COVID-19 pandemic could reverse progress on India’s electricity transition

While being at the threshold of 21st century transitions, India’s electricity sector continues to grapple with 20th century challenges – like operational inefficiencies, unreliable supply, access challenges, theft, non-payment and distressed finances. The Government of India has committed to the long-term goals of energy access security for all and electricity transition to cleaner sources. The disruptions caused by the COVID-19 pandemic are consequential for both. While exacerbating existing weaknesses in the sector, the pandemic could also affect the trend toward an electricity transition. 

 Against this backdrop, our report – Powering Through the Pandemic: Will COVID-19 Reset India’s Approach to the Future of Electricity? – is an attempt to understand the impact of the pandemic on India’s electricity sector. The report analyses government-led responses to the pandemic within the electricity sector, and suggests a structural approach to building a resilient electricity future. We find that COVID-19-caused disruptions in the electricity sector are pervasive, and will have alarming secondary effects and long-term consequences (see below).  

Figure: Multiple Pathways to Disruption –  COVID-19 vulnerabilities and impacts on India’s electricity sector 

If not addressed strategically, these impacts will risk progress on India’s long-term electricity goals. While the Central and state governments have been swift to recognise the disruptions, the responses fall short of a strategic approach. The band-aid approach ­– focussed on fixing existing patterns in the sector – appears inadequate to current challenges. Ironically, the long-term electricity reform agenda – proposed in major legislative and policy amendment proposals from the Centre – shaped during the pandemic has failed to internalise the challenges thrown-up and the insights gained from the COVID-19 experience.

This report argues that the combination of COVID-19 disruptions, technological driven cost reductions in renewable energy, and the longstanding financial and governance problems of the sector combine to create a ‘critical juncture’ for the sector- a moment to envision a new and alternative configuration of technology, institutions and politics that could transform Indian electricity. While this a long-term and complex conversation, the report suggests two illustrative pathways toward these goals.

Pathway 1: Electricity as an instrument of a productive and resilient rural economy: A resilient electricity future necessitates an alternative approach to electricity access security that enables a shift from subsidising minimal welfare through electricity to enhancing productivity by subsidising fixed costs for clean energy infrastructure to the poor. Below are two options that can reinforce each other.

• Drive a shift away from ‘redistributive welfarism’ (that prioritises subsidised tariffs for the poor while compromising on the quality of service) to ‘productive power’ that empowers and enables the poor to pay for better quality service through productive use of electricity.

• Shift away from recurring and inevitably rising tariff subsidies to one-time clean energy infrastructure support for targeted beneficiaries and incentivise productive use of electricity.

 Pathway 2: Electricity transition for productive recovery: In planning a post-COVID-19 recovery, India needs a strategic approach that treats the electricity transition as a catalytic force for rebooting the economy while redirecting electricity in the direction of more resilience. Below are three steps in that direction.

• Promote domestic manufacturing of clean energy equipment based on a broad strategy that adopts a green industrial policy approach, supports innovation and addresses distributive questions.

• Seek opportunities to accelerate retirement of old and inefficient coal-fired plants through a timebound strategy based on adequate consideration of economic, environmental and political consequences.

• Consider the costs and risks associated with fossil fuel in energy planning, and strategically use tax and subsidy instruments to keep clean energy cost competitive against fossil energy

This report was launched in July 2020, in a conversation moderated by Navroz K. Dubash (Professor, CPR) and featuring the following speakers:

• Arvind Subramanian – Professor, Ashoka University; Founding Director, Ashoka Centre for Economic Policy; Former Chief Economic Advisor, Government of India

• Ajay Shankar – Former Secretary, Department of Industrial Policy and Promotion; Former Additional Secretary, Ministry of Power

• Vandana Gombar, Editor – Global Policy, BloombergNEF

• Ashwini K. Swain, Fellow, Centre for Policy Research

You can watch the complete video here.

Environmentality is a collection of ideas, perspectives, and commentary by researchers at the Initiative on Climate, Energy and Environment, Centre for Policy Research, New Delhi. Views and opinions expressed in this blog are solely those of the authors. They do not represent institutional views.

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