Indian manufacturers of power plant equipment and automobiles need to plan for the scenario in which their domestic and international clients have shifted partially or totally to solar power and electric vehicles
Globally, innovations and start-ups are challenging and disrupting the business-as-usual approaches. Post the Paris Agreement in 2016, the global economy is rapidly moving towards cleaner energy options for sustainable development. In his book ‘Clean Disruption of Energy and Transportation,’ author, thought leader and serial entrepreneur Tony Seba emphasises that currently three innovation-driven trends are transforming the world—exponentially falling prices of solar panels, sharp improvement in performance of batteries, and the rising demand for electric vehicles.
The convergence of these innovations can be massively disruptive for the energy and transportation sectors worldwide. While the pangs of disruption may not be palpable just yet in the Indian context, the waves of disruption are gaining momentum. India’s energy and transportation sectors need to prepare for the change to not only survive the imminent disruption, but to actually gain from it.
Internationally, early movers (China and Tesla) are racing ahead and India needs to catch up fast to remain relevant in the global economy. India’s energy and transportation sectors are primarily dependent on fossil fuels that have serious pollution and energy security issues. As per a Greenpeace report titled ‘Airpocalypse,’ air pollution in India is a ‘public health and economic crisis,’ with about 2.3 million annual deaths attributed to it. A large part of the polluting fossil fuels is imported from various countries. During 2016-17, the country’s crude oil import stood at 213 million tonnes (worth $70 billion), whereas coal import for power sector was 60.7 million tonnes. Solar power, batteries and electric vehicles are cleaner energy options that can help India address its pollution and energy security issues in a big way.
Globally, the drastic reduction in the cost of solar panels due to large-scale production (especially by China) is accelerating the integration of solar power with the grid. In many countries, solar power has already achieved grid parity (price equivalence with fossil-fuel-fired electricity). In May 2017, during the auction of 500MW capacity at Bhadla Phase-III Solar Park in Rajasthan, the solar tariff hit a new low of Rs 2.44 per unit, which is cheaper than power obtained from many fossil-fuel-fired power stations in India. Apart from attractive economics, solar power is a clean source of energy as it has an emission-free power generation process. Additionally, solar power addresses energy security concerns by reducing the dependence on imported fossil fuels such as coal.
In this transition to solar power, India can gain significantly by leveraging its proximity to the equator, which ensures good sunshine throughout the year.
However, despite its several attractive features, solar power has inherent grid stability issues due to the intermittent nature of sunlight. In the absence of commercially-viable megawatt-scale power storage, the rapid integration of solar power with the grid seemed a distant goal. Sensing the opportunity, early movers are on a mission to develop commercially-viable power storage solutions.
In July 2017, Tesla signed a contract to integrate the world’s biggest 129 megawatt-hours (MWh) lithium-ion battery storage to the grid in Southern Australia, with an execution deadline of 100 days. This is a significant improvement over Tesla’s own 80 MWh battery facility in California. Tesla’s Gigafactory has developed lithium-ion batteries named Powerwall that are compact and stackable, and with a built-in inverter these can integrate seamlessly to a household’s electric circuit or grid. Tesla is aiming to increase its annual battery manufacturing capacity to 35 gigawatt-hours (GWh) by 2018.
Manufacturing giant China is not far behind. According to Bloomberg Intelligence, China aims to increase its battery manufacturing capacity to 120 GWh by 2021. Apart from stimulating growth of solar power, batteries also provide impetus to the adoption of electric vehicles.
According to Forbes, China is the world’s largest electric vehicle market, with about 400,000 pure (excluding hybrid) electric cars, and its demand grew by 65% in 2016. A dozen local manufacturers have already launched 32 pure electric car models in China. Tesla, being one of the harbingers of pure electric vehicles, has earned $1.1 billion in revenue from China alone in 2016—it accounted for 15% of its worldwide revenues. With a reported mileage of above 400-km per charge, top speed of 249 km per hour, acceleration of 0-96 km per hour in just 2.8 seconds, impeccable safety and obviously zero tailpipe emissions, Tesla’s electric cars and similar electric vehicles are here to disrupt.
Registrations of electric cars hit a new record in 2016, with global sale of over 750,000 units. In terms of the share of electric car in a country’s car market, Norway is the global leader, with 29% market share, followed by the Netherlands with 6.4% electric car market share, and Sweden with 3.4% share. China, France and the UK reported electric car market shares close to 1.5%. Running on charged batteries, electric vehicles prevent local emissions during the ride, although electricity used for charging may come from fossil-fuel-fired power plants polluting at distant locations. If solar power is used for charging, then the entire cycle becomes emissions-free.
Individually, innovations in solar panels, batteries and electric vehicles may not have that big bang of an impact. What make these innovations so disruptive is their convergence and their potential to combat climate change economically. Innovative batteries are making integration of solar panels with the grid more reliable and economical. These batteries are also enhancing the performance of electric vehicles. With charged batteries, electric vehicles can also power homes. Households with solar panels, batteries and electric vehicles can become independent from the electric grid and fossil fuels for energy needs, and may transform into net supplier of electricity to the grid. Also, as solar panels, batteries and electric vehicles complement each other, their individual commercial success is expected to trigger the success of others, enabling them to enter a virtuous cycle.
India can take advantage of the convergence of innovations through appropriate policy interventions that make all relevant stakeholders foresee the future and adapt seamlessly. Indian manufacturers of power plant equipment and automobiles need to plan for the scenario in which their domestic and international clients have shifted partially or totally to solar power and electric vehicles. Similarly, power plant developers, coal mining companies, power transmission and distribution companies in India need to adapt to conditions wherein solar power is the predominant source of electricity and households are net power suppliers. In addition, with the onslaught of electric vehicles, oil and gas and automobile companies need to diversify themselves to remain relevant. Otherwise, as Elon Musk says, “Some people don’t like change, but you need to embrace change if the alternative is disaster.”
Umakant Panwar & Ajay Mathur
Umakant Panwar, an ex-IAS officer, is Director, Centre for Public Policy and Good Governance, Uttarakhand.
Ajay Mathur is Director General, TERI, New Delhi