Editorials/Opinions Analysis For UPSC 31 March 2023

Editorials/Opinions Analysis For UPSC 31 March 2023

Contents

1. A resilient supply chain could make India a wind manufacturing hub
2. Implementation of Hydrogen Mission is crucial

A resilient supply chain could make India a wind manufacturing hub

Context

According to the Global Wind Energy Report 2023 of the Global Wind Energy Council, India has the potential to develop into a major hub for wind energy manufacturing worldwide. (GWEC).

Relevance

GS Paper-3: Economic Development, Biodiversity, Environment

Mains Question

Discuss the obstacles that must be overcome in order to overcome the potential for growth in the Indian wind energy sector. (250 Words)

Major highlights

• According to the report, India needs to develop a plan for a dependable raw material supply chain in order to strengthen its position in the wind energy manufacturing industry.
• India is the world’s second-largest market for gearbox manufacturing and the second-largest supplier of blades and generators in the Asia-Pacific (APAC) region, with an annual manufacturing capacity of 10–12 GW for wind turbine generators.
• As a result of recent global events, such as the diversification of supply chains by American and European turbine OEMs to ensure supply security in the wake of COVID-19, India has taken a more significant position in the world’s wind supply chain.
• India needs a dependable raw material supply chain, including rare earth metals and non-standard steel, as well as for specialised tasks like casting and forging, in order to maintain its leadership position in the wind energy manufacturing industry.
• The report urges maintaining the current import duty exemption for machinery and parts made of non-Indian materials like balsa wood and pultruded carbon fibre.
• The report also emphasises the significant function that MSMEs, or micro, small, and medium-sized enterprises, play in the Indian wind manufacturing industry.
• For businesses involved in the onshore wind industry and those looking to enter the offshore wind manufacturing industry, the government should take into account targeted production-linked incentives.

Note:

• Wind turbines built and positioned on the land are referred to as onshore wind power.
• Offshore wind power is the term used to describe wind farms constructed on shallow water, typically in the ocean.

Favorable conditions for the generation of wind energy in India:

• Ample land is available: India has a sizable landmass with a lot of room for open space, which makes it a good location for large-scale wind power projects.
• Favorable wind conditions: India is perfect for wind power generation due to its high wind speeds in coastal regions and some interior regions.
• Government support: Through a number of policies and programs, the Indian government has actively promoted renewable energy, including wind power.
• Growing demand: Economic expansion, urbanization, and industrialization are all contributing factors to India’s rising demand for electricity. In order to meet the rising demand for electricity, wind power can be used.
• Cost competitiveness: Wind energy is becoming more and more affordable in India, making it a viable alternative to more conventional energy sources.

Issues Associated:

• Land Acquisition: Land acquisition for wind power projects can be difficult, particularly in densely populated areas where land is expensive and scarce.
• Financing: Because of their high upfront costs and lack of long-term financing options, renewable energy projects can be difficult to finance.
• Grid integration: Due to the intermittent nature of wind, which can affect the grid’s stability, integrating wind power into the national grid can be difficult.
• Infrastructure: Building the transmission lines and other wind power-related infrastructure in remote and inhospitable locations can be difficult.
• Changes in government regulations and policies may leave investors uncertain, which could discourage investment in the industry.
• Technological developments: Due to the wind energy industry’s rapid technological development, it may be challenging for current projects to maintain their competitiveness.
• Another significant issue facing the Indian wind energy sector is the high cost of capital. Due to India’s high borrowing costs, wind power project financing may be prohibitively expensive.

The government has taken a number of initiatives to support wind energy:

• National Wind Energy Mission: The National Wind Energy Mission was established by the Indian government in 2014 to hasten the growth of wind energy in the nation. By 2022, the mission hopes to generate 60 GW of wind energy.
• Competitive Bidding: To lower the cost of wind power generation, the Indian government has instituted competitive bidding for wind power projects. As a result, the price of wind energy in India has decreased.
• Generation-Based Incentives: To promote the production of renewable energy, the Indian government offers generation-based incentives (GBIs) to wind power developers. Developers receive GBIs based on the volume of electricity produced.
• Grid Connectivity: To enhance grid connectivity for wind power projects, the Indian government has been working. To ensure the smooth transfer of renewable energy to the grid, the government has created a designated green energy corridor.
• Research and development: In order to advance technology and lower costs, the Indian government has been spending money on research and development in the wind power industry. The National Institute of Wind Energy (NIWE) was established by the government to advance industry research and development.

Steps to Take:

• To increase the effectiveness of wind turbines and lower costs, there is a need for ongoing research and development. The Indian government ought to keep funding the field of wind energy research and development.
• India’s offshore wind energy potential is substantial and largely unrealized. To capitalise on this potential, the Indian government needs to develop offshore wind energy projects.
• The reliability and consistency of the power supply can be increased by using hybrid energy systems, which combine wind power with other renewable energy sources like solar power or energy storage. The development of hybrid energy systems in India should be encouraged by the government.
• For wind power to expand in India, grid connectivity and stability must be improved. To ensure the seamless integration of wind power into the grid, the Indian government should continue to invest in the development of transmission infrastructure and energy storage systems.

Implementation of Hydrogen Mission is crucial

Context

• India has set goals to achieve Net Zero by 2070 and energy independence by 2047.
  • A key component of India’s energy transition is increasing the use of renewable energy across all economic sectors.
  • Green hydrogen is regarded as a promising substitute for making this transition possible.
• Hydrogen can be used for clean transportation, long-term storage of renewable energy, and possibly even decentralised power generation, aviation, and maritime transportation. It can also be used to replace fossil fuels in industry.
  • As a result, the National Green Hydrogen Mission was established last year with lofty goals.

Relevance

GS Paper -3: Climate Change, Green Energy, Hydrogen Mission

Mains Question

The Green Hydrogen Mission is what? What problems do these solutions potentially address? (250 Words)

Mission for Green Hydrogen:

• Green hydrogen is a potential replacement for fossil fuels and can be used for electricity generation, ammonia production, fertiliser production, steel production, and transportation (cars, trucks, trains, ships, and aircraft).
• Last year, the National Green Hydrogen Mission received approval, with the following goals:
  • Establishing India as a major global producer and supplier of green hydrogen.
  • Development of export markets for green hydrogen and its byproducts
  • Less reliance on imported feedstock and fossil fuels
  • Building up domestic manufacturing capacity
  • Attracting capital and commercial opportunities for the sector
  • Creating opportunities for economic growth and employment
  • Aiding R&D initiatives
• The following mission results are anticipated by 2030:
  • Creation of a green hydrogen production capacity of at least 5 MMT (Million Metric Tons) annually, along with an increase in the nation’s renewable energy capacity of about 125 GW.
• More than Rs. 8 lakh crores worth of investments in total
  • The creation of more than 6 lakh jobs
  • A cumulative decrease in imports of fossil fuels of over Rs. 1 trillion crore
  • Reduction of annual greenhouse gas emissions by almost 50 MMT

Varieties of hydrogen

• Hydrogen is divided into three groups, namely Grey, Blue, and Green, depending on the type of extraction method used.
• grey hydrogen
• It is created either through the gasification of coal or lignite (brown or black), or through the steam methane reformation (SMR) of methane or natural gas. (gray).
• These typically involve lots of carbon-intensive procedures.
• the blue hydrogen
• To cut down on carbon emissions, it is made by gasifying coal or natural gas with carbon capture and storage (CCS) or carbon capture use (CCU) technologies.
• Hydrogen that is green
• It is created by electrolyzing water with electricity produced from renewable sources.
• The carbon neutrality of the electricity source is ultimately what determines the carbon intensity.

Green hydrogen challenges:

• Cost :
  • Compared to the fossil fuel it can replace, green hydrogen is much more expensive.
• Various phases of development:
  • Worldwide, downstream uses are in various stages of development.
• Inducement of Demand:
  • The development of a green hydrogen economy, which can make the transition to net zero feasible, is receiving funding from governments in the advanced industrial economies.
• Additionally, this would give their companies a competitive edge.
• India is attempting this alongside the developed economies.
  • As green hydrogen production ramps up, it will be crucial to make sure that demand for downstream applications keeps pace with supply.
• The task at hand is more challenging than designing a Production Linked Incentive Scheme for a mature product in an established market because domestic demand for green hydrogen must be generated.

The use of competitive procurement as a remedy:

• Choosing a procurement method that is competitive may be a solution.
• It establishes a competitive industry structure that allows India to fully benefit from the likely global price decline by accelerating movement down the cost curve through successive bids.
• For instance, when the cost of solar power was initially about four times the cost of thermal power and has now obviously decreased, this approach gave us remarkably good results in the National Solar Mission.
• For the Hydrogen Mission, it would be necessary to establish the minimum size of plants for least expensive production for the upstream production of green hydrogen and its downstream uses.
  • As examples, it is possible to determine the minimum size of a new fertiliser plant, a green ammonia production unit, and a green hydrogen production plant.
• The supply and demand of green ammonia and green hydrogen would then need to match for the supply chain, working backwards from the fertiliser plant.
• In order to produce green hydrogen at the lowest cost, competitive bids may be requested.
• This green hydrogen cost allows for the competitive pricing of green ammonia.
• The price of the inputs would then serve as the starting point for soliciting bids for the production of green fertiliser.
• To close the price gap between the market-determined price of green fertiliser and the price set by the government for sale to farmers, a budgetary subsidy may then be provided for each tonne of green fertiliser produced.
  • This subsidy would obviously be much higher than the subsidy provided per tonne for the normal production of fertiliser.
  • The intermediate stages wouldn’t require any kind of subsidy, though.
• In a similar vein, the government could sign a long-term contract for all aspects of a green steel plant’s production.
  • Since this would be among the world’s first green steel plants, our major steel producers should be persuaded to join forces and establish the plant so that everyone can become familiar with the new technology.
  • A cost plus basis would then be required for the purchase price.
• The government, as well as its agencies, may use this more expensive steel in all of its construction projects.
• The budgets for the construction projects could easily absorb the impact on the final cost per square meter, which would be minimal.
• No direct assistance would be required.
• The supply chain for fertiliser production up to green ammonia would be the same for shipping.
  • A long-term contract indicating the price at which green ammonia would be supplied could be used to conduct a competitive procurement of green shipping services starting at a reasonable future date.
  • By doing this, the risk associated with building a cargo ship that uses green ammonia would be entirely eliminated.
  • Since freight costs make up a relatively small portion of the Indian user’s overall costs, he can easily absorb the higher cost of the shipping service.
• Again, a subsidy would not be required in this situation.

Need of the Hour

• Through a credit enhancement mechanism, the government, multilateral development banks (MDBs), and domestic development banks (DDBs) can support the green energy sector.
• Making green hydrogen’s cost comparable to the fuel it would replace could be accomplished by combining a lower GST rate and/or a direct subsidy per kg of green hydrogen used. This could be done for the market-based competitive chemical, pharmaceutical, and other industries.
• This would also need to be done if green ammonia was to be used to generate electricity in order to meet seasonal spikes in demand.
• However, the costs of transporting and storing hydrogen are high.
• If India is to reach the technological frontier, not only as a user but also as an innovator, public funding for technology development and cost reduction would be crucial.
  • There is a lot of young talent available, so this has a lot of potential.
• The challenge requiring leadership would be financing the private sector in partnerships with our research institutions to work to develop scalable outcomes.
• Through creative financing models and policies, public institutions can encourage the private players to contribute to the urgently needed green energy sector.

Conclusion:

• The future for the green energy sector appears to be very promising given the benefits it provides, the government incentives for the development of green energy infrastructure, and the rising demand from environmentally conscious consumers.