Green energy and just transition

This article originally appeared in Financial Express

Coal-rich states in the country can take a cue from Odisha’s new renewable energy policy, which is geared to ensure a just energy transition for the state.

By Nikunja B Dhal and Chandra Bhushan

Odisha has been playing a central role in meeting the country’s growing energy needs. The state is the largest coal producer, producing about 185 million tonnes of non-coking coal in 2021-22. This is sufficient to fuel about a quarter of the country’s coal-based power generation. But Odisha is also one of the most climate-vulnerable states, with extreme weather events like cyclones, heat waves, floods and droughts taking a significant toll on the livelihoods and the economy every year.

To balance the imperatives of energy and climate change, thegovernment of Odisha has unveiled a new renewable energy (RE) policy during the Make in Odisha Conclave held recently Bhubaneswar, with a clear ambition and objective of ushering in a just energy transition in the state.

Increased adoption of RE has become vital for the state due to multiple reasons:

  • First, the government of India has committed to a net-zero target by 2070. This means that coal production and consumption would have to decline significantly over the next two to three decades, impacting the lives and livelihoods of coal-dependent communities. Therefore, Odisha must plan for the coming energy transition to safeguard the interests of vast numbers of people in its coal and industrial districts
  • Second, Odisha is among the country’s leading industrialized states, and a continuous increase in energy demand from all sectors is expected in the coming years. There is an apparent demand for RE from electricity distribution companies (discoms) and industries due to Renewable Purchase Obligations (RPOs). But the state currently accounts for just 0.55% of the country’s RE capacity (excluding hydropower) and imports renewable power to meet most of the existing RPO requirements. Without a rapid RE scale-up within the state, RE imports will increase several times in the coming years as RPO targets reach closer to 45% by 2030
  • Third, it is highly dependent on the mining and metal sector for growth and jobs. Currently, 39.5% of the state’s gross value addition comes from the industry sector, the highest in the country. Moreover, the global mining and metal sector is transitioning to renewable energy and green hydrogen to reduce its carbon footprint and meet net-zero targets. Odisha, therefore, has an opportunity to become the hub of the green mining and metal sector by encouraging its industries to install captive RE plants within the state
  • Lastly, sectors like green hydrogen, green ammonia and energy storage are developing rapidly. Given the strong manufacturing base, Odisha has the opportunity to grow these green sectors to support the next phase of industrialization, creating new employment opportunities as well as boosting economic activity and income. But, so far, the RE sector has not taken off in the state due to certain policy challenges and perceptions. For instance, there is a misconception that the state has low solar and wind potential. This misconception has been created due to gaps in potential estimation, which the Odisha Renewable Energy Policy, 2022 (OREP-2022) is addressing on an urgent basis. Likewise, the policy challenges have also been addressed in the new policy

Overall, a combination of factors has led to a scenario that it is cheaper for discoms and industries to buy renewable power from states like Gujarat and Rajasthan than to install RE projects within Odisha. Therefore, one of the key aims of OREP-2022 is to bridge the cost delta by providing best-in-class incentives to attract investors to develop the vast untapped RE potential of the state.

The policy includes several exemptions on duties, charges and surcharges for 15-20 years duration, along with investment facilitation and single window clearances. In addition, several measures have been introduced to ease land allocation for RE project development, including priority allocation under the state’s land bank scheme, provisions for aggregation of private land, and exemptions from the land ceiling.

The policy pays special attention to certain high-potential technologies, such as pumped-storage hydro and small-hydro, for which the requirement of free power supply to the state has been waived for projects contributing to the state’s RPO. In addition, given the paucity of large wasteland tracts, the policy pays special attention to developing solar rooftops, floating solar, and distributed solar projects. Furthermore, wind power is proposed to be promoted through feed-in-tariff, and upcoming technologies like green hydrogen and ammonia are also being promoted through various incentives.

Meanwhile, economic diversification, and the need for skilled human resources for new and emerging sectors, would be vital to ensure a just transition of the coal districts of the region. Odisha’s new RE policy addresses this by including explicit measures for creating a skilled and semi-skilled workforce for the RE sector. Existing educational infrastructure in the state is planned to be upgraded to provide training on RE component manufacturing, installation, operations and maintenance. Most importantly, to maximize RE job creation in the state, the green energy manufacturing sector has been included as a ‘thrust sector’ in the state’s new Industrial Policy Resolution (IPR), which aims to transform Odisha into the most “Preferred Investment Destination in India”.

Overall, OREP-2022 and IPR are timely steps taken by the government to boost green investments in the state and decarbonise the energy sector. These policies will also support balanced RE growth in the country and help meet the nation’s RE and Net-Zero targets. But, most importantly, they will help ensure a just energy transition in coal regions over the next decades.

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Chandra Bhushan is one of India’s foremost public policy experts and the founder-CEO of International Forum for Environment, Sustainability & Technology (iFOREST).

Nikunj B Dhal
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