PSUs- the Pathway for India’s Clean Energy Goals to Net Zero By 2070
Coal India Limited (CIL), NTPC, and Indian Railways, three of India’s largest central state-owned enterprises, can help the nation achieve its climate goals while also capturing a portion of the clean energy market and reducing an anticipated 22%-28% cash flow gap by 2050 as India moves towards net-zero, according to a new report by the International Institute for Sustainable Development (IISD).
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India's State Energy Firms Can Help Meet Clean Energy Goals and Avoid Cash Flow Shortfall En Route to Net Zero by 2070—New Report
September 13, 2022
September 13, 2022, New Delhi—Three of India’s biggest central state-owned enterprises—Coal India Limited (CIL), NTPC, and Indian Railways—can help the country reach its climate goals while seizing a share of the clean energy market and mitigating an estimated 22%–28% cash flow gap by 2050 as India gears itself towards net-zero, according to a new report by the International Institute for Sustainable Development (IISD).
The study, India's State-Owned Enterprises in Energy from 2020-2050: Identifying Evidence-Based Diversification Strategies, uses public sector undertakings (PSUs) in the coal sector to show how energy businesses can identify their future uncertainties while also identifying opportunities in the changing energy system.
“State-owned companies can be part of India’s clean energy future while continuing to bring revenues to the government, creating jobs, and supporting local communities,” says co-author of the report Balasubramanian Viswanathan, Policy Advisor at IISD. “Our evidence-based approach shows pathways for how this can be achieved.”
The study finds that between 2020 and 2050, under the net-zero-aligned pathway, CIL and Indian Railways could face a INR 415 billion (28%) and a INR 2,112 billion (22%) reduction in cash flow, respectively, while NTPC’s cash flow could drop by INR 404 billion (22%) compared with a business-as-usual scenario.
But taking a few concrete measures in the next few years to diversify their businesses can allow these firms—and other similar PSUs in India—to alleviate future uncertainty and avoid revenue gaps, argue the authors of the report.
Early Diversification
For instance, the study finds that it is critical for PSUs to create net-zero roadmaps with interim targets for the firm—which can become a guide for future decisions—and develop in-house estimates on the financial impact of the changing energy landscape.
They can also use their ability to raise capital at favourable rates to identify diversification strategies and become early adopters of clean energy technologies. To do so, firms should set clean energy targets in proportion to the potential scale and speed of the financial implications, and periodically increase the ambition of these targets, the experts recommend.
Furthermore, building strategic partnerships among PSUs to exchange expertise and investing in research and development can help PSUs build internal capacity in new and emerging clean energy technologies. Finally, making their ambitions toward achieving a clean energy transition public can send positive market signals that can further strengthen previously mentioned measures.
“As major employers in the conventional energy sector, PSUs are key actors in reaching India’s climate and energy targets, and they should involve other relevant stakeholders in the decision-making process,” says Viswanathan.
The authors of the report encourage all state-owned energy enterprises to adopt this approach to produce their own detailed internal assessments and an evidence-based strategy for transition into a clean energy business.
Coal India, NTPC, Railways can help meet clean energy goals: Report
Three of India's biggest central state-owned enterprises -- Coal India Limited (CIL), NTPC, and Indian Railways -- can help the country reach its climate goals while seizing a share of the clean energy market and mitigating an estimated 22-28 per cent cash flow gap by 2050 as India gears itself towards net-zero, a new report by the International Institute for Sustainable Development (IISD) said on Tuesday.
Can Coal India, NTPC and Indian Railways help India reach its climate goal?
Coal India, NTPC, and Railways can help our nation to meet clean energy goals as per the report of the International Institute for Sustainable Development.
India has positioned itself as a strong advocate of climate action among emerging economies, aiming to significantly scale up renewable energy by 2030 and to reach net-zero emissions by 2070. The country’s energy state-owned enterprises, known as public sector undertakings (PSUs), will have a key role to play as India gears up to become net-zero by 2070—yet, many of them remain heavily dependent on coal. This study provides an evidence-based approach to identify diversification strategies that will prepare these firms for the future while continuing to bring revenues to the government, creating jobs, and supporting local communities.
Three of India’s biggest central state-owned enterprises—Coal India Limited (CIL), NTPC, and Indian Railways—can help the country reach its climate goals while seizing a share of the clean energy market and mitigating an estimated 22%–28% cash flow gap by 2050.
Our evidence-based approach shows how state-owned companies can be part of India’s clean energy future while bringing revenues to the government, creating jobs, and supporting local communities.
Seven out of 10 largest state-owned firms in India are from the energy sector. They will play a key role in helping India become net-zero while diversifying their businesses and avoiding potential revenue gaps.
This study uses PSUs in the coal sector to show how energy businesses can identify their future uncertainties while also finding opportunities in the changing energy system. Taking a few concrete measures in the next few years to diversify their businesses can allow these firms—and other similar PSUs in India—to alleviate future uncertainty and avoid potential revenue gaps.
The companies can follow these six steps to ensure they are part of India’s clean energy future:
Create a net-zero roadmap with interim targets, which can become a guide for future decisions.
Develop in-house estimates on transition business risks.
Identify new clean energy business opportunities and become early adopters of clean energy technologies.
Set clean energy targets in proportion to anticipated change and periodically increase the ambition of these targets.
Build strategic partnerships with other PSUs to share expertise and invest in research and development to build internal capacity in new and emerging clean energy technologies.
Make ambitions for the transition public to send positive market signals.
The report encourages all state-owned energy enterprises to use an evidence-based approach to produce their own detailed internal assessments and a strategy for transition into a clean energy business.
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As per a recent report published by the International Institute for Sustainable Development, fossil fuels account for around 76% of India’s total primary energy supply. 18% of the total revenue of the Government is derived from fossil fuels. Against this backdrop, India is set to take a giant leap by the passing of the Energy Conservation (Amendment) Bill, 2022 (Bill) by the Lok Sabha on August 8, 2022.
This webinar presents the findings of a new IISD report that provides an evidence-based approach to ensuring India’s state-owned enterprises (SOEs) are part of the country’s clean energy transition while also continuing to bring revenues to the government, create jobs, and support local communities. The presentation is followed by a panel discussion on opportunities for SOEs in the clean energy future.
SOEs—known in India as Public Sector Undertakings (PSUs)—hold dominant positions in India’s energy sector, controlling coal mining, transport, power generation; natural gas exploration; and crude oil extraction, refining, and marketing. They bring sizable financial returns to the Government of India, employ millions of citizens, engage in community building, and take on activities of strategic importance. With the growing pressure from cost-competitive clean energy sources and India’s global decarbonization commitments, Indian PSUs are expected to face challenges due to their fossil-dependent business model.
IISD has undertaken a study to build an evidence-based approach to how firms can identify business risks while also illustrating the “opportunity” in transition—how SOEs can mitigate risk by helping deliver a share of India’s clean energy targets.
Organized in partnership with the Indian Institute of Management Calcutta Centre for Development and Environment Policy (IIM–C CDEP), this webinar shows how this approach can be applied to three central-level PSUs that play fundamental roles in the coal-to-power value chain: Coal India Limited, the largest national coal miner; NTPC, the largest thermal power producer; and Indian Railways, the primary transporter of coal across the country.
