Navigating India’s Energy Transformation Through JETP Approach

Just Energy Transition Partnership (JETP) was first announced at the CoP26 and has since emerged as a key mechanism for multilateral financing by developed countries to support an energy transition in developing countries. JETPs provide a means for partner countries to work with climate finance donors and private sector investors on a clean, just energy transition to create new jobs, economic growth, clean air and a resilient, prosperous future. In simpler terms, JETPs are innovative funding models, the aims of which are to help a selection of heavily coal-dependent emerging economies make a just energy transition.

The JETP model was pioneered at the COP26 Summit in Glasgow in 2021. An International Partners Group (IPG) of France, Germany, the United Kingdom, the United States of America, and the European Union went into partnership with South Africa for a JETP. A second tranche of countries announced as partners in the JETP approach included India, Indonesia, Vietnam, and Senegal.

At the G20 leaders’ summit in Bali, in November last year, Indonesia’s JETP deal was announced with USD 20 billion in finance over 3 to 5 years, half from the donors and a half due from the private sector. The donor pool has been expanded to include multilateral development banks, national development banks, and development finance agencies. Vietnam also followed the suit with a JETP agreement between the Southeast nation and International Partners Group (IPG) with an initial US$15.5 billion of public and private financing.

India – Next in Line

After South Africa, Indonesia, and Vietnam, India is considered the next candidate for a JET Partnership. The G20 presidency of India could be a facilitator in clearing any reservations the voice of the global south may have regarding the model that suits her energy transition goals.

Dealing with Concerns

Energy transition will bring several potential challenges for a country still in its developing stage. These include the impact on near-term fossil-dependent jobs, disruptive forms of future energy access, and shrinkage in the State’s capacity to spend on welfare programmes, which may exacerbate existing economic inequities between coal and other regions.

Phasing down coal will result in job losses. JETPs tend to pay limited attention to this intra-generational inequity. For instance, out of the three JETP deals, only South Africa’s deal mentions a ‘just’ component of funding reskilling and alternative employment opportunities in the coal mining regions. This was the main reason the negotiations for India got stalled last year.

Energy transition in the industrialised world involves a natural tapering of energy consumption alongside fuel switching to clean energy sources. India’s transition will be more complicated than this. The energy transition in industrialized nations involves a decrease in energy consumption and a shift to clean energy sources, while India’s transition requires both a significant increase in energy demand and a switch to cleaner fuels.

Steps India Needs to Take

India needs to accelerate its renewable energy deployment rates to match the pace of demand growth. India has an installed power capacity of over 400 GW. The Central Electricity Authority (CEA) estimates India’s power requirement to almost double by 2030, reaching 817 GW. The country needs to add at least 38 GW of renewable capacity every year until 2030 if it wants to achieve its 2030 RE targets. Having already missed its 2022 target for 175 GW of renewable share, a boost is also critical for India’s just energy transition.

For faster RE addition, India would need to shift its energy demand patterns, such as solarisation of agricultural electricity demand, electrification of diesel-powered MSMEs, decentralised RE for residential cooking and heating, etc.

Domestic manufacturing is another dimension that India would need to focus on. Manufacturing of renewable energy components in India will also solve employment issues which are critical to sustaining a JET. However, cost competitiveness remains a major challenge in doing this, especially considering the cheap Chinese supply. To balance the dilemma, India may negotiate access to markets outside India as part of a JET Partnership, to reduce the cost gap through economies of scale.

Using coal with increased efficiencies for time being is the need of the hour. This may include optimising the use of coal-fired power plants closer to where coal is mined rather than based on energy demand in States.

India’s just energy transition transcends mere capacity addition and needs preparing of allied dimensions for the transition as well. The G20 presidency is an opportunity for India to deliberate on a JETP deal that aligns with its national energy transition goals.