Reducing import dependence: Renewable energy can play a significant role

Union Finance Minister Nirmala Sitharaman on Monday rightly termed the conflict in West Asia as a “systemic tremor” threatening the vital arteries of global energy. In a way, this also underlines India’s vulnerability. India imports over 85 per cent of its consumption of crude oil, with the bulk sourced from West Asia, a region highly prone to geopolitical uncertainties. Such disruption quickly feeds into higher import costs, inflationary pressures, and uncertainties for industry. As the ongoing crisis shows, it’s not only prices but also availability that can be significantly affected. A spike in energy prices and a sharp increase in the import bill increase risks to macroeconomic stability, as has been witnessed on several occasions in the past. Therefore, in a world with persistent geopolitical disruption, to secure its long-term economic interests, India will need to reduce its dependence on energy imports.

 

It will have to work simultaneously on different fronts to achieve this. It has been argued that India must push up the domestic production of fossil fuels, including oil and gas, along with diversifying sources of imports. However, what India also needs is a significant push towards renewable energy. It has been reported that several businesses have partially or fully stopped production because of gas not being available. It would be worth finding out if some of them can switch their energy requirements to power. Such shifts, possibly with the help of the state, can create a stable source of demand. Reliable industrial offtake can improve utilisation in renewable capacity, attract private investment, and accelerate the development of supporting infrastructure such as storage. The recent data from the International Renewable Energy Agency highlights that India is now the world’s third-largest renewable-energy market. However, the contribution of renewables in the energy mix is still low and needs to increase substantially.

 

There is also a significant employment-generation dimension. A recent study by the Indian Council for Research on International Economic Relations showed that clean-energy jobs could rise from about 0.31 million in 2021-22 to about 0.9 million by 2029-30, while jobs related to energy efficiency may grow from 1.26 million to 4.28 million, implying a near threefold increase if India meets its 2030 targets of 500 Gw of non-fossil fuel capacity and 150 million tonnes of energy savings. These gains could substantially increase if India considerably increased its ambition in the space for renewables. Solar is likely to drive much of this growth, alongside rising demand for skilled maintenance roles. However, these gains are not automatic. Jobs remain concentrated in a few regions and skewed towards lower-skill roles, pointing to the need for stronger skilling systems and better policy coordination.

 

Besides, it must be noted that the shift to renewable power will require reform and investment at various levels.  Accommodating a much higher level of renewable power would require large investment in grid modernisation. It would also require reform in distribution. Power-distribution companies are often seen as the weakest link in the sector. The pricing policy, which subsidises a certain class of consumers by overcharging businesses, also creates friction and pushes enterprises to alternative sources of energy. India must start reforming this sector. A substantial push for renewable power can not only address environmental concerns but also reduce India’s dependence on energy imports. Thus, renewable energy should be a substantial part of a multipronged strategy.