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Important Editorial Summary for UPSC Exam

23May
2023

Renewables can cement India Australia bonhomie (GS Paper 2, International Relation)

Renewables can cement India Australia bonhomie (GS Paper 2, International Relation)

Context:

  • Greater engagement on the ‘green economy’ and climate finance in international forums like the Group of 20 (G20) and the Quad will help India and Australia to achieve their ambitious net-zero goals, promote sustainable development and mitigate the impacts of climate change.
  • Meanwhile, the two countries also want to strengthen bilateral collaboration in clean energy research and innovation.  This will require boosting investment, technology transfer and knowledge sharing.

 

Bilateral visits:

  • In a sign of the deepening relationship between India and Australia, Indian Prime Minister will visit Australia to hold bilateral talks with Prime Minister Anthony Albanese, despite the cancellation of the Quadrilateral Security Dialogue (Quad) summit in Sydney.
  • His visit follows Albanese’s trip to India in March, in which renewable energy, green hydrogen and solar and critical minerals supply chains featured high on the agenda, as well as a stop in Ahmedabad for the fourth cricket test.

 

Mobilising capital for renewable energy infrastructure:

  • Australian pension funds, with trillions of dollars in ‘patient’ capital and a growing need to address climate risk, have the potential to contribute to India’s renewable energy journey.
  • India’s target for half of its electricity capacity from non-fossil fuel sources by 2030 provides huge opportunities for institutional investors to finance renewable energy infrastructure, energy storage and grid expansion and modernisation.

 

Solar PV manufacturing industry:

  • India and Australia have set up a task force on solar that aims to provide both governments with advice on solar photovoltaic (PV) deployment and supply chains.
  • The International Energy Agency (IEA) has warned that countries need to diversify their solar supply chains.
  • India’s efforts to promote a domestic solar PV manufacturing industry have reduced its import dependence on China for solar equipment, which was previously more than 90%. It is also developing its solar export capacity.
  • A recent study showed that Indian solar module manufacturing capacity could reach 110 gigawatts (GW) per year by 2026. India will achieve self-sufficiency in solar PV modules at this level and expand exports further.
  • Australia also wants to reduce its reliance on imports of solar panels from China and is looking to grow domestic manufacturing.
  • The government has established a A$15 billion National Reconstruction Fund to boost investment in domestic manufacturing projects in future industries, including solar and zero-emissions technologies.

 

Critical minerals supply chains:

  • India is a major importer of critical minerals, such as lithium, cobalt and nickel, which are used in electric vehicle (EV) batteries, while Australia, as a leading producer of critical minerals, has an opportunity to promote further growth in exports and investment.
  • In its 2023-24 budget, the Australian government announced A$57.1 million over four years to help the critical minerals sector build strategic and commercial partnerships globally.
  • Developing new and existing partnerships will help to identify investment opportunities and strengthen supply chains to accelerate India’s net-zero emissions plans.
  • Australia could also provide transfer of technologies and expertise in the exploration, mining and processing of critical minerals to support the successful extraction of India’s newly discovered lithium deposits.

 

Green hydrogen:

  • India has ambitions to become a global green hydrogen leader as part of its efforts to decarbonise emissions-intensive sectors, including fertiliser and steel production. The government has set a target to produce about 5 million metric tonnes of green hydrogen annually by 2030 under its National Hydrogen Mission.
  • Both India and Australia offer opportunities to explore green hydrogen and green ammonia development. India’s Reliance Industries is planning green hydrogen investments in Western Australia.
  • Indian company TheGreenBillions Limited recently announced plans to invest in Australia in sustainable energy projects, including green hydrogen, supported by the India Australia Strategic Alliance, an industry body for Indian and Australian businesses.
  • JSW Future Energy Limited, a JSW Energy subsidiary, has partnered with Fortescue Future Industries to develop green hydrogen projects in India.

 

Iron & Steel:

  • India is likely to drive global steel production growth in the coming decades. In its Stated Policy Scenario, the IEA expects steel production in India to almost double by 2030 and quadruple by 2050. This corresponds to over 150Mt of new steel capacity by 2030-31.
  • Accelerating the transition towards green iron and steel technologies will be key to supporting Indian and global emissions reduction objectives.
  • As the leading global iron ore producer, with a huge yet untapped economic opportunity in developing a local green iron and steel industry, Australia can continue developing its research and innovation partnership on green steel with India under the updated India Economic Strategy.
  • Opportunities include investing in developing technologies to allow green iron and steel production, green hydrogen supply chains to feed into iron and steel production processes, and the capabilities required to operate green iron and steel assets.
  • This presents a sizeable investment opportunity for Australian superannuation funds looking to support the global transition to net zero emissions.

 

Renewable energy best practices:

  • Whether small steps or giant leaps, Indian and Australian companies, industry experts and academics and researchers can work together to identify areas of collaboration and share best practices and solutions.

 

AICE:

  • A case in point is the launch of the Australia-India Centre for Energy (AICE), a virtual centre established by the Indian Institute of Technology (IIT) Madras, along with a consortium of Indian and Australian universities and research institutions.
  • AICE aims to work towards achieving United Nations Sustainable Development Goal 7 (access to affordable, reliable, sustainable and modern energy for all).

 

Solar penetration:

  • In South Australia, which has a high share of wind and solar penetration, the Australian Energy Market Operator (AEMO) manages large amounts of variable renewable energy in the electricity system. South Australia’s experience of integrating renewables can help other states and nations transition from fossil fuel-based to high renewables grids.
  • Australia is the global leader in installed rooftop solar per capita and can share its experience of integrating distributed energy sources (DER) into the grid.
  • While India has largely focused on grid-scale renewable energy expansion to date, accelerating the uptake of DER will play an important role in achieving its renewable energy goals.

 

Just transition:

  • Policymakers in both India and Australia face challenges in managing a just transition as their economies move away from fossil fuels.
  • The two countries should use international forums like the G20 and the Quad as platforms to push for the transfer of technologies and finance from developed to emerging economies to support a global just transition.
  • There is also an opportunity to collaborate on strategies to tackle the impact of the EU’s Carbon Border Adjustment Mechanism (CBAM). The policy aims to reduce carbon emissions by imposing a carbon border tax on goods imported into the EU from countries with weaker climate policies.
  • The EU is India’s second-largest export market, with €64.6 billion of goods and services exported in 2021, and Australia’s third-largest trading partner after China and the United States.
  • India and Australia must engage with the EU to reduce their carbon emissions, improve their data collection and reporting, diversify their export markets, and develop low-carbon industries.

 

Way Forward:

  • Australia is seeking a more comprehensive trade deal with India, building on the Economic Cooperation and Trade Agreement signed in 2022. The two have similar priorities and goals for renewable energy.
  • A Free Trade Agreement (FTA) will increase trade, reduce or remove tariffs on goods and create new opportunities for Australian and Indian businesses to expand their markets.
  • Most importantly, it will break down barriers to the transfer of private capital. The transition to renewable energy will require massive investment in infrastructure and technology, and increasing private and public capital flows will be crucial in helping both countries meet their climate goals.