Karnataka – Charging ahead on India’s energy transition
The Indian state of Karnataka boasts RE share of 62 percent in its power mix and has made concerted efforts towards making Bengaluru, its capital city, the EV capital of India. What remains to be seen is how it will maintain the pace required to sustain the growth.
Karnataka has been a model for India's service sector-driven growth over the last decade. Its contribution to India's GDP of as much as 10 percent makes it a crucial state for the country's sustained growth prospects.
In 2017-18, Karnataka became the top state in India for renewable energy capacity, providing a clear leadership and endorsement of the much-needed electricity sector transformation. Ever since, it has retained its leadership position in the Indian RE growth story. As of early June, Karnataka has an installed capacity of 15.2 GW of RE, followed closely by Tamil Nadu. During the financial year 2018-19, 1.3 GW of RE projects were commissioned against a target of 1.9 GW.
The state also possesses the largest solar park in the country at Pavagada which now stands completely commissioned at a capacity of 2,050 MW. The state is also the leader in terms of solar installations, with 7.1 GW of grid-connected solar PV installed and another 1 GW in development stage. The state boasts of RE share of 62 percent in its power mix, followed by thermal and nuclear at 35 percent and 2.5 percent, respectively. The share of solar in the total installed capacity is around 22 percent.
Being the leader, Karnataka has also set long term targets. As per the RE policy, the state has set a target of having non-solar RE generation at 6 GW by 2022. It also has set the objective of making Karnataka an investor-friendly State for all forms of renewable investments.
The recent RE success in Karnataka is a result of its prudent energy policies and commitment to comply with renewable purchase obligations enforced by the central government. The fully subsidized open access model for solar power has allowed businesses and developers to mitigate payment and offtake related risks, purchase cheaper and more reliable power supplies, while overcoming the barriers posed by loss-making State-owned distribution companies.
The state has suffered from an over-reliance on imported coal for its electricity needs in the past decade and has been left with no options but to import electricity from other states or purchase expensive power from the open market. Karnataka does not require any further thermal capacity additions in the coming decade except possibly to replace the 1.7 GW Raichur station, which should be retired as per the guidance in the 2018 National Electricity Plan.
The decade-long ambition to build mega-size gas import capacity and gas-fired power projects has met no success and has rather ended in a waste of capital, land and political effort. The currently under-construction Yelahanka gas-based power project might have to be considered for conversion into a peak-hour power supply facility and even then, without time differentiated tariffs the project could be commercially unviable.
According to BNEF projections, the levelized cost of electricity for coal and gas-fired generation is projected to be much higher than that of Indian wind and solar over the coming decade. The competition will force either tariff re-negotiations or refusal of expensive thermal power purchase, resulting in more stranded thermal power assets in the state. The state should ensure optimum utilization of its current capacity through building more interstate-connected generation and transmission capacity.
Protecting investors' confidence with offtake and payment assurances will attract capital into rooftop solar, wind-solar hybrid coupled with storage, and potentially offshore wind. The Institute for Energy Economics and Financial Analysis (IEEFA), a venture philanthropy based in the US that funds investments in clean energy future foresees renewable capacity addition of at least 11 GW by 2027-28, a rather conservative ambition compared with the national target. Building more RE grid export capacity will enable Karnataka to better contribute to the nation's economic growth, energy security and climate protection effort − all highly commendable goals for India.
Karnataka's EV journey has also been noteworthy. In his speech, during the 2017-18 Budget, the then CM of Karnataka, Siddaramaiah had announced to make Bengaluru the EV capital of India. A lot of work has been done in the state since. The state was the first to come out with an EV policy and was also seen as the first mover in terms of deploying EVs on road. Karnataka is looking to attract investments to the tune of `31,000 crore from companies looking at research R&D, and manufacturing of EVs in the state, at a time when the Center is using a heavy hand to force automakers to switch to green technology. Karnataka has been the first state to roll out an EV and energy storage policy that looks not only at boosting sales of EVs, but also setting up charging infrastructure and special manufacturing zones. The state estimates that it will be able to create employment for 55,000 individuals over the next few years through the EV industry.
One of the top mandates for Karnataka's policy is to set up EV manufacturing zones along with facilities for testing that can be used even by startups. Apart from India's only electric car manufacturer Mahindra Electric, the State is also home to one of the most promising e-mobility startup, Ather Energy. The state is also home for component makers such as Bosch and Delphi, which have begun preparing for India's electrification drive.
In the recent state budget announcement, Karnataka Chief Minister, BS Yediyurappa announced that `100 million ($13.56 million) would be allocated to establish an EV and energy storage manufacturing cluster in the state. The chief minister also said that under the FAME-II program, 300 air-conditioned electric buses are being added to the fleet of Bengaluru Metropolitan Transport Corporation (BMTC). On similar lines, the state government is providing a grant of `1 billion ($13.56 million) for adding 500 ordinary e-buses to the fleet of the corporation.
The state overall looks very promising and forward-looking in terms of being the early mover in the energy transition, what needs to be closely watched here is whether the state government keeps the focus strong by means of enabling support in forms of policies, and incentives to make this grow into the dream of making the state a leader not only in RE but also in energy storage and EVs.