Energy needs to grow 2.5 times but green power faces hurdles: Economic Survey 2023-24

India aims to shift from conventional to non-fossil fuel energy sources, aiming for 50% of its power capacity from non-fossil fuels by 2030.

India’s energy needs are expected to grow 2-2.5 times by 2047, given the growing economy, but the renewable energy sector still faces challenges, says the Economic Survey 2023-24 tabled by the government on July 22.

India’s energy mix in 2022-23 was primarily dominated by fossil-fuel, accounting for almost 84 percent, including coal, oil, and natural gas combined. But the composition in the electricity sector has significantly changed with the government’s sustained push for renewable energy. The share of non-fossil power capacity stood at 45.4 percent as of May 2024 from around 32 percent in April 2014.

“Considering that resources are limited, the pace of energy transition would need to factor in alternative demands on the resources for improving resilience to climate change and for sustained social and economic development. Achieving Net Zero by 2070 requires an orderly transition to a diversified mix of energy sources with a significant share of non-fossils and enhancement in energy production and usage efficiency,” says the document.

“Phasing renewable energy into the country's energy mix is paramount in India’s drive towards cleaner energy sources,” it says.

Renewable push

The government’s push to boost the renewable energy sector has continued with recent initiatives like the PM-Surya Ghar Yojana launched in February 2024 with a total outlay of Rs 75,021 crore. This initiative alone aims to add 30 gigawatts (GW) of solar capacity and reduce 720 million tonnes of CO2 equivalent.

India is also looking to set up offshore wind energy capacity to tap the potential, given its 7,600-km coastline. In an attempt to boost the offshore wind energy sector, the government approved a viability gap-funding scheme for the sector on June 19; it has identified several offshore zones and aims an initial capacity of 1GW.

India has also undertaken the Green Hydrogen Mission which aims at a 5 MMT capacity by 2030. The scheme offers financial incentives to boost electrolyser manufacturing and production.

Constraints for green hydrogen 

The Economic Survey flags some challenges that India faces in scaling up its renewable energy capacity.

“India’s ambitious green hydrogen production target is subject to various constraints, including on the supply side, or the cost of production and delivery, and on the demand side, or the readiness to consume green hydrogen in traditional industrial processes,” the Survey says.

The electrolysers and renewable energy used as inputs are the two major components of green hydrogen production cost. The cost of capital, water supply and treatment, storage and distribution, conversion of hydrogen to suitable derivatives, and an enabling infrastructure would also contribute to the final delivered cost of green hydrogen for any particular application,” the document says.

Green hydrogen is produced using renewable energy which also makes it vulnerable to the issues faced by the sector like the issue of intermittency and the huge requirement of land for solar and wind energy.

Challenges in green power 

India is steadily moving towards its commitment to shift from conventional to non-fossil fuel energy sources, aiming for 50 percent of its power capacity from non-fossil fuels by 2030. However, challenges persist, particularly in mobilising necessary finance and investment on competitive terms.

“Gearing up the banking sector for arranging finances for larger deployment goals, exploring low-interest rate, long-term international funding, and developing a suitable mechanism for risk mitigation or sharing by addressing both technical and financial bottlenecks,” the Economic Survey suggests.

Land acquisition continues to be a challenge, too. “Identification of land with renewable energy  potential, its conversion (if needed), clearance from the Land Ceiling Act, decision on land lease rent, clearance from revenue department, and other such clearances take time. The state governments must play a major role in acquisition of land for RE projects,” the survey says.

According to the National Electricity Plan of the Central Electricity Authority, non-fossil fuel, including hydro, nuclear, solar, wind, biomass, small hydro, pump storage pumps based capacity, which is around 203.4 GW, accounting for 46 percent of the total installed capacity in 2023-24 is likely to increase to 349 GW (57.3 percent) in 2026-27, and 500.6 GW (64.4 percent) in 2029-30.