Why India needs balanced renewable energy growth

India is beefing up 500GW of non-fossil fuel capacity by 2030. But lopsided regional development of the clean energy sector could lead to grid congestion and opportunities going in the hands of too few.

In 2022, at the 26^th Conference of Parties (COP26) to the United Nations Framework Convention on Climate Change (UNFCCC), India set a target for 500 GW of non-fossil fuel capacity by 2030[1]. As of December 2024, we’re nearly halfway there, with 209 GW of capacity installed[2]. In addition, according to the Central Electricity Authority (CEA)’s quarterly report on ongoing renewable energy (RE) projects, another 79 GW is under construction and 95 GW is in other (upstream) stages of development[3]. In other words, India is well on its way to reaching the envisioned 2030 target.

However, the gross capacity addition figures hide a rising regional disparity in capacity additions of RE. As of December 2024, seven states in south and west India make up over 80 per cent of India’s RE-installed capacity[1]. In descending order, they are Rajasthan, Gujarat, Tamil Nadu, Karnataka, Maharashtra, Andhra Pradesh, and Telangana. Further, just two of these states — Gujarat and Rajasthan — make up 37 per cent of the total.

Continuing the uneven regional development of energy resources would raise three main issues — technical, financial, and economic.

Transmission investments and costs

A key concern with putting all your eggs in one basket in the context of electricity generation is grid congestion. As more and more capacity is built in the same region, grid congestion becomes more likely. If left unchecked, this can lead to the curtailment of power from otherwise perfectly operational plants.

To prevent this from happening, additional investment in transmission infrastructure is required. In December 2022, the CEA published a report on the transmission system requirement to integrate 500 GW of RE by 2030. According to it, the tentative cost of building this transmission system is Rs 2.4 trillion (Rs 244,200 Cr)[5]. These investments will follow the geographic trend in capacity addition — accruing largely to Gujarat, Rajasthan and a few Southern states.

Further, transmission investments in these areas are already creating pressure on land sources, such as agricultural land and areas populated by the Great Indian Bustard (GIB). Regarding the latter, a 2023 factual report by the Ministry of Environment, Forests and Climate Change stated that collisions with power lines are a key factor for adult mortality in the species[6]. The report goes on to state that there is a “high density of transmission lines because of the impetus on renewable energy production in GIB habitats in Rajasthan and Gujarat”.

Transmission losses also make the endeavour inefficient. Transmission losses and associated costs rise linearly as we increase the distance between the point of generation and the point of consumption. In a nation as vast as India, the losses associated with transmitting energy (say from the West to the East) can be substantial. Even with immense transmission investments, a degree of inefficiency would still be present in the system.

Financial concerns

The cost of acquiring electricity from generators is passed on from transmission companies (transcos) to distribution companies (discoms). In many states, discoms continue to be owned and operated by subnational governments. If a state’s exchequer is financially stressed, energy security can come under duress.

This is precisely the case in eastern India. Thus far, the eastern region states have drawn royalties from coal production. As we move away from thermal energy to renewable alternatives, these royalties will decrease, while purchases from RE centres in other states rise. Mitra and Chandra (2023) illustrate the expected result of these two forces. According to their research, a state such as Chhattisgarh may see its budget deficit rise to as much as 17.1 per cent by 2030 — substantially higher than the limit posed by the Fiscal Responsibility and Budget Management Act, 2003)[7]. Needless to say, these dual pressures can significantly hamper the fiscal capabilities of a state.

Green growth and state economies

The final set of concerns has to do with the local economic effects of lopsided RE growth. In the last decade of RE growth, nearly 80,000 jobs were created in the RE sector (utility-solar, wind and rooftop solar)[8]. However, given roughly 70 per cent of the capacity addition was carried out in just the aforementioned states[9], it stands to reason that these jobs also largely accrued to the same states.

In addition, these states are also emerging as centres of industries that are downstream of RE. Green hydrogen hubs are already being established in Karnataka and Tamil Nadu[10] [11]. In the latter case, the project (an investment of Rs 36 billion) is set to create 1,000 jobs in the Thuthukudi area.

The implication is that the growing disparity of RE capacity can translate into lopsided development across regions. In such a scenario, the benefits of green growth would be localised to just a few states, undermining the ‘just-ness’ of India’s energy transition.

As we rally for an energy transition ahead of The International Day of Clean Energy, celebrated this week, it is worth underlining that India must move away from coal-fed power plants in eastern India to meet its decarbonisation goals. But as Mitra and Chandra (2023) point out, climate change mitigation has become a national level issue with states being kept out of the decision-making process[12]. The outcome is a mad rush by policymakers to court developers and attract RE (and downstream industry) to their states. Instead, these

threats suggest the need for a more co-operative federalist approach to tackle climate change while keeping technical, financial and economic outcomes in mind.

_{[5] Central Electricity Authority, Government of India. 2022. “Transmission system for integration over 500 GW RE capacity by 2030”. https://cea.nic.in/wp-content/uploads/notification/2022/12/CEA_Tx_Plan_for_500GW_Non_fossil_capacity_by_2030.pdf}

^{[6] Ministry of Environment, Forests and Climate Change, Government of India. 2023. “Factual report on the Great Indian Bustard recovery programme”. https://greentribunal.gov.in/sites/default/files/all_documents/Report%20byNo.385-2019..pdf}

^{[7] Sanjay Mitra and Rohit Chandra. 2023. “Deep decarbonization and regional equity”. National Institute of Public Finance and Policy. https://nipfp.org.in/media/medialibrary/2023/10/WP_402_2023.pdf}

^{[8]Kuldeep, Neeraj, Joshi, Madhura et al. 2019. “Powering Jobs Growth with Green Energy”. Council on Energy, Environment and Water, Natural Resources Defense Council, and Skill Council for Green Jobs. https://www.ceew.in/sites/default/files/CEEW-Jobs-Issue-Brief-2019-2-web-24Jul19.pdf}

^{[9] Ministry of New and Renewable Energy, Government of India. “State-wise cumulative installed capacity”. https://mnre.gov.in/year-wise-achievement/}

_{[10] Chauhan, Bala. 2022. “Karnataka plans India’s first green hydrogen cluster in Mangaluru”. The New Indian Express. https://www.newindianexpress.com/states/karnataka/2022/Oct/31/karnataka-plans-indias-first-green-hydrogen-cluster-in-mangaluru-2513358.html}

^{[11] Yadav, Subhash. 2024. “Sembcorp industries developing Rs 36,000 crore green hydrogen project in TN”. Iamrenew. https://www.iamrenew.com/green-energy/sembcorp-industriesdeveloping-rs-36000-crore-green-hydrogen-project-in-tn/}

^{[12] Sanjay Mitra and Rohit Chandra. 2023. “Deep decarbonization and regional equity”. National Institute of Public Finance and Policy. https://nipfp.org.in/media/medialibrary/2023/10/WP_402_2023.pdf}