While the transformation was already happening, driven mainly by climate change mitigation, the Covid-19 pandemic has hastened its pace globally.
The energy market dynamics have overnight tilted favourably towards renewables such as wind, solar and hydropower. Independent oil companies (IOCs) across the world are accelerating towards this transition.
With sustainability as the key driver, the world is witnessing a major shift in the overall share of global energy spending towards clean energy technologies. Oil majors across the world are now reshaping their portfolios, by expanding into solar and wind power generation.
Sectoral oil and gas companies are increasingly transforming into energy companies, with a strong renewables business vertical. Globally, this portfolio diversification is a significant trend to be noticed.
Oil majors such as BP have set ambitious targets while some Asian energy majors are already into renewables in a big way. Ecopetrol wants to go from zero to 300 MW in renewable power generation by 2022 for its own use.
Royal Dutch Shell is involved in bio-methane, biofuels and hydrogen. European oil and gas majors have so far made greater strides towards this energy transition than their counterparts across the globe.
The situation in India is more or less similar. Being a signatory to the Paris Climate Agreement, the share of renewables is going to increase significantly very soon. Renewables and green energy may turn out to be a real game-changer in the post-Covid era.
According to estimates by the World Economic Forum, by shifting towards renewables, India can save over $90 billion in imports between 2021 and 2030; this, even if half the generated renewable power is used to replace imported coal.
India has seen an exponential growth in its renewable energy sector in the past few years. Though our installed renewable energy capacity is already the fifth largest in the world, there is much more potential in this sector.
Prime Minister Narendra Modi has set a target of 450 GW by 2030. Driven by a highly conducive policy environment, a steady influx of capital and new technologies, it is most likely to reach 175 GW even before 2022.
Cost of production
With continuous reduction in the cost of production of renewable energy, it is becoming affordable, which is an encouraging sign for a growing economy like India. In fact, thanks to policy support, the per unit cost of production of renewable energy in India is the lowest in Asia-Pacific.
The activity in the renewables front has risen significantly. India witnessed M&A (merger and acquisition) deals worth around $2 billion in the renewable energy sector in 2020, a jump of 75 per cent over the previous year.
In order to meet the target set by the Prime Minister, the recent Budget announcement to allow foreign portfolio investments and provide additional capital for SECI (Solar Energy Corporation of India) and IREDA (Indian Renewable Energy Development Agency) are positive moves, which can increase the cash flows for the industry.
Since Independence, India’s energy industry has developed on standalone sectoral basis, like coal, oil and gas, and renewables.
A holistic integration of these power sources under a single umbrella would go a long way in harnessing more accessible, affordable, equitable and clean energy.
In this context, Indian companies moving from their standalone specialisation to become integrated energy producers is widely visible.
Because of their abundance and convenience of handling, fossil fuels like coal, oil and gas have been the most preferred fuel for economic growth across the globe. While this preference is still to continue for a few more decades, consumption of these fuels must be controlled not only because of their limited availability but also due to their comparatively adverse impact on the environment.
And, hence, the endeavour to conserve them by limiting their consumption as well as by substituting them with renewables to the extent possible would be beneficial for posterity as well as the environment.
According to its Energy Strategy 2040, the renewables portfolio of ONGC is to grow significantly.
To operationalise this, ONGC has already taken steps in this direction, including strategic collaborations and diversification in niche areas like exploring geothermal opportunities. It has inked an MoU for developing India’s first geothermal plant at Ladakh.
At a time when climate change has reached a critical juncture, the world is striving to bring about change in the way energy is used. All stakeholders now require to come together and pitch to fast-track this transformation.
The transformation in terms of conserving oil and gas and producing more renewable energy through standalone endeavour as well as through collaboration across the energy verticals, will make India more saksham and “self-reliant” as far as its energy needs are concerned.
All-out efforts are required to prepare the country for future energy requirements, as India gears to celebrate the 75th anniversary of its Independence next year.
The writer is Chairman and Managing Director of ONGC