Properly Defining “Green Electricity” is Key to India’s Broader Energy Transition

Executive Summary

• The lowest hanging fruit for decarbonisation is adding more wind and solar power, which are cost-competitive compared with other alternatives.
• In addition to globally leading targets to scale up wind and solar power, India has ambitious plans for using electricity for new services, including mobility (electric vehicles) and green hydrogen production for industrial use. Such use would happen even before India’s electricity grid is carbon-free. Thus, a key question is how “green” will such services be.
• Making the grid greener has two challenges. The first challenge relates to scaling up wind and solar power. As wind and solar capacities increase, grid integration will become increasingly difficult because of the well-known challenge of renewable energy’s (RE) intermittency, for which one solution would be to add storage. Unfortunately, storage is likely to be more expensive in the foreseeable future than many models and public documents estimate for two reasons. One, the upfront costs associated with grid-scale batteries are likely to be much higher than estimates often calculated based on the cost of cheaper automotive batteries. Two, most models fail to capture battery usage patterns or duty cycles and instead use an expected or ideal usage pattern. Such calculations typically assume almost full daily usage as part of calculating the levelised cost of energy (LCOE). Another option for increasing RE output is oversizing RE capacity with expected strategic (temporary) excess. This is cost-effective up to a point, but it also means India must add even more RE capacity.
• The second challenge with wind and solar power (without storage) is that their variability and performance in a portfolio of supply can significantly reduce the “greenness” of grid-based electricity powering electric vehicles (EVs) or the production of hydrogen. Pure matching of hydrogen production or EV charging to times and locations when there is incremental green power becomes expensive or limiting. Furthermore, instead of matching, current green energy and green hydrogen norms in India are based on average-basis accounting over a long period, termed banking. This means over- and under-generating RE at different times while still relying on traditional supplies, predominantly coal, for non-direct–RE periods. Systems based on banking can reduce the growth of carbon dioxide (CO2) emissions through offsets—that too only in the short run—but cannot eliminate emissions.
• Policies and frameworks should be updated to ensure electricity services are truly green to the extent possible. This requires policies where granular additionality of green supply is the key criterion and is measured across a short timeframe and not just averaged over time. Such measurements need rigorous norms and scientific tools, such as grid models, for verifying and ease of developer planning.
• Proper frameworks are essential not just for reducing CO2 emissions but also for compliance
  with green norms that may be set by other countries, banks, or third parties, which would thus impact exports or access to climate funding.