India Aims to Provide $100 Billion in Solar Subsidies Over the Next 20 Years

India’s New and Renewable Energy Ministry has prepared a plan, which, if implemented as stated, will make the country one of the leading producer of solar energy globally by the year 2030. The proposal, yet to be approved, calls for $100 billion investment in solar energy over the next two decades to install 20,000 MW of solar energy.

The plan proposes that the government should give out $5 billion subsidies to the power utilities, every year for the next 20 years, which will then buy solar generated power from the solar power plants. The goal seems quite ambitious given the fact that the International Energy Agency predicts global solar energy generation to be 20,000 MW by the year 2020. The proposal comes after the announcement made by the Indian Prime Minister last year that solar energy would be the focus of the energy transformation in the country.

Solar energy gains importance from the fact that the coal fired power plants in India have been struggling to get coal supplies and there is lack of consistent gas supplies from other nations. Solar energy makes sense as it can be an alternative to connecting all the remote areas of the country to the grid.

Grid expansion and transformation (for renewable energy) is a cost intensive exercise which is one of the major obstacle in large scale proliferation of renewable energy even in the developed countries. India still has thousands of remote villages which do not have access to electricity, with off-grid solar energy systems these areas could become self reliant.

Officials in the Indian government would love to call this a proactive measure dodging all arguments pointing to pressures from the developed countries to reduce carbon emissions. With the negotiation for the next climate treaty under way India would definitely point to the transformations it intends to undertake in its energy policy and would look to dodge any demands for mandatory or, even, voluntary emission reductions. There has been tremendous pressure on India to agree to some kind of emission cuts especially after China agreed to sectoral emission cuts.

Instead, it is a very likely possibility that the Indian government approaches the developed nations to partly finance the subsidies plan. The developed countries could directly invest in the solar power plants or could invest through the Clean Development Mechanism through trade of carbon credits. The Indian government would certainly avoid sharing the massive load of subsidies with the consumers, which is why a plan to apply additional tax on coal and gas generated power was scrapped.

India is likely to continue investing in promoting renewable energy while avoiding demands for emissions cuts. Recently, a World Bank report justified India’s stand on resisting mandatory emissions cuts noting that any such attempt could result in adverse consequences for India’s efforts to eradicate poverty. Therefore, it seems pretty reasonable that the developed countries provide financial help to India’s efforts set up large scale renewable energy-based power plants which could replace the coal-based power plants in the future and, in the process, reduce the amounts of carbon emissions produced.