JONATHAN KAY
SUMMARY
Almost none of the world’s largest polluters have enacted policies compatible with the Paris Agreement’s target of limiting global warming to within 2 degrees Celsius, a threshold past which climate disruption is projected to become even more frequent, severe, and unpredictable.
Fortunately, despite the absence of adequate government support, renewable energy has grown at an astonishing pace in recent years thanks to its plummeting cost. India, for example, has more than doubled its stock of wind and solar power in the last five years, driven less by sustainability concerns than by clean energy’s potential for cost-effectively meeting citizens’ pressing development needs.
However, the low prices of wind and solar projects disguise the structural costs renewable energy poses for grids when deployed at larger scales. The intermittent, unpredictable nature of the electricity generated by such technologies—in contrast to the stable, on-demand flow of power from traditional fossil fuel generation—requires fundamental changes to how countries invest in and operate their grids.
For India, one of the most important steps for coping with the variability of these new sources of energy will be better coordination of the flow of power between the country’s disparate state-run grids. By increasing the volume of energy traded between state utilities, periods of surplus power in one region can compensate for deficits in others, making for a more stable and reliable supply of renewable energy—one that can better displace expensive and polluting fossil fuels.
Yet, while such reforms would be difficult under the best of circumstances, they will be particularly challenging given the unique dysfunctions of India’s power sector. With its politically compromised, perennially loss-making electricity distribution companies already struggling to keep the lights on, bolder change appears unlikely. Deeper reforms to India’s power sector are therefore prerequisites to adopting solutions like regional coordination that can ensure the continued growth of renewable energy.
The good news is that Prime Minister Narendra Modi’s national popularity and the dominance of his Bharatiya Janata Party (BJP) at the state level offer the country’s leaders an opportunity to reform the power sector where others have failed. But to take advantage of this opening, Modi must go beyond his modus operandi by investing in incremental institutional solutions rather than one-and-done technical fixes and by serving as a coordinator for India’s states rather than legislating by central fiat.
Deeper reforms enabling India to maintain its rapid expansion of renewable energy not only would provide clean, low-cost power to its people but also would help the world offset the failings of more laggard countries, perhaps even putting back within reach the Paris Agreement’s more aggressive target of keeping global warming to within 1.5 degrees Celsius. But the hardest part of this ambitious task lies ahead—in ending the vicious cycles that have plagued India’s power sector for decades.
INTRODUCTION
India’s spectacular embrace of renewable energy is a rare reason for optimism in the fight against climate change. The world’s third-largest carbon emitter has more than doubled its stock of wind and solar power in the last five years, making it one of the only countries in the world whose policies appear compatible with the Paris Agreement’s target of limiting global warming to within 2 degrees Celsius—a threshold past which climate disruption is projected to become even more frequent, severe, and unpredictable.1
Yet the hardest part is still to come. Fossil fuels like coal, which currently accounts for a majority of India’s power-generating capacity, produce a stable and predictable stream of on-demand power. By contrast, power generation from wind and solar energy is more variable and unpredictable: wind turbines only generate electricity when the wind is blowing, and solar panels only generate electricity when the sun is shining. As a result, grid operators may not be able to fully rely on these forms of variable renewable energy, forcing them to turn back to fossil fuel generation. This challenge increases emissions and costs in the short term and slows the buildout of renewable energy in the long term.
Coping with variable renewable energy like wind and solar will therefore require deeper changes to how India manages its grid. One of the most important solutions will also be one of the most difficult: the integration of the country’s disparate state-run electricity grids into a more coordinated system capable of using periods of surplus power in one region to compensate for deficits in another. In this way, variable renewable energy can more efficiently service larger geographic areas and more reliably displace expensive and polluting fossil fuels.
However, while such reforms would be difficult under the best of circumstances, they will be particularly challenging given the unique dysfunctions of India’s power sector. A long history of politicians manipulating power distribution companies for the sake of short-term electoral objectives has compromised utilities’ finances and the independence they need to undertake structural reform. Without addressing these more fundamental problems, clean energy–enabling solutions like regional coordination are unlikely to succeed.
Fortunately, Prime Minister Narendra Modi’s national popularity and the dominance of his Bharatiya Janata Party (BJP) at the state level offer the country’s ruling coalition an opportunity to reform the power sector where others have failed. To take advantage of this opening, however, Modi must go beyond his modus operandi, investing in incremental institutional solutions rather than one-and-done technical fixes and serving as a coordinator for India’s states rather than legislating by central fiat.
One potential solution would be to organize a mutually reinforcing package of state-level power sector reforms undertaken by a coalition of the willing formed around a core of BJP-led state governments where Modi can use his personal influence to ensure follow-through. Such a reform package would include the narrower task of encouraging increased regional coordination of energy exchange as well as a broader, complementary set of reforms focused on the pathologies of the distribution companies themselves.
Modi and the BJP have strong incentives to invest in such overdue changes. Enabling India’s clean energy transition through comprehensive power sector reform would complement other components of the BJP’s agenda, including support for India’s domestic manufacturing sector and the electrification of rural households. Perhaps most importantly, while India’s adoption of renewable energy to date has been primarily motivated by development concerns rather than sustainability, that might change as the impacts of climate change grow more severe—particularly given the country’s heightened vulnerability to climate change due to its reliance on agriculture, proximity to rising sea levels, and high levels of poverty.
Deeper reforms enabling India to maintain its rapid expansion of renewable energy not only would provide clean, low-cost power to its people but also would help the world offset the failings of more laggard countries, perhaps even putting back within reach the Paris Agreement’s more aggressive target of keeping global warming to within 1.5 degrees Celsius. But the hardest part of this ambitious task lies ahead—in ending the vicious cycles that have plagued India’s power sector for decades.
A NEW ERA OF INTERMITTENT ENERGY
India has long refused in international negotiations on climate change to adopt specific commitments to reduce its carbon emissions, arguing that it and other developing countries should not have to respond as rapidly as wealthy industrialized nations given the former’s pressing development needs and low share of historical emissions.2
Yet despite Western countries’ fears that India would become a “spoiler” for international cooperation on climate change, New Delhi’s development-first stance has proved compatible with a rapid shift toward decarbonizing its energy sector, which constitutes the single largest source of its carbon emissions.3 Installation of new generating capacity for renewable energy in India has outpaced that of fossil fuels in recent years, making the country home to the fifth-largest supply of renewable energy in the world.4 New Delhi recently set its sights on further expanding its supply of renewable energy to 450 gigawatts by 2030 (see figure 1)—a number that would constitute a majority of its total energy capacity and be roughly equal to the current combined renewable energy resources of the United States, Japan, and France.5
Consistent with its international rhetoric, India’s embrace of clean energy has been motivated more by developmental concerns than by sustainability per se; climate change ranks low among Indian voters’ priorities.6 The plummeting cost of solar and wind energy have made renewables cheaper than fossil fuels in most states, offering the chance to simultaneously improve citizens’ electricity access, throw a lifeline to India’s bankrupt public utilities, and slow the growth of India’s carbon emissions.
However, India’s current approach to managing its grid means that this synergy may not last. The more wind and solar power that the country installs, the harder and more expensive such energy will be to use, threatening to put the brakes on the nation’s transition to clean energy.
Solar and wind energy pose a problem that traditional forms of fossil fuel generation do not: intermittency. Whereas coal or natural gas power produce a stable, continuous flow of electricity, solar panels only generate power when the sun is shining, and wind turbines only generate power when the wind is blowing. Wind and solar generators therefore are expected to stay idle for portions of the day and year. However, while much of this variation obeys certain trends—solar energy generates the most power when the sun nears its zenith, for example, while India’s wind output peaks during monsoon season—the precise scale of such variation is unpredictable.
When a cloud bank passes above a solar farm or a dying wind makes the turbines go still, grid operators must find a replacement source of energy. The typical solution is to turn to more reliable forms of power generation like fossil fuels that can produce power on demand. Yet because such power plants cannot be brought online or off-line instantly or without cost, grid operators prefer to keep a stream of stable fossil fuel generation on and running for hours or days at a time as a backstop to the vicissitudes of variable renewable energy (VRE).
The downside of this strategy is that, when wind and solar energy hits their peaks, the grid may already be getting all the energy it needs from the fossil fuel backstop. When this happens, VRE generators are consequently curtailed, prevented from selling their energy to the grid.
The immediate environmental cost of curtailment is obvious: clean VRE that could be displacing polluting fossil fuels is prevented from doing so. Furthermore, in the long term, the losses from such curtailment to solar and wind operators’ profits may prevent them from constructing more generation capacity going forward. Curtailment also raises the price of energy for consumers since, unlike coal or natural gas, the fuel for VRE—sunlight and wind—is free. Therefore, every additional megawatt of power generated at these facilities is produced at an extremely low marginal cost.7 Finally, during periods when VRE can meet a majority of energy demand, the fossil fuel plants stabilizing the grid decrease their output by running at lower factor capacities, which usually makes them even more inefficient, expensive, and polluting to operate than usual.8
Without measures to adapt, these problems will only worsen as India grows the share of VRE capacity on its grid from 18 percent today to a target of over 40 percent by 2030 (according to International Energy Agency projections).9 While the total generating capacity available to the country’s grid at peak solar and wind output—say, on a gusty spring day with clear skies—might increase, the floor of fossil fuel generation needed to fill in the gap when VRE approaches nil remains largely the same. This means that increasing amounts of VRE are competing to meet the same energy demand left over after the fossil fuel backstop takes its share—unless the fossil fuel backstop itself can be reduced.
ADDRESSING VARIABILITY THROUGH REGIONAL COORDINATION
While some amount of curtailment is unavoidable at higher levels of VRE, there are several strategies to minimize it. One solution is to ensure that the grid enjoys a more stable and reliable supply of renewable energy in the first place by coordinating energy supply over as wide a geographic area as possible.
Transmission lines connect the whole of India into a single national grid. Responsibility for the electricity that passes through that grid, however, largely rests with the states, most of whom give responsibility for procuring and distributing electricity to state-owned power distribution companies, or discoms.10 Discoms typically purchase the bulk of their power through one-on-one, long-term contracts with particular generating facilities within their own state.
One problem with this approach is that, at the level of a single state, the weather conditions that affect VRE output change rapidly, meaning that supplies of wind or solar energy can peak or fall dramatically in a matter of minutes or seconds. These rapid fluctuations force each state’s grid operators to maintain a larger cushion of fossil fuel generation to cope with unexpected drops in VRE output.
However, the average meteorological conditions experienced across several states are more predictable, with momentary troughs in one area typically balanced by momentary peaks in another. If grid operators were to coordinate to efficiently source and dispatch generation capacity across a larger geographic area, they would be able to draw from a larger and more stable pool of VRE—and thus turn off some of their fossil fuel plants.
Regional coordination also helps diversify the kinds of renewable energy in the grid by allowing the strengths of some states to complement the weaknesses of others. Some states may enjoy plentiful supplies of solar energy but little in the way of wind power, for example, or large amounts of nuclear energy or hydropower but less in the way of VRE (see figures 2a and 2b). With regional coordination, however, solar power concentrated in India’s south and west can be sent north and east during the day and wind power from turbines in coastal states can be sent inland at night. By enabling one region’s surplus to meet another region’s shortfall, VRE curtailment in states with a temporary excess of wind or solar power can be reduced, and states with insufficient VRE can avoid turning on new fossil fuel capacity.11
Finally, regional coordination could make more efficient use of the non-VRE backstop itself. Hydropower from the mountains of northern India, for instance—a relatively on-demand form of renewable energy—could in some cases replace fossil fuels in the lowlands as grid stabilizers over the course of the day. Perhaps most important in the short term, a larger fleet of older coal plants could be replaced by a smaller fleet of newer ones. These newer plants would be capable of more easily and quickly reducing their power output during peak VRE generation, reducing curtailment of wind and solar energy, while also running at more efficient factor capacities during troughs in VRE generation, reducing emissions and costs.12
The benefits of regional coordination are obvious, and several studies have found such coordination to be one of the most important steps in the next decade for reducing India’s curtailment of VRE.13 Nevertheless, despite a proliferation in recent years of forums for trading energy across state lines, states continue to procure the vast majority of their energy from in-state generators.14 For example, as things stand now, if Tamil Nadu were to find itself curtailing a surplus of wind energy in the same moment that adjacent Karnataka were ramping up coal production to meet an energy deficit, the two states likely wouldn’t exchange power. As a result, Karnataka would pay for expensive and polluting coal power, and wind farm operators in Tamil Nadu would shut off their clean energy rather than making a profit. Each state would lose money and pollute more.
One possible obstacle to regional coordination is cost: accommodating an increased flow of electricity between states and regions without congestion requires significant investments in transmission infrastructure.15 However, this investment would likely be more than offset by the more efficient use of generation capacity—and greater use of cheap renewable energy—that increased energy exchange between states would enable.16
The deeper obstacle to regional coordination is precisely that, however much money such coordination might save in the long run, state utilities have even stronger incentives to prioritize shorter-term interests—including by maintaining personalized control over energy dispatch rather than committing themselves to a more independent and centralized system. The reasons for this disconnect lie in a decades-long history of political capture and financial disarray that has left India’s power companies tools of politics first and effective utilities second.
DISTRIBUTION DYSFUNCTION
One of the state’s foremost priorities in India’s early years as an independent country was the provision of electricity to its citizens through the expansion of its grid and investment in new generation capacity.
Fortunately, in many states, cheap coal and hydropower were plentiful. Yet the combination of this natural abundance and the importance of electricity to India’s citizens created a huge temptation for states to give out electricity for free to shore up voters’ support. The power sector quickly became an instrument of mass patronage.17
Before long, as India’s electricity demand grew, states could no longer afford to offer steep electricity subsidies while still paying to lay down new transmission lines and build new power plants. Yet voters had grown used to receiving these subsidies, and politicians had grown used to giving them out to win support from key constituencies. Consequently, rather than raise prices, most states turned to a system called cross-subsidization: charging industrial consumers like factories more for their power and using the profits to maintain subsidies for key voting blocs like farmers.
Yet this strategy, too, soon ran into problems. For one thing, some industrial consumers disconnected from the grid entirely, generating their own electricity from on-location power plants, which meant they were no longer financing consumer subsidies.18 Additionally, by raising the cost of doing business, the cross-subsidy regime likely depressed the growth of the country’s industrial sector itself, and thus its ability to pay inflated electricity bills.19
Commandeered by politicians and severed from the accountability of market forces, the discoms’ operating losses have mounted over the years, forcing them to cut back on investments in generation, the grid, and consumer billing infrastructure. This state of affairs has only led to further losses: even after years of attempted reforms, more than one-fifth of the power sent to Indian consumers today is either lost en route due to poor distribution infrastructure or never billed at all, roughly twice the share in other South Asian countries like Bangladesh or Sri Lanka and four times that in the United States or China.20 Inadequate investment has also led to chronic power shortages, which themselves have in some cases been triaged in favor of key electoral constituencies.21
In principle, both politicians and consumers have incentives to reform the system. Massive losses in the power sector strain India’s public finances, cut into funding for other programs, and ultimately depress economic growth. Meanwhile, consumers may get subsidized electricity, but only in exchange for frequent blackouts. However, apart from a few success stories—including in Gujarat under the leadership of then chief minister Modi—reforms have proved elusive, and a vicious cycle of discom debt and low-quality power has endured.22
One problem is credibility. Investing in power infrastructure often requires immediate increases in prices but may take years to yield any results, so consumers have to believe that governments will actually deliver on their promises of higher quality power in the future. Yet governments often either lack the discipline to think on this kind of time horizon or simply worry that the voters will fail to remain committed to such an arrangement.23 Indeed, many would-be reformers have been ejected from office before their work could be completed, only to see the next ruling party return to the old cross-subsidies system.24 As a result, the condition of most states’ power sectors has remained largely unchanged for decades.
The most comprehensive study to date of the state politics of energy distribution in India, Mapping Power, concluded that there is no single solution to these vicious cycles, or even necessary conditions for success.25 When states enjoy the financial cushion of cheap power or plentiful revenue from industrial consumers, for example, they may be better able to invest in new infrastructure without immediately increasing the prices consumers pay for electricity, but they may also feel less pressure to reform in the first place.26 The electoral landscape also matters: the presence of substantial numbers of urban or industrial customers willing to pay more for high-quality electricity or the absence of well-organized farmers’ movements with incentives to retain subsidies may both be conducive to reform.27 However, states without these conditions have sometimes succeeded in reforming where states enjoying both conditions have failed.28 Meanwhile, states with stable political leadership may be more likely to reform than those experiencing frequent changes between ruling parties, where politicians have less latitude to think beyond the next election.29 Nevertheless, parties in power for several successive administrations can still fail to move the needle.30
The enduring dysfunction of India’s discoms is perhaps one of the most important barriers to the country’s economic development today, with poor-quality power acting as a drag on economic development while the power sector’s disastrous finances soak up public funds that could be used for more targeted investments or welfare initiatives.31 Furthermore, so long as discoms remain financially insolvent, politically compromised, and insulated from the pressure to turn a profit, they will also pose an obstacle to India meeting its renewable energy goals—starting with regional coordination.
One general problem is that even if investments in the transmission infrastructure necessary to engage in regional coordination would be offset by savings over time, discoms often neglect long-term planning in favor of a short-term fixation on stopping the bleeding of revenue losses.32 Whether from a lack of foresight or a simple lack of funds, they might opt for solutions with lower upfront costs that are ultimately more expensive over their lifespan, such as building more coal plants than necessary, for example, rather than making the structural changes necessary to take full advantage of potential new renewable energy capacity. In such cases, solutions like regional coordination that require significant costs and efforts up front but pay for themselves over multiple administrations may never be seriously considered.
Discoms also have more specific motivations to resist regional coordination and the increase in interstate energy trade it would entail. Remaining in exclusive relationships with instate power generators, for example, allows discoms to more easily delay or even default on their payments, a common practice for coping with their frequent revenue shortfalls.33 By contrast, most arrangements for regional coordination would require a timelier settlement of payments—within days rather than months—a prospect that, in turn, would require that discoms maintain more cash on hand than is currently standard practice.34
Similarly, while more centralized and coordinated systems of dispatch would typically require that discoms commit to projecting their energy demand in advance, doing so might make it more challenging for them to use another favored tool of financial triage: simply deciding not to provide electricity when it gets too expensive, and then in some cases choosing to win voters’ support by making special efforts to purchase and dispatch power to certain areas in the lead-up to elections.35
Finally, with few funds to spare, discoms’ tolerance for experimentation may be marginal. Investments in transmission, for instance, may take longer to pay for themselves than anticipated, further straining discoms’ balance sheets in the short term. Discoms also might run afoul of approaches to regional coordination that would require them to pay fines for differences between their projected and actual energy use. And some coordination arrangements might force discoms to pool their reserve generating capacity, potentially requiring states to maintain more robust generating reserves than is common practice in India or risk having other states’ lack of generating reserves prevent them from averting a blackout.36 Although arrangements can generally be designed to limit risk, decisionmakers may nevertheless fear punishment if their efforts at innovation result in conspicuous short-term failures.
More to the point, they may believe that they have little to gain even if the risk were to pay off. This is perhaps the single most important obstacle to reforming the pathologies mentioned above: despite New Delhi’s regular clarion calls for reform, discoms face limited pressure to turn a profit.
The obvious candidates to pressure discoms to improve their operational performance, including through innovations like regional coordination, would be the state electricity regulatory commissions (SERCs). However, many SERCs have seen their institutional capacity, independence, and legitimacy compromised by state governments determined to protect the cross-subsidy regime from being challenged (as one of the SERCs’ primary functions is to set electricity prices), limiting their ability to push discoms to undertake any reforms.37 Consumers, for their part, often see little relationship between the cost of electricity and the subsidized price they pay, which makes them less likely to push politicians to cut the discoms’ supply-side operating losses.38 Finally, while the central government can attempt to create incentives for improved discom performance, it has limited leverage: unless New Delhi is willing to allow the wholesale collapse of a state’s power sector, it must continue bailing out distribution companies regardless of whether the states themselves are to blame for their problems.39 Commentators have noted that past efforts have fallen short by “providing a carrot but not much by way of a stick.”40
In the next stage of its transition to clean energy, India needs efficiently run utilities that are capable and motivated enough to take on risks for the sake of their consumers, not discoms that are tools of patronage first and power companies second. But if states can barely survive under the status quo, more disruptive and structural reforms like regional coordination are unlikely to materialize. Business as usual and reactive policy will likely remain the safest option for individual state politicians and bureaucrats unless the will to reform can be built elsewhere.
BREAKING THE CYCLE
Vicious cycles rarely end of their own accord. In most Indian states, the fundamental problems with the power sector have changed little in the two decades since the major reforms of the 1990s and early 2000s, and they will likely remained trapped in the same pattern of dysfunction unless they are disrupted by an external intervention.
The obvious candidate for such an intervention is the central government. Yet past efforts—like the country’s 2003 Electricity Act, for example, or the 2015 Ujwal DISCOM Assurance Yojana (UDAY) scheme—have typically done little to address the power sector’s core political problems, instead focusing on more technical or bureaucratic reforms like establishing new regulatory agencies or restructuring utilities’ debts.41 Such limited efforts have had limited results. UDAY, for example, the most recent major initiative, has had no discernable effect on a key metric of discom performance: the proportion of energy sent to customers for which no revenue is collected, a figure known as aggregate technical and commercial losses (see figure 3).42
Therefore, an alternative approach is necessary, one that begins with state-level rather than federal legislation and that sees the building of political will as a prerequisite to undertaking technical reforms.
The ideal solution might follow in the footsteps of the 2017 Goods and Services Tax, a rare instance in which India’s central government and the states came together to implement a sweeping overhaul of a contentious economic issue over which both groups had jurisdiction.43 However, the tax overhaul was in some ways far more straightforward to negotiate than a reform of the states’ power sectors, which would likely require more nuanced efforts to tailor technical proposals and political strategies to the idiosyncrasies of particular state contexts.44 Furthermore, the central government might have ruined any chance at repeating its success by recently reneging on its commitments to compensate the states for their losses under the new fiscal scheme, an outcome that may have created lasting distrust between the two sides.45
Another solution would begin not with all of India but instead with lower-hanging fruit: a coalition of willing, reform-minded states. The primary candidates would be those ruled by members of Modi’s own party, the BJP—a plurality of states accounting for 38 percent of India’s GDP and 40 percent of its population (see figure 4).46 Modi’s unparalleled national popularity and unrivaled dominance within the ranks of the party give him substantial formal and informal influence over state BJP leaders, which could be used to convince them to adopt a more penetrating set of reforms to their power sectors with a degree of political will that past efforts lacked.47
First, Modi could focus on the narrower task of encouraging—or, in the case of BJP-led states, actively pressuring—state governments to step up their engagement with interstate energy markets. These transitions could entail a vast range of possible governance options, from schemes largely retaining state primacy over energy dispatch to more market-based and centralized systems.48 For example, at first, states might choose to continue managing much of their scheduling and dispatch unilaterally, offering only a smaller share of their total fleet of generators up for coordination with other states. Eventually, as states build trust in and capacity for the system and see the benefits of increased cooperation, they might gradually move to a more centralized and market-based system in which state authorities play less of a role.49 This proposal would likely be an easier sell than a direct shift to a national, purely market-based system of power dispatch, as India’s Central Energy Regulatory Commission has recently proposed.50
However, an explicit attempt at regional coordination would, for all the reasons discussed above, be best complemented by a second level of reform focused on fixing the distribution companies themselves. Several policies have proven promising for unraveling the cross-subsidy regime. Participating states might upgrade their feeders, for example, so as to better monitor and curb the energy use of those receiving subsidized electricity, an effort the central government has offered to help fund through its most recent scheme for discom reform.51 They might also replace electricity subsidies with direct cash transfers so that welfare to key constituencies no longer directly prevents the price of electricity from reflecting the cost of supply, a policy that has already proved itself successful in India for reforming subsidies for liquefied petroleum gas canisters.52 The reform package could even eschew specific policies in favor of broader objectives, such as maintaining an independent energy regulatory commission, the routes to which could then be worked out within particular states.53 Yet whatever the precise design, if these reforms were undertaken, as power distribution gradually began to develop a degree of financial stability and independence from individual politicians’ priorities, innovations like regional coordination would grow more attainable.
Why would this approach succeed where past efforts have failed? For one thing, linking a coordinated agenda for state discom reform to a high-profile, ruling coalition–sponsored national initiative would go a long way toward addressing states’ credibility problem, leveraging Modi’s formidable reputation to convince voters that improvements in quality would actually accompany changes in the prices they pay. Additionally, a more comprehensive, mutually reinforcing package of reforms—including the encouragement of regional coordination, which would by necessity foster a certain amount of discipline and independence if successful—may have more staying power than any one policy in isolation.54
As important as the legislation itself would be, a change of mindset is perhaps most important. This would entail having the Prime Minister’s Office display adequate resolve to use Modi’s prominence both nationally and, more specifically, within the halls of power in BJP-ruled states to ensure that state governments actually implement their reforms—and that state leaders believe they have more to gain from a functional but independent power sector than a captured but broken one.
Of course, such an approach would likely require that Modi set his sights lower than a comprehensive national initiative and instead begin only with a few states, such as those with strong BJP majorities where he wields the greatest influence or renewables-intensive states like Tamil Nadu that would have the most to gain from regional coordination arrangements enabling them to sell their electricity surplus.
Yet even beginning with a smaller coalition would be enough. A critical mass of states proving the feasibility and benefits of reform would allow investors to vote with their feet and, in turn, would help voters to see the benefits of a better way, encouraging them to exert pressure on their own representatives. These regional arrangements could then gradually expand and deepen, eventually setting the stage for a truly national arrangement.55
Alongside its role as coordinator for the states, the Indian central government—as well as foreign donors and investors—will also have a clear role to play in national projects that can help make both discom reform in general and regional coordination in particular more attractive for states.56
One important area, particularly if energy trade between states increases, would be assisting with investment in transmission infrastructure, including the continued construction of “green energy corridors” capable of carrying large amounts of energy from one region to another.57 The central government could also help enable discom reform and clean energy adoption by bailing out and shutting down inefficient and polluting coal generators early; renegotiating expensive, long-term power purchase agreements; and investing in the technology to help grid operators more accurately predict the supply of VRE and engage with the logistics of market-based, coordinated dispatch.58
Yet while such initiatives—or the myriad regulatory changes necessary to adapt to a new, renewables-heavy energy landscape—are necessary, they are not sufficient absent reform to the discoms themselves.
CONCLUSION
While most of India’s actions to mitigate climate change so far have focused on development rather than sustainability concerns, this may change as the impacts of climate change grow more obvious. Mitigating climate change has often been described as a public good insofar as action by one country to curb its emissions benefits all countries.59 However, these benefits (in essence, foregone harms) do not and will not accrue to all countries equally: staying within the threshold of 2 degrees Celsius in global temperature increases targeted by the international community would still translate into rises in temperature far beyond 2 degrees in some countries—including in much of India.
Different countries in turn will enjoy vastly different abilities to adapt to the climactic disruptions they do experience. Given the country’s high levels of poverty, reliance on agriculture (which depends in turn on the increasingly fragile monsoon season), and large tracts of land in areas susceptible to rising sea levels or drought, India is one of the countries in the world most vulnerable to climate change.60 Therefore, as crop yields decline, sea levels rise, and diseases like malaria and dengue fever encroach on warmer climes, India may grow less willing to defer climate mitigation in exchange for short-term economic gains and an increased risk of catastrophe in the future.61 At this point, climate policy as an end in itself may assume a more prominent role on the national stage—thereby making the dysfunction of the discoms even more of a political liability.
Indeed, discoms’ dysfunction will likely sabotage enablers of clean energy beyond regional coordination as well. The same obstacles to intelligent investment in transmission infrastructure posed by the lack of fiscal space and capacity for long-term planning will likely present challenges for even more complicated and context-dependent decisions about investment in energy storage, for example, or when to shut down, upgrade, or replace older coal plants.62 The political rewards of controlling power dispatch, meanwhile, are already creating incentives to prevent the buildout of small rooftop solar panels—a sector that the Indian government hopes will grow to 40 gigawatts by 2022—since such resources would typically sell their energy directly to other consumers, thereby bypassing the discoms’ system of cross subsidies.63 In other words, unless India reforms its discoms, regional coordination will only be the first of many casualties in its green transition.
The timing for reforming India’s power sector is propitious. The BJP has several years before the next general election, and reform is typically best done well in advance of an election when time remains in an administration for the benefits to materialize.64 Additionally, the country’s recovery from the coronavirus pandemic presents a moment of crisis that the central government has already seized to enact painful reforms in other areas, such as privatization of public sector banks.65
Of course, the more organic approach to reform described above would require that Modi depart from his usual governance style, which has been large-scale, top-down, and centralized.66 Much of Modi’s popularity rests on efforts like his sweeping flagship welfare projects, which could be relatively easily designed and deployed from the Prime Minister’s Office without the need to gain wide buy-in from state governments or engage with the vagaries of institutional reform.67 By contrast, a state-based approach to power sector reform—even one that began only with BJP compatriots—would require flexibility, patience, and a willingness to engage with the specifics of each state context.
Fortunately, Modi and the BJP have strong incentives to try. Indeed, Modi’s prominent embrace of renewable energy and targeting of ambitious milestones is a sign of his faith that a buildout of renewables will translate into an electoral payoff nationally, just as his push for renewables as chief minister of Gujarat paid off for him there.
One incentive is that the power sector is a colossal strain on public finances and a drag on economic growth, which are important considerations for a ruling party whose popularity rests in large part on the promise of prosperity. Reforming discoms would also greatly increase the quality of electricity to India’s households, which may be a natural extension of Modi’s recent, largely successful campaign to electrify 100 percent of India’s villages.68 Energy security might be another motivation: reducing India’s substantial reliance on coal and gas imports by developing a domestic renewable energy manufacturing industry would accord with Modi’s push for Atmanirbhar Bharat (“self-reliant India”).69
This is to say nothing of issues that have not yet generated much electoral momentum but could be tapped into by a political entrepreneur as deft as Modi, such as the health benefits of clean energy. Pollution from coal plants is one of the primary drivers of India’s dismal air quality, for instance, which is estimated to lead to a staggering 2.5 million premature deaths each year.70
Contradictions between business as usual in India’s power sector and its green energy aspirations will only become more obvious as the country’s share of VRE generation capacity increases. Indeed, one study by the prominent Energy and Resources Institute found that, in the absence of flexibility-enabling changes such as regional coordination or battery storage, India’s target of 450 gigawatts of renewable energy by 2030 would be entirely unrealistic.71
By contrast, reforming now—while there is still time and flexibility to plan for high shares of renewable energy rather than simply react to an imminent crisis of curtailment—would let India not just continue the meteoric growth of renewables but accelerate it.
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