Energy Transition - Opportunities And Challenges
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<div><p style="text-align: justify;"><span xml:lang="EN-US" data-contrast="auto">One topic that is debated at all forums is issues related to Environment, Social and Governance (ESG). ESG has become extremely critical for all companies as investors and capital markets have become highly active and demanding action on this aspect. One of the critical topics in ESG is “Energy Transition” wherein sources of energy must move from fossil fuels to sources, which have a lesser carbon footprint, like renewable sources like solar, wind, etc. </span> </p><p style="text-align: justify;"> </p><h2 style="text-align: justify;"><span style="font-size: 14pt;" xml:lang="EN-US" data-contrast="auto">Why is energy transition critical?</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></h2></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">As per the World Economic Forum`s Global Risk report, the top three risks are:</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><ul style="list-style-type: disc;" role="list"><li role="listitem" data-aria-level="1" data-aria-posinset="1" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Extreme weather</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="2" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Misinformation spread</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="3" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Societal Polarization</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li></ul></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">To add, over the next 10 years, the top risks are:</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><ul style="list-style-type: disc;" role="list"><li role="listitem" data-aria-level="1" data-aria-posinset="4" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Extreme weather</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="5" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Critical changes to Earth`s systems</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="6" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Biodiversity loss and ecosystem collapse</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="7" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Natural resources shortages</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li></ul></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">Other risks, like polarization in society due to misinformation and Artificial Intelligence risks, rank lower than climate change-related risks. </span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">One of the leading factors in climate change risk is global warming due to the high usage of fossil fuels like coal and oil. Less fossil fuel use and more renewable sources is the way forward. </span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">According to the estimates, the share of fossil fuels in the global mix is expected to decrease from present levels of ~ 75% to ~ 55% by 2050, while the share of renewables and nuclear power is expected to increase from present levels of ~ 25% to ~ 50% by 2050. </span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p> </p><h2><span style="font-size: 14pt;" xml:lang="EN-US" data-contrast="auto">Key Challenges in Energy Transition</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></h2></div><div style="text-align: justify;"><p><strong><span xml:lang="EN-US" data-contrast="auto">Fossil Fuels Phase out</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></strong></p></div><div style="text-align: justify;"><ul style="list-style-type: disc;" role="list"><li role="listitem" data-aria-level="1" data-aria-posinset="8" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Energy security concerns to meet immediate demand, especially by emerging economies like China, India, Indonesia, etc which must rely heavily on fossil fuels to meet their energy needs. Coal, Oil and Gas are the major sources of energy for most of these countries</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="9" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Despite India`s progress on the renewables front, the Indian government has mandated all thermal power plants to import coal to meet the peak summer demand</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li></ul></div><div style="text-align: justify;"><p><strong><span xml:lang="EN-US" data-contrast="auto">Cost of Transition</span></strong><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><ul style="list-style-type: disc;" role="list"><li role="listitem" data-aria-level="1" data-aria-posinset="10" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Huge funding is required for the transition to renewables, especially to set up the infrastructure. Estimates suggest that about $3 trillion of annual funding is required for the next 20-25 years to achieve global warming standards as per the Paris Agreement</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="11" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">There is a constant debate on the sources of funding, especially the debate on the developed North Vs the developing South nations</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="12" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">The emerging economies / Southern nations must balance their development needs with climate change issues</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li></ul></div><div style="text-align: justify;"><p><strong><span xml:lang="EN-US" data-contrast="auto">Geopolitical Challenges</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></strong></p></div><div style="text-align: justify;"><ul style="list-style-type: disc;" role="list"><li role="listitem" data-aria-level="1" data-aria-posinset="13" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Energy supply chains are constantly under threat due to various geopolitical issues, such as the Russia-Ukraine war, the Israel-Hamas conflict, etc., which frequently causes the energy transition path to face hurdles. Countries must focus on securing their immediate energy supply chains rather than on energy transition activities</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li><li role="listitem" data-aria-level="1" data-aria-posinset="14" aria-setsize="-1" data-list-defn-props="{"335552541":1,"335559685":720,"335559991":360,"469769226":"Symbol","469769242":[8226],"469777803":"left","469777804":"","469777815":"hybridMultilevel"}" data-listid="1" data-font="Symbol" data-leveltext=""><p><span xml:lang="EN-US" data-contrast="auto">Recent trade embargoes on green energy infrastructure, like the tariffs on solar panels from China to the USA, play truant. China, the world`s leading producer of solar energy equipment, is also facing pressure from Europe on its solar equipment exports to Europe</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></li></ul></div><div style="text-align: justify;"><p> </p><h2><span style="font-size: 14pt;" xml:lang="EN-US" data-contrast="auto">India`s Energy Transition Roadmap</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></h2></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">India has taken very firm steps in the path of energy transition and balanced its development needs at the same time. India has been at the forefront of the International Solar Energy Alliance and was instrumental in setting up the biofuel alliance. </span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">At present, renewables account for ~ 30% of India`s energy needs, compared to the global average of ~ 38%. The share of renewables is expected to reach ~ 50% by the year 2050.</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p> </p><h2><span style="font-size: 14pt;" xml:lang="EN-US" data-contrast="auto">Steps Taken by India for the Energy Transition</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></h2></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto"><strong>Solar Energy</strong> </span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">India at present has a solar energy capacity of 66GW which is targeted to increase to ~ 250GW by 2035 and 400GW by 2050.</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">Key initiatives taken:</span> <span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></p></div><div style="text-align: justify;"><ul><li><span xml:lang="EN-US" data-contrast="auto">50 solar parks with a capacity of around 37GW across India</span> </li><li>PM-KUSUM scheme to add solar capacity of ~35GW by March 2026 </li><li>Production Linked Incentive (PLI) scheme for National Program on High Efficiency Solar PV modules </li><li>Rooftop Solar Yojana scheme to give free electricity to 10 million households.<span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></li></ul></div><div style="text-align: justify;"><p> </p><p><span xml:lang="EN-US" data-contrast="auto"><strong>Wind Energy</strong> </span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">Present capacity ~ 60GW is expected to increase to ~ 175GW by 2035.</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p> </p><p><strong><span xml:lang="EN-US" data-contrast="auto">Hydrogen </span></strong><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><ul><li><span xml:lang="EN-US" data-contrast="auto">Two green hydrogen hubs to be set up by FY’26 with capacity >100,000 MTPA</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></li><li><span xml:lang="EN-US" data-contrast="auto">National Green Hydrogen Mission to make India the hub for the production, usage and export of Green Hydrogen</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></li><li><span xml:lang="EN-US" data-contrast="auto">MNRE will provide central financial assistance for developing core infrastructure to set up green hubs for large-scale production and utilization.</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":0,"335559739":0,"335559740":279}"> </span></li></ul></div><div style="text-align: justify;"><p> </p><p> </p><p> </p><p><em>This article was contributed by our expert <a href="https://www.linkedin.com/in/ramn72/" target="_blank" rel="noopener">Ram Narayanan</a></em></p><p> </p><h3><span style="font-size: 18pt;">Frequently Asked Questions Answered By Ram Narayanan</span></h3></div><div style="text-align: justify;"><p> </p><h2><span style="font-size: 12pt;"><span xml:lang="EN-US" data-contrast="auto">1. What are the economic opportunities associated with transitioning to a low-carbon energy system?</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></span></h2></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">As India transitions to renewables, opportunities exist in the fields of solar, equipment, engineering, and project execution services. Solar rooftops offer opportunities for many installation service providers. </span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div style="text-align: justify;"><p> </p><h2><span style="font-size: 12pt;"><span xml:lang="EN-US" data-contrast="auto">2. What are the potential risks and mitigation strategies associated with ESG-focused investments in renewable energy projects, particularly in emerging markets?</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></span></h2></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">Assurance that funds are deployed in proper areas that will have maximum impact. Intensive project due diligence and governance mechanisms are the key mitigation steps. </span> </p><p> </p><h2><span style="font-size: 12pt;"><span xml:lang="EN-US" data-contrast="auto">3. How can industries leverage renewable energy microgrids and distributed generation systems to enhance resilience, reduce energy costs, and meet sustainability targets?</span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></span></h2></div><div style="text-align: justify;"><p><span xml:lang="EN-US" data-contrast="auto">By being part of a common grid, industries can mitigate the risk of an irregular power supply, which is the key risk in renewables now. </span><span data-ccp-props="{"134233117":false,"134233118":false,"201341983":0,"335559738":240,"335559739":240,"335559740":279}"> </span></p></div><div><p style="text-align: justify;"><span data-ccp-props="{"201341983":0,"335559739":160,"335559740":279}"> </span></p><p style="text-align: justify;"> </p><p style="text-align: justify;"> </p></div>
KR Expert - Ram Narayanan
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