According to a latest report, electricity generation from fossil fuels has reached its zenith, while renewables are on the rise, particularly in emerging markets that see the economic benefits they offer. The report is the result of a collaboration between India’s Council on Energy, Environment and Water (CEEW) and Carbon Tracker, both non-profit organizations.
The Role of Emerging Markets in Global Energy Transition
Emerging economies play a crucial role in the global energy transition, responsible for 88% of projected growth in electricity demand from 2019-2040. These markets, which currently make up 82% of the demand for electricity and are expected to contribute to 86% of future demand growth, are mostly importers of coal and gas. The financial motivation to switch to solar and wind power sources is strong in these regions. Effective policies can help overcome technological and cost obstacles, paving the way for a smoother transition.
Unlike developed markets where demand for fossil fuels for power generation has dropped by 20% since 2007, emerging markets are witnessing demand growth from a lower base. Moreover, the necessity to expand electricity access to hundreds of millions of people further differentiates their transition.
Four Key Groups of Emerging Markets
Emerging markets can be divided into four key groups. China tops the list, accounting for nearly half of the electricity demand and 39% of the expected growth. Importers of coal and gas like India and Vietnam form roughly a third of the demand and close to half the growth.
Coal and gas exporters such as Russia or Indonesia constitute 16% of demand but only about 10% of the growth. In these countries, resistance to the energy transition might be stronger than others. Lastly, ‘fragile’ states like Nigeria or Iraq make up around 3% of demand and similar share of growth.
India as a Role Model
India, responsible for 9% of emerging market electricity demand and 20% of expected demand growth, has demonstrated significant progress. From less than 20GW of solar in 2010, it has escalated to 96GW of solar, wind biomass and small hydro by May 2021. Taking into account large hydropower, renewables provide 142GW or 37% of India’s power capacity, with an ambitious target of 450GW by 2030.
Suggestions for Accelerating the Transition
The key to driving growth in the renewables sector is a supportive policy environment. By liberalizing markets and launching competitive auctions, countries can reduce costs and attract international finance at a time when capital markets are shifting away from fossil fuels. For instance, such approaches have allowed India to significantly reduce solar power costs.
Developed countries can facilitate the transition to renewables in emerging markets through policy support, technology expertise, and development finance aimed at reducing the cost of capital.
Indian Initiatives for Renewable Energy
India has introduced several initiatives aimed at promoting renewable energy. The National Hydrogen Energy Mission, announced in Union Budget 2021-22, aims to use hydrogen as an energy source, which could revolutionize transportation.
Other initiatives include the Jawaharlal Nehru National Solar Mission, launched in 2009 with a target of 20,000 MW grid-connected solar projects by 2022, and the International Solar Alliance, a global coalition of 121 solar resource rich countries established in 2015.
Further, the KUSUM scheme (Kisan Urja Suraksha evam Utthaan Mahabhiyan) seeks to provide financial and water security to farmers via harnessing solar energy. The National Wind-Solar Hybrid Policy and Rooftop Solar Scheme are also among the steps taken for promoting wind and solar energy.
