Experts Find Lower Costs, Cheap Credit To Be Decisive For Energy Future

What does the energy landscape look like in the post-Covid era?

Ajay Mathur, Director, International Solar Alliance, believes that as we look to the future, two-three key changes emerge: One, post the pandemic, energy equipment buyers are considering the operating costs of energy with greater emphasis, largely because of the greater availability of credit, which allows the purchase of expensive equipment and the reduction of OP costs. Buyers strive to invest in “greater efficiency, low-carbon emission, and low-cost equipment.”

Two, due to the on-going diversification of the energy mix, the traditional system of buying electricity from the grid is giving way to the acquisition of energy from a broader system of services, such as rooftop solar for residents, hydrogen fuel for power stations, etc., leading to the development of new markets are developing.

Three, increased emphasis on “grid-connected mini grids” are enhancing reliability, much like inverters systems did in the past. “We are on the cusp of a major change in how energy is used and produced,” Mathur has stated. He was speaking at Industry event organised by a media publication.

The world has not entered the post-Covid era uniformly, says Tim Gould, Head of Division for Energy Supply Outlooks and Investment, International Energy Agency. He believes that the real challenge lies in separating cyclical elements from structural ones in the energy transition currently underway. For instance, global CO2 emissions recorded in December last year were found to be equivalent to 2019 levels, indicating a kind of inertia in the transiting process.

Nevertheless, things are changing too; the most dramatic change in production being that 90% addition to global power is expected to come from renewables in the future. According to Gould, the world will be reliant on a single infrastructure to fulfil future energy needs, and that the largest expenditure will not be on solar or wind but on the grid.

He believes that modernising the grid network — through resolving permitting issues in North America and Europe, finding solutions for investment problems through shifting reliance away from financially-stained utilities, and improving technology significantly — will be key in the future. “Our reliance on the grid is increasing,” Gould has said, “but its technology is decreasing.”

Some of these improvements are already underway. Somesh Kumar, Partner and Leader, Power Utilities, EY, has said that consumer services in the Indian energy sector have improved massively from their dismal past — modern technology like smarter meters, centralised command and control centres, and cyber security give greater emphasis to consumers. Continuous innovation through new RE technology, such as floating solar, offshore wind, etc., also contribute to this change. “EV and e-mobility and associated battery storage are really changing the world.”

Despite all these improvements and innovations, however, global emissions are still quite high. According to Gould, while we are seeing a gradual improvement in energy intensity of the global economy — energy needed to produce a unit of global GDP — which is 1.5% improvement per year at present, we would need to raise it 3-4% to reach outcomes complaint with the Paris Agreement. “We must urgently break links between carbon intensity and carbon use,” he has said.

And how to consolidate a global dialogue to achieve this so that everyone could benefit from renewable energy? Surely, international organisations like IEA and IFC have a key role to play.

According to Jun Zhang, Country Head India, International Finance Corporation, the organisation wants to go beyond a transaction to transaction relationship with its customers. Rather, it aims to create an investment-friendly environment by providing advisory services to important stakeholder in the renewables sector.

IFC’s upstream activities consist of pre-investment work that lays the foundation for future transactions, often in collaboration with the World Bank and the Multilateral Investment Guarantee Agency (MIGA). Efforts include technical assistance, capacity building for institutions and private companies, and support to clients and governments, among others.

Renewable companies financed by the IFC have added 15% capacity in India till date. To promote economic growth that is inclusive, sustainable and productive, the IFC provides on-the-ground, reliable feedback to interested parties.