Energy security has typically been discussed within the frame of access, reliability and affordability of fossil fuels. Today, however, against the backdrop of global warming and India’s commitment to reach net zero carbon emissions by 2070, this results in too narrow a perspective. India is on a two track energy trajectory. One track relates to the demand for fossil fuels (coal, oil and gas) and the other to renewables (solar, wind, bio etc). The national objective is to decrease the share of the former and increase that of the latter in the energy consumption basket. To achieve this goal, India must focus on not just conservation of the usage of fossils, but also the simplification and coherence of the energy regulatory system.
India has done well to safeguard its energy security in the traditional sense. It has opened up multiple sources of crude oil and has resisted western government pressure to sanction Russia. As a result, notwithstanding the crisis over Gaza, the Ukraine war and President Trump’s economic and personal predilections, it has created a resilient supply chain. Also, by steadily increasing the share of Russian crude in its import basket from 2.1 per cent by value in 2021-22 to 35.1 per cent in 2024-25, it has reduced the weighted average cost of the basket of imported crude by at least $2/barrel. Further, demand management and efficiency has reduced the intensity of fossil fuel demand per unit of GDP.
However, when looked at through the broader prism that captures the trajectory of renewables, the situation does not look as robust. This is not because growth in the capacity of renewable energy has been slow. In fact, on the contrary, it has been impressive, albeit from a low base. Five years back renewables accounted for 19 per cent of electricity generating capacity. Today it accounts for 49 per cent (234 GW).
What is worrying is the slowdown in the pace of this growth and the imbalance between the generation of capacity and the development of supporting transmission and distribution infrastructure. There are several reasons for this slowdown, but one major factor is the regulatory miasma surrounding the sector.
I recently read an article by Swaminathan Aiyar. He wrote about the findings of a study by Team Lease Regtech titled “unlocking renewable energy potential by reducing compliance burden”. I have not read this study and so I repeat here only the data produced by Aiyar. He writes that the Team Lease researchers identified 2,735 compliance obligations for the renewable industry across 35 state and central governments and 30 different government departments; that 40 per cent of these compliances related to labour and the balance predominantly to land acquisition, environment and safety. He adds that 60 per cent of these obligations require the applicant to fill in the forms manually and visit the offices of the regulator. Finally and more specifically, he writes a “solar plant of just 1 megawatt (MW) capacity may need over 100 licences, registrations, and approvals before it can begin operations… and that compliance is not a one-time process…but include annual, quarterly and monthly filings, physical inspections, renewals, and certifications”.
Every businessman has had to deal with bureaucracy. But I suspect even the most hardened will catch their breath reading these statistics. I recollect three decades back when Shell built the first Shell branded fuel retail outlet in Mumbai on an already existing BPCL outlet, it took 12 months to secure all approvals before construction could commence. It needed to secure only 58 approvals. I remember wondering why anyone would expend this level of effort to create a downstream footprint and only recommended continuation because of the hope and expectation that the government would simplify the process. So on reading Swami’s article, I could not help but reflect on how India would achieve its target of creating 500 GW of “usable” renewable electricity by 2035 if this were the regulatory maze that investors had to navigate?
The word “usable” is the key. For it is one thing to create generation capacity. Quite another to develop the interstate transmission network; establish backup storage systems; build the distribution network and set the tariffs and standards for this capacity to be consumed. And as the experience of Spain earlier this year brought into sharp relief, it is even more complicated to ensure that connectivity between these different segments of the value chain is seamless, balanced and technically solid. Last April much of Spain blacked out because of an interconnectivity fault in the cross border EU renewables transmission grid.
The supply of hydrocarbons depends crucially on geology. Governments have no control over a country’s natural resource endowments. On the other hand, the supply of renewables faces no structural block. Sunlight and wind are “freely” available; the technology for generating wind and solar energy is well established; the economics are competitive; and there is investor interest.
The rub is the multiplicity of regulatory agencies and regulators that bear on this sector. Plus the fact there is no one executive authority with nodal responsibility or accountability for its operations.
The positive is the government faces no structural block like geology to overcome this rub. It can, if it so wishes, undertake a root and branch reconfiguration and redesign of the current regulatory system. It can simplify the regulatory process by removing or converging the current multiple layers of oversight. It can standardise operating rules; ease the process of land acquisition; digitise the approval process; align technical standards and safety conditions; render transparent the setting of network charges and supply contracts; and expedite dispute resolution.
The government does, of course, face the block of legacy vested interests. It is a powerful block but it cannot withstand determined political will. Such will is required for the prize of weakening the current unhealthy link between economic growth, energy demand and environmental protection — for “Energy Atmanirbharta”.
The writer is former chairman of Shell Group in India. Views are personal
