Clean Energy Investments Have Surged In India: IEA Report

The International Energy Agency (IEA) has recently released a document on the roadmap for the Net Zero plans. The report indicates the role of government policies in bringing improvement in solar PV.  The report emphasizes that the clean energy investment today is dominated by the advanced economies and China. As per the report, large economies such as India and Brazil have recently seen strong growth in clean energy investment.

But, as per the report, developed and developing continue to lag investment in fossil fuels in other emerging markets and have an investment of an estimated USD 250 billion set to be invested in clean energy in 2023 compared to nearly USD 450 billion invested in fossil fuels.

The report gives an example of successive five-year plans practiced in China, which attempt to bring progressively raised ambitions for solar PV and drive down global costs. For instance, the report shows electric two/three-wheelers and buses have seen significant uptake in India and other emerging markets. 

For instance, the report highlights the role of policy support such as the one provided by the United States through the Inflation Reduction Act (IRA) adopted in 2022. The US legialation provides unprecedented funding to support deployment and reduce costs for various low-emissions technologies, notably Carbon Capture, Utilisation and Storage (CCUS) and Hydrogen. 

The report indicates the role of offshore wind deployment in Europe in kick-starting the global industry. The report shows that the Electric Vehicle (EV) aims to create a fuel economy with low Carbon Dioxide (CO2) emissions standards in the European Union (EU) and China. The report gives a more recent example of the United States – which has driven a significant transformation in the industrial strategies of car and truck manufacturers. 

As per the IEA report, the projected CO2 emissions in India in 2030 are 1.3 Gt lower in the STEPS (State Policy Scenario) than in the Pre-Paris Baseline Scenario. The report suggests that the share of solar PV in power generation increases eightfold, saving nearly 400 Mt of emissions in 2030 in the STEPS. As per the report, the Pre-Paris Baseline Scenario, which includes wind and solar PV, accounts for less than 10% of total generation in 2030. 

As per the report, from 2015 to 2022, the advanced economies and China together accounted for over 95% of global electric car and heat pumps sales and nearly 85% of combined wind and solar capacity additions. However, per the report, some technologies have expanded enormously in other countries. For instance in India, rapid progress has been made in solar PV deployment.

Yet, as per the report, the recent policy changes are beginning to expand project pipelines elsewhere. The report indicates that there have been notable increases in the project pipeline for battery production facilities in the United States. The report highlights that the incentives provided by the IRA largely drives it. Meanwhile, the Production Linked Incentive (PLI) programme in India boosts domestic manufacturing. 

As per the IEA report, substantial gains in clean cooking among the developing countries in Asia, where the share of the population without access to clean cooking solutions has declined from more than 40% to less than 30% since 2015. The report highlights the strong gains in India, China, and Indonesia through access to clean cooking technologies in the last seven years. As per the report, this is (equivalent to about 7,000 people per hour) in sub-Saharan Africa. However, population growth has outpaced progress. 

As per the report, the Inflation Reduction Act in the United States and the Net Zero Industry Act in the European Union in addition to programs such as the Production Linked Incentives in India, had a positive impact. It has had the positive effect of significant increases in the potential supply of clean energy technologies while at the same time raising concerns about potential market distortions and the extent of public fiscal commitments.

As per the report, India needs policies to address the causes of the high cost of capital in these economies. Clear national targets with an annual implementation plan, for instance, through competitive auctions, would be likely to increase investor confidence. 

In India, for example, the IEA said that an ambitious government target set for renewables capacity has been followed by central and provincial auction schedules with a transparent procurement process. The risks associated with the financial health of off-takers could be addressed through standardized power purchase contracts backed by government guarantees, especially for publicly owned utilities. India provides an example of policy action here too: its centralized large-scale auctions conducted by the Solar Energy Corporation of India (SECI) helped reduce project risks and lower the cost of capital for utility-scale solar PV and wind plants. Policies along these lines could also facilitate the availability of concessional financing from international and regional development banks, and this would further reduce the cost of capital.

However, as per the IEA report, the progress in other regions has demonstrated that it is possible to quickly provide access to clean cooking solutions. The report suggests that India has nearly half a billion people gained access within ten years thanks to a combination of subsidized refills of liquefied petroleum (LPG) cylinders, deposit-free LPG connections, and a scheme allowing wealthier households to renounce their access to LPG subsidies voluntarily.