Green Energy Paradox

04.09.2025

Green Energy Paradox

Context
India faces a “green energy paradox”: despite having 44 GW of renewable energy (RE) ready for deployment, weak demand, lack of Power Purchase Agreements (PPAs), and systemic barriers leave it underutilised.

About the Paradox
The paradox arises when RE capacity exists but cannot be absorbed due to financial, policy, or grid-related constraints.

Current Status:

• Coal Dependency: Coal and lignite still supply ~79% of energy (FY23).
   
• Low RE Share: Excluding large hydro, renewables contribute just 3.8% of domestic production.
   
• Import Dependence: India imports over 85% of oil and 50% of gas.
   
• Idle RE Capacity: 44 GW renewable projects ready but stranded without PPAs.
   
• Reliability Deficit: SAIDI ~600 mins/year vs. Thailand (35) and Malaysia (46).
   

Dimensions of the Paradox

1. Supply-Side Readiness

• 44 GW RE projects built but underutilised due to missing PPAs.
   
• Global solar/wind costs are declining, but India’s tariffs remain high due to policy and financing barriers.
   
• Government incentives: PLI (Production-Linked Incentive) and VGF (Viability Gap Funding).
   
• Storage-backed RE (battery/pumped hydro) costly: ₹6.6–₹9/unit.
   

2. Demand-Side Weaknesses

• Discoms prefer coal PPAs for cost predictability.
   
• Grid integration costs for variable RE are high.
   
• Smart meters and demand-response systems largely absent.
   
• Slow electrification of EVs, cooking, and industrial processes limits RE demand.
   

Barriers to RE Integration

• Structural: Weak discom finances, no nationwide smart grids.
• Environmental: Coal lock-in, idle RE delays emission reductions.
• Economic: High capital costs, costly storage, reliance on imports.

Initiatives Taken

• National Solar Mission & Hybrid Policy: Expand solar and wind-solar blending.
   
• PLI for Batteries & India Semiconductor Mission: Promote domestic storage and electronics.
   
• Renewable Purchase Obligations (RPOs) & Green Open Access Rules 2022: Mandate renewable procurement, allow direct industrial access.
   
• National Green Hydrogen Mission: Hydrogen as clean fuel and long-term storage.
   

Way Forward

• Enhance Storage Ecosystem: Scale VGF, encourage pumped hydro and domestic batteries.
•  Accelerate Demand Electrification: Promote EVs, electric cooking, and industrial electrification.
•  Smart Grid & Market Reforms: Deploy smart meters, adopt market-based RE dispatch.
•  Discom Reform: Financial restructuring, cost-reflective tariffs, reduce political interference.
•  Differentiated RPO Trajectories: State-specific targets aligned with grid and resource capacity.

Conclusion
India’s green energy paradox shows that generation alone is insufficient. RE utilisation requires storage, flexible grids, demand-side adoption, and discom reforms. Aligning green growth with affordability, reliability, and climate goals is critical for a sustainable energy transition.