The Finance Minister’s Budget speeches have been giving increasing emphasis to green growth.
This has followed PM Modi’s announcement at COP26 that India would have 500GW fossil fuel-free capacity by 2030 and become net zero by 2070.
Affirmation of the commitments in the Budget speech would send the right signals.
Investors need to appraise options through this prism for major investment decisions.
This would prevent sub-optimal, lumpy, capital investments in fossil-fuel economy
Renewable Energy (RE) capacities are being created by private investment with declining costs in a competitive industry structure.
RE, combined with storage for round-the-clock supply, is now cheaper than new thermal power.
RE now requires large-scale storage as its generation is intermittent and inflexible whereas the demand to be met is variable.
An ambitious plan for creating storage by the invitation of bids should also be in the Budget Speech.
This would get potential investors to prepare for the large storage market that would be created
Both river and off-river hydro pump storage are attractive options.
The technology of concentrated solar thermal energy being stored in molten salt to run a conventional thermal turbine has also become mature and cost effective.
These storage projects have a large capital cost, a very long life and nominal running costs.
The bid prices would be considerably lower if long-term rupee debt at fixed rates is made available to potential developers.
Conceptually, government needs to assume some contingent liability for long-term fixed interest rate lending.
India can become a global leader in large scale grid storage.
The production of solar panels with full value addition in India over the next five years is an achievable goal.
The PLI (Production Linked Incentive) policy instrument should be crafted to get investors to put up plants with full value addition in India
With assured offtake at a price which gives returns, the investment would become risk free, resulting in a good investor response.
This government procurement would not be in contravention of WTO commitments.
Repeated bids should be used to create a competitive industry structure as has been done for development of grid scale solar projects and get lower prices through competition.
The National Hydrogen Mission is positioning us well for the use of green hydrogen produced at a globally-competitive cost for downstream carbon-free production.
This gives us an opportunity to leapfrog and become a competitive green manufacturing hub.
We need to welcome, rather than oppose as a new non-tariff barrier, the new European tax on import of goods depending on the carbon content of the entire value chain going into its production, the CBAM (Carbon Border Adjustment Mechanism)
Firms, especially MSMEs, exporting to Europe would gain by government support in reducing carbon footprint.
The easy part would be mandating real-time supply of carbon-free electricity, albeit at a higher price to industrial customers who demand such electricity.
A small firm could buy carbon-free electricity for production and EV charging stations could use such electricity making the logistics of supply-chain carbon-free.
For capital investments, a dedicated financing facility may be created.
Where necessary, government could provide credit guarantees and/or an interest subsidy
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