The new US Energy Secretary, Jennifer Granholm, has signalled a transformational shift in the country’s energy policy to combat global warming. In her first public speech in the new role, Granholm announced that the US would install “hundreds of gigawatts” of clean energy capacity in the next four years to meet its climate targets. Granholm is aiming to gradually shut down oil & gas production to accelerate energy transition. She has also directed investment amounting to “billions of dollars” with revival of a USD 40 billion government loan programme, defunct under the previous government, towards clean energy technology innovation.
- Besides the US, China, Japan and EU have announced radical new climate action goals and thrust on clean energy technologies;
- We expect global renewable power capacity addition to jump by about 40-50% over the next 2-3 years to over 300 GW per annum;
- The expected boom would throw open new opportunities and challenges for the Indian market;
The comments were made by the Energy Secretary at an industry conference this week. Formal policy announcements are still awaited. But the roadmap is becoming clearer after the US re-joined Paris Climate Agreement in January 2021. The US plans to achieve 100% carbon-free power generation by 2035 and carbon neutral status by 2050.
Other major economies including China, Japan and the EU have made similar bold announcements recently. Last month, China released its draft national renewable energy targets for 2030 with share of non-hydro renewable power expected to grow to 25.9% from 12.7% in 2021. Provisional calculations suggest addition of total solar and wind power capacity of a staggering 1,600 GW by 2030, or about 160 GW per annum. Subsequent to announcement of aiming to achieve net-zero status by 2060, China is now focusing on green and low-carbon circular economic development with reliance on locally developed technologies, creation of “green communities” and “zero-carbon cities.” Meanwhile, Germany, the largest economy in the EU, plans to add 48 GW solar capacity by 2030.
Figure: Total installed capacity and penetration
Source: GWEC, BNEF, AECEA, MNRE, Germany’s federal network agency, BRIDGE TO INDIA research
These are all stunning announcements and herald a new boom era for renewables. Global capacity addition could plausibly jump by about 40-50% over the next 2-3 years to cross 300 GW per annum. The boom would mean more capital flows into the sector, more innovation in technology and faster trajectory for reduction in costs.
This is all good news for the Indian market. But as more countries strive to attract investments, India would need to improve its game to stay relevant. Inconsistent policy regime, implementation snafus and failing distribution utilities need to be tackled immediately. Moreover, there is a real danger that as other countries invest aggressively in R&D and deployment of new technologies, ‘Make in India’ could become more forbidding. In the short-term, there is also a risk of equipment prices further firming up in line with the trend over the past few months.