructure, and climate change mitigation among others,” says the CEA in the chapter titled Climate Change, Sustainable Development and Energy in Economic Survey-II.

The Survey notes several schemes of the government are helping in improving the situation. The Pradhan Mantri UJJWALA Yojana for LPG distribution, Pratyaksh Hastantrit Labh (PAHAL) scheme for direct transfer of LPG subsidies and Deen Dayal Upadhyaya Gram Jyoti Yojana for rural household electrification were hailed as successful initiatives.

It also says that to ensure 100 per cent energy access to its population and bridge the ‘development deficit gap’, all clean energy sources need to be tapped.

The Survey notes that the NPA ratio pertaining to electricity generation is around 5.9 per cent from total advances (outstanding) of Rs 4,73,815 crore. The total advances to the coal sector are Rs 5,732 crore with a NPA ratio of 19.8 per cent.

The Survey says a multilateral climate regime will do well if financial resources are provided to developing countries to facilitate the pathway towards low greenhouse gas emissions and climate resilient development. “In this regard, India underscores the importance of an increase in the volume, flow and access to finance alongside improved capacity and technology for developing countries,” it adds.

Extreme weather events cost India losses of about $9-10 bn

Estimates indicate that currently, India incurs losses of about $9-10 billion, annually, due to extreme weather events, the Economic Survey noted. Of these, nearly 80 per cent of losses remain uninsured. From 2014-15, natural catastrophe (NatCat) losses for Indian insurance companies were estimated at $11 billion.

The low insurance penetration in India is also visible from the data from recent calamities. For example, the total losses due to floods in Kashmir in 2014, caused by unprecedented rains, were declared officially to be in excess of Rs 100,000 crore (approx. $15 billion), insurance companies were required to pay around Rs 4,000 crore (approximately $610 million) according to a High Court directive, due to the low insurance coverage. In another instance, while total losses from 2014 Cyclone Hudhud reached $11 billion, only $650 million was insured.