Modi and Obama Backstop Indian and Global Climate Action

Efforts by the Indian and U.S. leaders could help bend the greenhouse gas emissions trajectory for the world’s fastest-growing economy

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Modi and Obama Backstop Indian and Global Climate Action
U.S. President Barack Obama shakes hands with India's Prime Minister Narendra Modi [left] during a meeting in the Oval Office of the White House on 7 June 2016.
Photo: Mandel Ngan/AFP/Getty Images

The leaders of the world’s two biggest democracies—the U.S. and India—pledged at a White House meeting yesterday to complete their countries’ ratification of the Paris climate agreement by the end of 2016—a move that would bring the treaty into force before President Barack Obama leaves office. Obama and Prime Minister Nahendra Modi also announced specific actions on energy and climate in a joint statement, including: 

  • Initiation of preparatory work on a 6-reactor, 6.6-gigawatt nuclear power complex in India to be built by Westinghouse Electric, Toshiba Corp.’s U.S.–based nuclear engineering subsidiary.
  • A resolution to jointly broker an international agreement by the end of this year on the phaseout of hydrofluorocarbon (HFC) refrigerants, which are potent greenhouse gases.
  • New financing programs to catalyze renewable energy investments in India.

Phasing out HFCs could take a big bite out of projected global climate change this century, according to Andrew Light, a former advisor to U.S. Department of State on climate change policy and India and a fellow with the Washington, D.C.–based World Resources Institute. HFCs warm Earth’s atmosphere thousands of times more, molecule-for-molecule than CO2. Light says amending the Montreal Protocol to end their use by 2030 could, “avoid half a degree Celsius of warming by the end of the century.”

Reactor construction by Westinghouse, meanwhile, would culminate years of work to bring to India Western nuclear technology and financing (first approved for India by the U.S. Congress in 2008). The joint statement said engineering and site design for six AP1000 reactors would start “immediately” in the state of Andhra Pradesh. Obama and Modi set a June 2017 deadline for the U.S. Export-Import Bank to finalize a financing package. 

Nuclear remains a long road for India, however. India has been trying to grow its nuclear power sector since the 1950s, and currently has just 5 GW of capacity generating about 3 percent of the country’s power. Reactor projects can take a decade to complete. Light at WRI says it would take a “huge acceleration in construction” for nuclear power plants to meaningfully contribute to India’s power supply by 2030. Plus, adds Light, “costs have to make sense.”

Solar is now India’s energy source to beat on both cost and speed. Solar installations doubled last year and could double again this year. By 2020 India’s solar farms could be generating more gigawatt-hours of energy than the nuclear sector.

Much of the credit goes to the ambition of Modi, who has championed rural electrification and renewables since his election in 2014. Under Modi, reverse auctions and other supportive policies have cut solar energy costs to below 5 rupees (7.5 U.S. cents) per kilowatt-hour—lower than India’s average wholesale power rate. Indian energy minister Piyush Goyal recently stated that solar farms are cheaper than building new coal-fired power plants

Modi pledged in 2014 to boost India’s non-hydro renewable power capacity to 175 GW by 2022, including 60 GW of utility-scale solar farms and 40 GW of rooftop solar. At the time many experts called those goals wildly ambitious, but an increasing number express confidence that the utility-scale solar goal  at least is achievable. 

India will meet its 12 GW goal for the current fiscal year (which ends in March 2017), predicts Ajay Mathur, director general for The Energy and Resources Institute (TERI), a New Delhi–based NGO. “The spadework for that capacity is already done,” says Mathur, noting that government auctions have secured 15-GW worth of commitments.

What India needs most to sustain its renewable energy upswing, says Mathur, is access to cheap capital. Cheaper capital is one reason why reverse auctions elsewhere are yielding unsubsidized utility-scale solar bids twice as cheap as India’s.  WRI’s Light agrees: “The absolute key for India to hit its 2022 targets is cost of capital and finance.”  

Investment in non-hydro renewables in India rose 22 percent last year to US $10.2 billion, according to the United Nations Environment Programme. But that sum is dwarfed by the $102.9 billion that China invested. 

Modi and Obama’s meeting produced two renewable energy finance programs that could help. They appear small, but White House spokesman Brian Deese told reporters yesterday that they could facilitate much larger infusions of private and institutional capital. 

The Center for American Progress’ ClimateProgress blog, citing Deese, writes that a new $20-million U.S.–India Clean Energy Finance initiative will provide early-stage “risk capital” intended to mobilize up to $400 million in private capital by 2020. Another $40-million fund targeted primarily to microgrid projects in unelectrified villages, the U.S.–India Catalytic Solar Finance Program, promises to catalyze projects worth up to $1 billion.

Speaking of unelectrified villages, Modi’s government claims to be crushing his promise to give all citizens access to electricity by 2022. The International Energy Agency reported last year that 240 million people in India lack access to electricity, and by the Indian government’s count there were 18,452 villages lacking grid connections in April 2015.

But the number of powerless villages is in free-fall according to the government’s online electrification dashboard. It claims that power grid extensions have already electrified over 7,000 villages since last April, while microgrids have electrified another 558 villages.

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