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India's Electrification Push Raises Environmental Stakes

Category: Energy & Environment,Finance

Indian public electricity cablesPhoto: Getty Royalty Free

India is in the home stretch of today’s most ambitious electrification effort, one that is akin to the U.S. government’s push to bring power to rural America in the 1930s. Back in 1936, President Roosevelt put forth the Rural Electrification Act as part of his Depression-era New Deal. The policy aimed to create jobs in the near term and, more enduringly, build electric infrastructure that would underpin future economic development in the nation’s rural and agricultural regions, including those that had been economically devastated by a half decade of drought and crop failure during the Dust Bowl.

India’s challenges look similar today, if not magnified by the sheer number of people who still live without electricity in the country, and by the environmental and climate challenges it faces.  Globally, there are 1.1 billion people with no access to electric power. Some 240 million of them live in India. Hundreds of millions more Indian citizens are connected yet endure electricity service that is far from adequate, providing power for just a few hours a day. And, challenging the economics of electrification is the fact that, as of 2015, 133 million rural Indian households lived on less than $79 USD per month.

It is against this backdrop that India’s government, under Prime Minister Narendra Modi, in 2017 launched an initiative to extend electricity access to the remaining 31 million Indian homes without power. The government expects to complete the $2.5 billion drive, named Saubhagya (luck or good fortune), by the spring of 2019 and just in time for the next round of national elections.

India’s grid provides its own set of challenges. Where the U.S. electric grid by the 1930s was an engineering marvel that had grown dramatically during the economic boom of the previous decade into a robust, if still geographically limited network, India’s twenty first century grid is less solid. Power outages are frequent and many Indian companies resort to generating off-grid electricity. Distribution utilities have repeatedly flirted with insolvency in recent decades. The government has subsidized poor customers, yet at times been tardy in delivering make-whole payments to the utilities. Additionally, 25% or more of electricity is siphoned off illegally.

Yet there’s reason to believe that Saubhagya will deliver. Modi pledged electrification upon assuming leadership in 2014, and in 2015 launched a program that would electrify every town in the country. That drive, much of which was orchestrated by then Minister of Coal, Power, and New and Renewable Energy Piyush Goyal, was fulfilled in April of 2018. It’s worth noting that electrification is the central political issue in India. The opposition Congress Party, supplanted by Modi’s BJP party in 2014, would argue that the bulk of country was already electrified prior to Modi’s term.

Politics aside, the recently completed village-level electrification drive does come with an asterisk. Electrification, per the government’s definition, happens when just 10% of households in a village become connected to power, plus public services like hospitals and schools. The drive to electrify households is thus essential as the next, and the government hopes final step in providing universal power access.

Getting customers to accept the electricity is another matter. Below-the-poverty line families that qualify for free powerline hookups might not be able to afford the electricity subsequently delivered, or the purchase price of devices that would use the power. Electrification in its early stages will not look like a home full of TVs and kitchen appliances. The current definition of “modern electricity” access is a mere 50 kilowatt hours per year in rural areas, just enough to power a lightbulb for a few hours a day and allow a child to do homework.

India faces another big Catch-22 in its drive to electrify. Universal electrification will require 28 gigawatts of new generation capacity in the near term. That demand will be met in part by the expanded use of coal, which makes up 60% of India’s 350 gigawatt grid today. India is a country where powerplant emissions combine with smoke from domestic biomass stoves, and air heavy with ash from the seasonal burning of farm fields, to result in abysmal local air quality both in cities and towns.

It’s difficult to get a clear read on the trajectory of coal growth. The resource is interwoven into the economy and, notably, the railways, which depend on coal shipments to provide traffic and revenue.

“Coal is an imperative that we can’t push away overnight,” said Goyal, now minister for Coal, Railways and Corporate Affairs, in October. “After all, we will need a base load in our system in which we can inject renewables for a few more years, until we are able to replace coal with other forms of electricity, 24 by 7.” The government has set 2022 as the deadline to achieve quality, round-the-clock power. 

And, recognizing air quality and climate concerns, India plans to grow its installed renewable capacity to 175 gigawatts by 2022, with competitively priced solar accounting for 100 gigawatts of that total.

“We set out to have 40% of installed capacity through renewable sources of energy by 2030,” said Goyal. In fact, he is hopeful for more.

“My sense is that by 2030, given the rapid innovations that we are seeing in the space of renewable energy, the falling prices of a clean energy, and also better storage being available by sensors, India would be probably 60% renewable.”

In a positive sign, Bloomberg New Energy finance recently revised downward its projections for India’s power sector emissions growth. Emissions will peak in 2033 at a level 29% higher than today, and fall to 17% below today’s level by 2050. Bloomberg had previously projected that emissions would triple by 2040. Solar capacity will rise to nearly 1 terawatt by mid-century, while thermal generation’s share will shrink to 14%. Goyal maintains that, if all goes as planned, carbon intensity, a measure of emissions per unit of GDP, will fall a third by 2030.

In sum, India is making a calculated yet necessary bet. Its transition away from energy poverty is at odds with its need to address local air pollution and the larger climate impact that electrification will bring, confounding factors never imagined during the U.S. push to electrify 80 years ago. The outcome of its transition will have profound implications for living standards within its borders and, as the world’s third leading source of greenhouse emissions, for the global climate.

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Indian public electricity cablesPhoto: Getty Royalty Free

India is in the home stretch of today’s most ambitious electrification effort, one that is akin to the U.S. government’s push to bring power to rural America in the 1930s. Back in 1936, President Roosevelt put forth the Rural Electrification Act as part of his Depression-era New Deal. The policy aimed to create jobs in the near term and, more enduringly, build electric infrastructure that would underpin future economic development in the nation’s rural and agricultural regions, including those that had been economically devastated by a half decade of drought and crop failure during the Dust Bowl.

India’s challenges look similar today, if not magnified by the sheer number of people who still live without electricity in the country, and by the environmental and climate challenges it faces.  Globally, there are 1.1 billion people with no access to electric power. Some 240 million of them live in India. Hundreds of millions more Indian citizens are connected yet endure electricity service that is far from adequate, providing power for just a few hours a day. And, challenging the economics of electrification is the fact that, as of 2015, 133 million rural Indian households lived on less than $79 USD per month.

It is against this backdrop that India’s government, under Prime Minister Narendra Modi, in 2017 launched an initiative to extend electricity access to the remaining 31 million Indian homes without power. The government expects to complete the $2.5 billion drive, named Saubhagya (luck or good fortune), by the spring of 2019 and just in time for the next round of national elections.

India’s grid provides its own set of challenges. Where the U.S. electric grid by the 1930s was an engineering marvel that had grown dramatically during the economic boom of the previous decade into a robust, if still geographically limited network, India’s twenty first century grid is less solid. Power outages are frequent and many Indian companies resort to generating off-grid electricity. Distribution utilities have repeatedly flirted with insolvency in recent decades. The government has subsidized poor customers, yet at times been tardy in delivering make-whole payments to the utilities. Additionally, 25% or more of electricity is siphoned off illegally.

Yet there’s reason to believe that Saubhagya will deliver. Modi pledged electrification upon assuming leadership in 2014, and in 2015 launched a program that would electrify every town in the country. That drive, much of which was orchestrated by then Minister of Coal, Power, and New and Renewable Energy Piyush Goyal, was fulfilled in April of 2018. It’s worth noting that electrification is the central political issue in India. The opposition Congress Party, supplanted by Modi’s BJP party in 2014, would argue that the bulk of country was already electrified prior to Modi’s term.

Politics aside, the recently completed village-level electrification drive does come with an asterisk. Electrification, per the government’s definition, happens when just 10% of households in a village become connected to power, plus public services like hospitals and schools. The drive to electrify households is thus essential as the next, and the government hopes final step in providing universal power access.

Getting customers to accept the electricity is another matter. Below-the-poverty line families that qualify for free powerline hookups might not be able to afford the electricity subsequently delivered, or the purchase price of devices that would use the power. Electrification in its early stages will not look like a home full of TVs and kitchen appliances. The current definition of “modern electricity” access is a mere 50 kilowatt hours per year in rural areas, just enough to power a lightbulb for a few hours a day and allow a child to do homework.

India faces another big Catch-22 in its drive to electrify. Universal electrification will require 28 gigawatts of new generation capacity in the near term. That demand will be met in part by the expanded use of coal, which makes up 60% of India’s 350 gigawatt grid today. India is a country where powerplant emissions combine with smoke from domestic biomass stoves, and air heavy with ash from the seasonal burning of farm fields, to result in abysmal local air quality both in cities and towns.

It’s difficult to get a clear read on the trajectory of coal growth. The resource is interwoven into the economy and, notably, the railways, which depend on coal shipments to provide traffic and revenue.

“Coal is an imperative that we can’t push away overnight,” said Goyal, now minister for Coal, Railways and Corporate Affairs, in October. “After all, we will need a base load in our system in which we can inject renewables for a few more years, until we are able to replace coal with other forms of electricity, 24 by 7.” The government has set 2022 as the deadline to achieve quality, round-the-clock power. 

And, recognizing air quality and climate concerns, India plans to grow its installed renewable capacity to 175 gigawatts by 2022, with competitively priced solar accounting for 100 gigawatts of that total.

“We set out to have 40% of installed capacity through renewable sources of energy by 2030,” said Goyal. In fact, he is hopeful for more.

“My sense is that by 2030, given the rapid innovations that we are seeing in the space of renewable energy, the falling prices of a clean energy, and also better storage being available by sensors, India would be probably 60% renewable.”

In a positive sign, Bloomberg New Energy finance recently revised downward its projections for India’s power sector emissions growth. Emissions will peak in 2033 at a level 29% higher than today, and fall to 17% below today’s level by 2050. Bloomberg had previously projected that emissions would triple by 2040. Solar capacity will rise to nearly 1 terawatt by mid-century, while thermal generation’s share will shrink to 14%. Goyal maintains that, if all goes as planned, carbon intensity, a measure of emissions per unit of GDP, will fall a third by 2030.

In sum, India is making a calculated yet necessary bet. Its transition away from energy poverty is at odds with its need to address local air pollution and the larger climate impact that electrification will bring, confounding factors never imagined during the U.S. push to electrify 80 years ago. The outcome of its transition will have profound implications for living standards within its borders and, as the world’s third leading source of greenhouse emissions, for the global climate.


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