Policy considerations for decarbonization
Achieving India's 2070 net-zero goal while also supporting strong economic growth is a challenge and there are multiple avenues to choose from. Given the variability and absence of round the clock energy in case of renewable sources such as wind and solar, these need to complemented with other sources like gas and supported by storage systems. Therefore, policy measures on decarbonization must adhere to the parameters of reliability, affordability and energy independence.
Energy independence: India mainly relies on fossil fuel imports for its primary energy requirements, making the economy susceptible to volatility in global energy prices. The government needs to consider creating domestic capabilities across the clean energy value chain through initiatives like production-linked incentives (PLI) in products besides solar panels and advanced chemistry cell (ACC) batteries.
Innovation: Achieving India's net-zero goal is a financial and technological challenge. Various possible pathways exist to help the country achieve its net-zero target based on technical choices. Large-scale commercial exploitation, however, depends on further innovations that can lower costs. Instead of predicting the future setting or narrowing down the technologies and power sources, policies should create the right incentives for innovations.
Creating markets: Having India-specific carbon markets will incentivize the adoption of clean energy and technologies. Currently, most businesses follow the open access strategy, i.e., they buy green energy directly. Widespread adoption of such measures may make the grid more complex. Therefore, in addition to policy initiatives such as green open access, there is a need for measures that incentivize decarbonization and address the complex needs of the energy system through market-based prices.
Mobilizing investment: India would need significant capital as it transitions toward net-zero. The current estimates point to a massive investment of about US$10.1 trillion by 2070. While the estimates may vary, policymakers must consider ways to mobilize the required capital.