US President Donald Trump's decision to pull out of the Paris Accord may be a chance for India to shine, writes an energy expert.Trump's pullout from the Paris Accord on climate change has brought India to the fore. Two claims are especially puzzling. One, the treaty lets India (and China) not do much till 2030, and that India is looking for developed countries to pay them $2.5 trillion for its Nationally Determined Contributions (NDCs). India's NDC calculations were taken with their own calculations, and have very little to do with the US (or any other country).A US pull-out would have limited on-ground implications, though it may change a bit of mindset. It's worth mentioning that India's electricity sector is dual (“concurrent”) in the Constitution, both Central and State, but the distribution utilities, who retail electricity are all under state purview. Ultimately, they have to want to be green, and they, in turn, rely on signaling from consumers. Most consumers are more worried about power availability and quality than carbon. Even local air pollution, a much more pressing problem, isn't given enough attention - people use dirty diesel vehicles as these are ostensibly cheaper (for them).India's global role and clean energy ambitionsIndia treats its climate obligations, especially the growth of Renewable Energy (RE) as an “article of faith”. Importantly, India announced very ambitious targets for RE well before Paris. The newly-elected Modi government announced a plan in 2014 to reach 175 GW of RE (growing from some 30 GW then) by 2022. This was exceedingly bold, corresponding to a growth rate of over 25 per cent annually in RE. In contrast, targets for high RE penetration in selected US states, China, and EU require an annual growth of RE of only about 5 per cent or so, in some cases lower.Paris emphasised the importance of India's RE targets, but not all of India's Paris obligations are based on adding RE. Efficiency can and must play a greater role, especially given India's growing urbanisation and likely growth of housing, appliances, vehicles, etc. More than targets per se, the most dramatic shifts in India's electricity portfolio have come from changes in the market. Grid-scale solar power, which only a few years ago was over Rs 14/kWh (almost 15 pence then), has been falling in price dramatically, with recent bids coming in under Rs 2.5/kWh.This makes it “cheaper than coal” if you believe the headlines in their entirety. Of course, these are only levelised costs, and not an apples to apples comparison, but certainly cheaper solar is one reason coal is facing pressure, and several Indian states have announced plans to scale back coal plant ambitions, and the Central government said that no new coal plants will be needed for almost a decade - the understated fact being this allows for under-construction plants. Even existing coal plants are being utilised less and less, not only because of RE but also because of modest demand growth with greater efficiency, such as impressive programs for LED bulb rollouts. RE will continue getting cheaper; India didn't create the phenomenon of globally falling prices - but it is certainly riding it well, with concerted effort and top-down programs.What will US actions mean The US has been a strong partner in India's RE ambitions, including efforts on helping mobilise funds, such as through the US-India Clean Energy Finance Task Force. It's worth clarifying that these actions may have US government support, but the ultimate funds are from the private sector or others. Hopefully such efforts will continue, in part driven by the size of India's potential market.The US (and all global players) can help India not just with the scale of capital, but lower interest rates than in India (the forex hedge remains a concern). There is also a role for technology, not just for RE but also batteries and other related technologies. Again, these will also be commercial discussions and decisions.
The US pullout's biggest negative is that the world's second-largest emitter of greenhouse gases (GHG) has a potential trajectory for GHG reductions lower than planned. When we normalise by per capita, the US becomes even more critical. The good news is that even the US isn't monolithic. Like India, states matter, and many states (and cities) have taken pledges to reduce their GHG emissions. In addition, many US companies are taking the pledge to push cleaner energy for their operations, led, in part, by Silicon Valley type companies. This makes it hard for global consumers to punish US companies, and a formal retaliation by Indian (or other) governments via a border adjustment mechanism also appears unlikely. This is in part due to complexity, and in part due to political risks, and in part it wouldn't achieve much - energy is a decreasing share of US value-add in an economy that is less and less about natural resource-intensive manufacturing.How much will India do - and what can change Falling RE prices make it easier for India (and others) to do the right thing, but the US and other developed countries have both higher incomes to pay for any changes, and also need to do less per year. The flip side is India is growing anyways, so it may be both feasible and advantageous to do it as green as possible.There are a few possible hiccups. Low RE prices mask other challenges, not least because RE today is opportunistic RE - use it when available. You still need something else much of the day, or storage, which is expensive today. RE also has lots of system level costs that are being managed via socialisation, but this will become harder as RE's share grows. Thus, it's not yet the case that RE is a pure “no regrets” option.Second, the readiness of states to handle energy transitions is a bottleneck. Take Smart Grid deployments, which go hand in hand with clean tech. The technology exists, but the real gap is business-regulatory models and implementers willing to put in the long-haul effort to execute including change management at the state level. This is where global players, with global deployment experience, are helpful. Like with RE, the need is for patient capital, one that is in it for the long haul, relying on the ongoing savings (or income in the case of RE), and not upfront valuation. The analogy is the need for rental oriented YieldCos, instead of people interested in capital appreciation ala flipping a house.One only hopes that India (or others) don't only do what they can initially, especially with low hanging fruit, but then limit their efforts citing the US. India's central leadership is likely to stay the course, but they need more stakeholders to help them achieve their plans, both within India (states, utilities, consumers, etc.) and outside India (financiers, technology providers, etc.)Many people worry about a climate leadership vacuum. The world doesn′t need a leader for climate change; US leadership was anyways by President Obama rather than the entire government - the legislature didn't support the Treaty. Tackling climate change needs everyone to be leaders, doing more than what may be easy or popular. Most countries are poised to try, especially India.Dr Rahul Tongia is a Fellow at Brookings India. He was founding Technical Adviser for the Government of India's Smart Grid Task Force, and also the Chair of the Working Group on Policy of India's Clean Energy Finance Forum.