Graduate School of Social Sciences (GSSS) M.Sc. Political Economy Academic Year 2019/2020

The Political Economy of the Energy Transition in Development in the State

Date of submission: 26th June 2020; Word count: 23,298

Author: Supervisor: N Eschenbruch Dr. M. P. (Mehdi) Amineh Student ID: 12772178 Second reader: E-Mail: [email protected] Dr. Henk Houweling

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- 2 - Abstract

The political economy of countries has been found to determine their strategy for energy transitions. This thesis presents research regarding the question: How did the political between 1990 and 2019 influence the emergence of the energy transition? Through document analysis, the results indicate that both niche and landscape-level change contributed to deregulation in the political economy of . However, the case study of wind in the Gujarat state demonstrates that capacity addition is subject to changing regulatory frameworks which fail to fully integrate renewable energies into the political economy of electricity in India so far. Hence, this thesis argues that the political economy of energy continues to determine limitations for the implementation of the energy transition in India. Most importantly, the data indicates that the primary reason for India to attempt the energy transition is the diversification of its energy supply in order to reduce its import dependency.

Keywords: Energy Transition, India, Gujarat, Renewable Energies, Wind Power

- 3 - Acknowledgements

This thesis concludes a turbulent academic year with deep and insightful academic endeavours. For these learnings, challenging but also fun moments, as well as extracurricular get-togethers to contextualise the newly learned topics, I am very grateful to my lecturers and fellow students. Writing this thesis, the research design, as well as the schedule, had to be adjusted to the measures imposed by governments to limit the spread of the COVID-19 virus. A big help during this time has been my research group and the feeling that we are getting through this together. Most importantly, I want to thank my supervisor Mehdi Amineh for his continued support, patience, and confidence in my work despite all the reasons I gave him not to do so any longer. Finally, I want to thank my family and friends for their persistent endurance of my work, particularly in the situations when at home in their proximity was the only place left to study at.

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- 5 - Table of Contents

Abstract ...... - 3 -

Acknowledgements ...... - 4 -

Table of Contents ...... - 6 -

1. Research design ...... - 10 -

1.1 Introduction ...... - 10 -

1.2 Literature review ...... - 11 -

1.3 Theoretical framework and concepts ...... - 14 -

1.4 Research questions and hypotheses ...... - 16 -

1.5 Methodology and Data ...... - 17 -

1.6 Outline of the argument ...... - 19 -

2. The political economy of the energy situation in India ...... - 22 -

2.1 Structure of the energy situation ...... - 22 -

2.2 Reflection in energy policy ...... - 29 -

2.2.1 Reflection in policy ...... - 29 -

2.2.2 Reflection in institutional design ...... - 33 -

3. The political economy of the energy transition emergence in India between 1990 and 2019- 36 -

3.2 Brief summary of political economy in India before 1990 ...... - 38 -

3.3 1990-2003 The emergence of the energy transition ...... - 38 -

3.4 2004-2013 The design and fast acceleration of the energy transition ...... - 43 -

3.5 2014-2019 The bottlenecks of the energy transition...... - 51 -

4. Case study: The political economy of wind energy development in Gujarat ...... - 58 -

4.1 Case motivation ...... - 59 -

4.2 The political economy of electricity and wind energy development in Gujarat ...... - 62 -

4.3 Identification of best practices, challenges, and learnings ...... - 69 -

5. Discussion and Conclusion ...... - 72 -

Bibliography ...... - 78 -

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- 7 - List of Tables and Figures

Table 1 Consumption of Electricity by Sectors in India ...... - 28 - Table 2 Energy Balance of India for 2017/-18 ...... - 29 - Table 3 The main energy policies in India ...... - 32 - Table 4 Years wise wind power capacity addition of different Indian states since 2002 ... - 44 - Table 5 Recently installed energy generation capacity in India ...... - 56 - Table 6 Overview of results ...... - 57 -

Figure 1 Theoretical Framework of the MLP theory ...... - 15 - Figure 2 India crude oil production by region, 2015 ...... - 23 - Figure 3 Source wise Estimated Potential of Renewable Power in India in 2018 ...... - 24 - Figure 4 Per Capita Energy Consumption from 2011-12 to 2017-18 ...... - 26 - Figure 5 Source wise Consumption of Energy during 2017-18 ...... - 26 - Figure 6 Energy sector administration in India...... - 34 - Figure 7 GDP per capita in India between 1960 and 2018 (in US$) ...... - 37 - Figure 8 Levelized Cost of energy for onshore wind energy projects on a globally weighted average and global capacity addition between 1993 and 2018 ...... - 44 - Figure 9 Installed wind power capacity in India between 2002 and 2011 (in MW) ...... - 45 - Figure 10 Development of Brent Oil Spot price between 1988 and 2018 ...... - 47 - Figure 11 Fuel mix year wise in the forced renewables scenario of the Integrated Energy Policy Report ...... - 49 - Figure 12 Global weighted average total installed costs, capacity factors and LCO for solar photovoltaic between 2010 and 2018 ...... - 52 - Figure 13 Wind Atlas India, wind speed at 100m hub height ...... - 60 - Figure 14 Wind Atlas Gujarat, wind speed at 100m hub height ...... - 61 - Figure 15 Heat map for the preliminary selection of suitable offshore wind sites ...... - 61 - Figure 16 Structure of the Gujarat Electricity Board ...... - 64 - Figure 17 Forces in the Gujarat power sector reform process ...... - 65 - Figure 18 Newly installed wind energy production capacity in Gujarat since 2002 ...... - 68 -

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- 9 - 1. Research design

1.1 Introduction

With challenges from climate change and environmental pollution and geopolitical risks from fossil fuel energy resources, there is no doubt that power sectors will have to de-carbonise in energy transitions in the future. While already industrialised states such as Germany, the UK or Scandinavian countries are among the most successful at improving the share of power generation from renewable energies, the transition is even more challenging for still developing countries such as India with immense economic growth and increasing energy consumption. With renewable energy technologies slowly starting to reach production power price parity, power production has traditionally been expanded based on fossil fuels such as coal, oil, and gas. Particularly the economically important state of Gujarat with its aim of 30,000MW installed in renewable energy power generation capacity by 2022 represents one of the leading states of the Indian energy transition. India, with a current population of 1.4 billion, is experiencing rapid economic growth and is thereby increasingly becoming an important actor in the world economy. Because of this, it is also becoming one of the most important consumer markets in Asia. This development requires large amounts of energy and raises the importance of energy supply security in India. At the same time, climate change and environmental pollution largely caused by the use of fossil fuels provide an interesting case for the study of an energy transition designed to reduce the emissions of the energy sector and to increase domestic energy sourcing. As a consequence, this research aims to analyse the emergence of the energy transition in India between 1990 and 2019. Key objectives are the identification of relevant actors and change among these, the analysis of policy frameworks on energy as well as the incorporation of renewable energies into the energy system. First, the review of the energy situation shows that dependent on imports to meet its total energy consumption. Indeed, the economic development trajectory of India leads to a rapid increase in energy consumption and creates tensions for its energy security. With a relatively high potential for renewable energy sources, the energy transition can contribute to increased energy security. Policy analysis shows that the energy transition emerged as a topic in Indian energy policy between 1990 and 2003 and got manifested and actively advanced between 2004 and 2013. Supported by technological innovation in renewable energy technologies, landscape-level pressure on the energy security of India and reforms of the political economy of energy production in India are the key reasons for the energy transition. Secondly, the case study of wind power development in the Gujarat state indicates that power sector reform and capacity installation incentives have increased the

- 10 - installation of renewable electricity production significantly. Still, the development continues to be curtailed by changing regulatory frameworks that fail to provide a stable political- economic environment for future development. As a result, while the case serves well to highlight challenges and best practices, the outcomes are context-specific and can therefore not directly be applied to other states. Thus far, there is little research on the energy transition in India compared to literature about, for example, the US, Europe, China, or countries of the Middle East. Hence, there is a clear asymmetry in scientific knowledge about India as a political player and matters of its political economy of energy. These two are inherently connected, gaining insights into India’s energy status and the state of its energy transition will, therefore, help to analyse Indian activities in international relations such as during the UN climate change conferences. Because it considers both political and economic actors, it will also help to advance the understanding of the political economy setup (of energy) in India and how this is affected by an ongoing liberalisation. Furthermore, it can add another example to the discussion of whether private or public actors are more successful in increasing the efficiency of an energy transition. Finally, it can contribute to the debate about sustainable development in emerging economies such as India. The argument is structured as follows: First, this section is continued by the research design developed and methodology applied. The second chapter reviews the energy situation in India to identify the key challenges for the country’s energy security and to determine its potential for the installation of renewable energy technologies. Thereafter, the third chapter analyses the emergence of the energy transition as a topic in national level (energy) policy. Similarly, Chapter four analyses the political-economic environment and regulatory framework for the development of wind energy production capacity. Finally, Chapter 5 reviews and discusses the results before ending with concluding remarks.

1.2 Literature review

Thus far there has been little research considering the energy transition in India as a socio- technical transition with consequences particularly for, and also caused by, political and economic conditions. There is, however, substantial literature developed on various aspects relevant to this research. First, Kar and Sen (2016) analyse the growth of India’s economy particularly from 1990 onwards. They state that two main argumentations have evolved identifying the reasons for the sudden increase in growth: 1) The policy regime shifting from a socialist to a business and private focus in the late 20th century and 2) that economic liberalisation reforms in the 1990s increased productivity, sparked growth and started - 11 - international trade (Kar & Sen 2016, p. 2). Overall, they conclude that political economy factors significantly relate to the different growth episodes India has seen since its independence. There also is a limited amount of research on energy and energy transition aspects in India. Perhaps the best overview of India’s energy situation is portrayed by the Energy Information Agency (EIA 2016). Importantly, India’s energy demand is growing, and it is increasingly becoming dependent on imports from other countries to satisfy its energy demand. Very recently researchers have started to look at the associated geopolitical projects such as newly developed pipelines through Pakistan. Scholars such as Sokołowski (2019) trace the development of overall energy policy in India and situate it in a tension between old, fossil resources and new, renewable energy source developments. The “quest for an appropriate policy” is discussed by Mangotra (2016). The TERI institute published a report with further details to the Indian energy sector particularly concerning renewable energies (The Energy and Resources Institute 2019). Considering wind power, Mani and Dhingra (2013a) attempt an analysis of the state of wind power development up until 2012 and suggest policies for the development of . In the same year, they review wind power development policies of Germany and the UK and identify lessons for India (Mani and Dhingra 2013a)). Davidson et al. (2017) provide a lone-standing theoretical conceptualisation of a political economy framework for wind power development and integration. The primary units of analysis are ‘actors’ and ‘institutions/functions’ that are operationalised through several determinants of successful wind power policy conditions (Davidson, Kahrl, and Karplus 2017, p. 252). In line with MLP theory, their wind power policy framework helps to identify relevant actors and further informs the context. For example, Jolly and Raven (2015) have emphasised the importance of considering the actors involved in the development of wind power capacity. Hence, research will additionally need to consider and compare the perspectives of various stakeholders in the wind power development process. Among others, these should include local administration officials, experts from the institutional forming the institutional entrepreneurship groups and company representatives. In an MLP perspective, these could be considered as developments on the niche level (Geels 2002). In addition to the theoretically developed framework, some scholars have conducted wind power policy specific analyses on a country case study basis. Their frameworks, however, appear fairly simple compared to Davidson et al.’s approach. For example, Cai and Aoyama analyse institutional misalignment in China as a potential cause for the curtailment of wind energy development (Cai and Aoyama 2018). Drawing on a socio-technical transformation background they conclude that institutions shaped by fragmented authorities and misaligned

- 12 - institutions are unlikely to appropriately address complex ongoing developments. Indeed, the assumption that institutional design and the respective actors within shape the policy outcome is shared by Davidson et al (2017). Moreover, Cai and Aoyama also employ an analysis of the socio-political history of China to trace underlying ideas and explain the current policy. Finally, they question whether a highly directive, strong state such as China can deal with changing underlying fundamentals appropriately (ibid, p. 79). Also conducting their case study on China, Zhao et al. (2016) test the correlation between price or non-price policy and wind power capacity installed. Price policy is analysed based on FITs and non-price policy conceptualised as fiscal incentives, development subsidies or promotion (Zhao et al. 2016, p. 273). Controlling for statistical noise such as differing wind resources, technological change or power demand they find that price policy generally appears to be more effective in increasing the installed wind power capacity than non-price policy. In wind-rich areas, however, non-price policy seems to be more effective. Therefore, this adds an element of economic feasibility to the policy framework. In other words, if policies are designed in such a way that they prevent the economic profitability of a wind power project any other non-price policy becomes irrelevant. Thus, economic feasibility can be identified as one of the key determinants of established wind power capacity and will, therefore, need to be addressed carefully in later research. At the same time, there is very limited research on best practices for wind power policy developments that are specifically recommended for India. For example, Mani and Dhingra (2013b) review the offshore wind policies of the UK and Germany to identify important determinants for offshore wind power development in India. Most importantly, they stress that a country-specific offshore wind policy would need to be developed in the first place because its absence currently prevents any projects from being developed (Mani and Dhingra 2013b, p. 907f). Besides this, practices such as early completion bonuses, streamlined environmental clearance processes or ‘no squatter’ clauses (a successful bidder owning a plot but not starting project development) are recommended. Specifically for India, the authors propose a legally enforceable payment mechanism as state electricity boards purchasing the power from development companies are financially unstable and at times did not pay for power purchased over several months. Indeed, this seems to be in line with Zhao et al.’s research on the importance of price policy and further validates ‘general profitability’ as a key determinant of wind power development. The energy and electricity reform in the state of Gujarat has also been the topic of studies. The political economy of state power sectors is most comprehensively covered by Kale, Bharvirkar, and Dubash (2018). A more detailed of the political economy of electricity

- 13 - in Gujarat with a special focus on the efficient distribution of power is also available in the same issue (Sareen 2018). Still, there is little concrete research on renewables or wind power in particular in Gujarat and the underlying political-economic structures for its further development. Thus, a brief literature review shows that a lot of research is developing around the energy transition in India. However, thus far no research is available that connects all themes presented and considers the multiple levels, the points where different interests, assumptions and structural constraints meet. In other words, no research is available that specifically studies the energy transition in India from an MLP theory perspective and as a socio-technical transition. Therefore, specific, context-dependent policy frameworks rather than general assumptions about actors’ interests or demands need to be studied. Such research addressing the problem of decreasing wind power development in India would contribute to the debate by identifying policy opportunities and impediments as perceived by and tested with the stakeholders. Thereby, such research will provide an overview of the current situation of wind power development in India and can assist a variety of stakeholders in targeting and overcoming key challenges in policy areas.

1.3 Theoretical framework and concepts

The thesis rests upon Socio-Technical transition theory (Multi-Level Perspective) and is complemented by insights from the theory of geopolitical economy as well as wind power specific frameworks. Figure 1 provides an overview of the conceptual model of the theory. Multi-Level Perspective theory (MLP) is used to study the socio-technical transitions as it provides tools for a contextual analysis of innovations in light of specific actors and systems (Geels et al., 2016, p. 580). Originating from technological innovation theory, it argues that transitions occur based on (1) innovations that originate from niches, (2) exogenous factors such as geopolitics that put pressure on the existing regime to change/adapt and (3) arising tensions within the regime that create windows of opportunity for the expansion of innovations (Geels 2002, p. 1262). In this approach, technology is defined as inherently powerless that only obtains meaning through human agency and the incorporation into social structures – any transition is dependent on its actors. Socio-technical regimes are conceptualised as technology, markets and user practices, infrastructure, policy as well as industry structure. The inclusion of renewable energies and wind power in particular into the existing political-economic energy regime of India is widely considered to represent such a socio-technical transition. In other words, the energy transition creates not only technological challenges but first and foremost also political and economic tensions. - 14 -

Figure 1: Theoretical Framework of the MLP theory. Reprinted from Geels 2002, p. 1263.

The MLP theory, however, has not fully transformed into a theory of political economy transitions yet but is usually applied with a strong focus on the history of technological innovations. Indeed, it is shaped by a mainly descriptive, qualitative methodology and considering strategy as its unit of analysis rather than specific policy instruments (Geels et al., 2016, p. 580). Thus, while well equipped to cover the multi-level context for the energy transition in India, the MLP theory needs to be complemented with energy and wind power specific frameworks to be analytically sharpened and rigid. Fundamental to energy studies are the concepts of resource scarcity providing challenges for the energy security that actors try to achieve (e.g. Amineh & Houweling, 2005). Insights from these concepts can be utilised in the analysis of exogenous pressures (‘landscape level’) and the political regime formation. According to MLP theory, innovations are initially confined to particular niches. Particular attention is paid to the “breakthrough from niche- to regime-level” (Geels 2002, p. 1271). Rather than simply ‘waiting on the sideline’, innovations emerge from the niche level through cumulation in different uses. Indeed, Geels argues, this can specifically happen through add- on and hybridisation when technologies are used in conjunction with older technologies or through a growth in the particular market. Importantly, it describes a process rather than a single point of time when a technology has ‘left the niche’. The regime level then adapts to the cumulated use and application of technology through a stepwise reconfiguration of the variables depicted in Figure 1; for example Markets, user practices and sectoral policy.

- 15 - A major obstacle to wider expansion is a lack of specifically designed socio-technical frameworks. Therefore, to analyse the energy transition in India along with the example of wind power, the theory is finally complemented by a wind-power specific analytical approach. For this, Davidson et al. analyse the influence of different political and economic institutions on the development of wind electricity (2017, p. 252). For this, they define political institutions by the degree of centralisation and regulatory philosophy and economic institutions as industry structures and approaches to price formation. These will become particularly prevalent for the case study with the development of wind power in Gujarat.

1.4 Research questions and hypotheses

Research Question How did the energy transition in India emerge between 1990 and 2019 and what are the policy, economic and technological challenges?

a. What is the national-level policy strategy of India and its framework to achieve the energy transition?

b. What is the state-level framework for the development of wind energy in Gujarat?

c. How did the policy measures introduced determine the addition of wind power production capacity, which factors impede increased development?

d. What are the political-economic challenges for the energy transition in India?

Hypotheses H0.1: The Indian energy transition is a response to exogenous pressure rather than technological innovation. H1.1: The Indian energy transition is a result of technological innovation rather than exogenous pressure.

H0.2: The political economy of wind power development in Gujarat can serve as a role model for other states. H1.2: The political economy of wind power development in Gujarat cannot serve as a role model for other states.

- 16 - 1.5 Methodology and Data

Method and Operationalisation As outlined in the research question, this research aims to study the political economic context of the energy transition emergence between 1990 and 2019. In order to effectively evaluate the relevant developments on a niche, regime and landscape level a qualitative research approach is chosen. Two methods are selected to answer the research question: First, a policy document analysis is conducted to study the outcome of and political framework for the energy transition at different points in time. Second, a case study of wind power development in Gujarat is conducted because the responsibility for energy issues is shared between the national- and state-level. The case study helps to consider concrete regulatory frameworks and to identify challenges or impediments. While interviews as a secondary explanatory level to the analysis were planned at first, they could not be conducted because of the circumstances arising from the Corona pandemic. Furthermore, a review of the material energy situation in India provides the contextual insights for the analysis. First, the analysis is conducted with the qualitative research method of policy analysis. This method is chosen to apprehend the given political-economic context for the energy transition and to trace its development between 1990 and 2019. It helps to answer the research question by studying the outcome of the policy formation process and presents a clearly defined political strategy for the given points in time. As argued by Creswell, qualitative research is inherently connected to interpretative research (2013, p. 187). Hence, the results will furthermore be compared to each other in order to trace the issue over time. Similarly, reviewed arguments from the niche and landscape level such as a rural/urban divide or the level of electrification contextualise the results of the policy documents on the regime level. The biggest shortcoming of a policy document analysis is its inability to evaluate the policy formation process. Therefore, arguments are weighed carefully and the study does not aim to delineate clear causal relations but rather correlation. The identification and selection of relevant policy material is described in more detail in Section 2.2. The principal dataset, however, consists of seven chronologically published strategy documents that contain the national development strategy for a period of three to five years. More specific energy reformation policy as well as position papers on climate change complement the analysis by adding to the analysis on a regime level. Second, the analysis furthermore draws on a case study of wind energy development in Gujarat to contribute to the overarching research question in general and to respond to sub questions b) and c) in particular. This method is chosen to provide an adequate holistic picture of the political economy shaping the energy transition in India. This approach is a core - 17 - understanding in qualitative research and contributes to the identification of actors and multiple perspectives in complex cases (ibid, p. 188). Indeed, India has a federal structure where the responsibility for energy issues is shared between the national- and state level. Therefore, a case study is vital to study the concrete implementation of the energy transition and the development of specific renewable energy types. The analysis can proceed in more detail and allows for a clearer relation between causes and consequences of ongoing developments. Also, the state with the highest potential for wind energy development in India is chosen to avoid a selection bias. Section 4.1 motivates the selection of Gujarat as the case in more detail and discusses its comparability to the political economy of energy in other states. For this analysis, a wide array of data is selected. While three wind power specific regulatory frameworks form the basis for the analysis of the political economy, the results are complemented by technical reports as well as further and previously conducted research. Thereby, the case study adds to the argumentation because it analyses a concrete state-level example and allows for the identification of specific actors in a regional political economic context. In other words, whereas the policy document analysis helps to analyse the strategy for the energy transition in India over time, the case study contributes data on concrete measures and the overall success of the implementation. Third, semi-structured interviews with informed stakeholders were planned to study the perspectives of other actors such as private companies or research institutes. Data obtained in interviews would have helped to understand not only the outcome of policy or the energy transition but provide information on the dynamics within the ongoing debate. Indeed, the formation of a regime for the energy transition is shaped by the interests represented to the policy makers. One particularly important issue interviews could have potentially explored would have been the strategy of the policymakers to ensure equal representation of interests in order to overcome resistance from the fossil fuel sector. Because policy outcomes only represent the outcome of such processes, there is not enough data for this kind of research.

Unfortunately, the Corona situation with travel bans and increased pressure on personal and professional life have rendered the execution of interviews very difficult. Although 24 different individuals were approached from a wide range of institutions such as administration, companies, or interest groups none of them was available for an interview. 13 of the potential interviewees responded that they would not be able to participate in an interview given the current circumstances. Moreover, three people that had already expressed interest in giving an interview before the start of the research cancelled their participation when the COVID 19 measures were implemented. Notably, India has been in continuous lockdown since March 24, 2020, and regular life is yet to resume. In effect, the intended travel plans to conduct interviews - 18 - in person also had to be cancelled. Based on discussions with other scholars that have conducted similar research e.g. in Gujarat, a personal appearance would have drastically increased the chances of getting interviews particularly among the local authorities such as the state electricity board.

Data

As outlined above, the data for this research consists of policy documents published by the national government and state governments of India. The identification of relevant policy documents is described in more detail in section 2.3.1. Effectively, the following policy documents are selected for the analysis:

Five-year plans (1992, 1997, 2002, 2007, 2012) NITI Aayog strategy plans (2017/18, 2019/20) Electricity Act (2003) Integrated Energy Policy (2008) Draft National Energy Policy (2017) Nationally Determined Contribution (2015) Wind Power Policy Gujarat (2007, 2013, 2016)

1.6 Outline of the argument

The remainder of the thesis will be structured as follows. First, Chapter two discusses the political economy of the energy situation in India by considering the material energy situation and its reflection in policy. The review demonstrates that India relies on coal, oil, and gas as its main energy sources. As domestic resources are very limited the country is dependent on imports to meet the steadily rising energy consumption. At the same time, there is a lot of potential for renewable energy technologies such as wind or solar power. The policy and administrative structure are designed to ensure a secure supply of energy, support the national strategy of GDP growth and more recently also to address climate change. Thereafter, Chapter three analyses and relates the developments on the niche, landscape, and regime levels in three different periods. The salience of the energy transition increases over time and is particularly framed as a response to import dependency and global action on climate change. Chapter four introduces a case study of wind energy development and policy frameworks in the state of Gujarat. It concludes that solid and transparent frameworks, as well as economic incentives,

- 19 - are key determinants of capacity installation. Moreover, the chapter demonstrates how the local political economy shapes the design of the energy transition. Finally, the fifth chapter reviews and discusses the results before presenting concluding remarks.

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- 21 - 2. The political economy of the energy situation in India

This chapter provides an overview of the energy situation in India by analysing energy consumption, production, and imports as well as the potential for renewable energy development. Thereafter, it is discussed how these reflect in India’s energy policy and its energy strategy. The assessment of the overall energy situation helps to develop potential reasons for the energy transition in India and to identify challenges that arise from an attempted switch to renewables. Detailed analysis and discussion of the material energy situation are vital for informing the historical analysis of the emergence of the Indian energy transition that follows in chapter 3. Because the state is the key player in shaping the energy situation in India the analysis of policy and the institutional setup further contribute to the theoretical concepts laid out in the MLP theory. This chapter is structured as follows: First, the energy situation of India is reviewed by presenting domestic energy resources, energy production, energy consumption and, finally, the imports resulting from the other factors. Second, Section 2.3. reviews the reflection of the material energy situation in policy and identifies relevant documents as well as political actors.

2.1 Structure of the energy situation

The energy situation in India is mainly shaped by coal and oil as the key fossil fuel energy carriers. Although India does have considerable fossil foul resources these are not sufficient to meet its quickly growing energy consumption. This section now introduces the overall availability of resources as stated by the Central Statistics Office of India (2019) before considering the current energy production capacity and levels of energy consumption. Finally, resulting imports are introduced briefly.

Domestic resources and production As of 2019, India has proven coal resources of 155.33 billion tonnes. Of these, 6.54 billion tonnes are in the form of lignite (brown coal) that generally has a lower energy density. The effects of this, however, are negligible in total and the resources of lignite are here counted towards the overall resources in coal. Most of the coal reserves are located in eastern parts of the country. In total, these resources make India the country with the fifth-largest proven resources of coal worldwide (EIA 2016). At the same time, has a comparatively low calorific value (energy density) as it is high in ash and low on sulphur. For example, coal sourced from Indonesia averages a calorific value of 6200 kcal/kg while coal from India averages only 3500kcal/kg (Bhattacharya et al., 2013, p. 178). Thus, while India has extensive - 22 - Figure 2: India crude oil production by region, 2015. Retrieved from Energy Intelligence Agency (2016)

coal resources, most of it is of a low calorific value that limits its use for the production of energy. In 2013, about 612 million tons of coal were extracted and used for the production of mostly thermal energy. The amount of coal extracted experiences an average annual increase of roughly 9% (EIA 2016). By 2018, only 127.56 million tons of coal were subsequently processed in coal washeries to reduce the amount of ash contained and make it more suitable for further processing (Central Statistics Office, 2019, p. 21). Because the distance between coal mines and final usage sites are often larger than 1000km, washed coal with a higher energy density is easier to transport from the extraction to the production site (Bhattacharya et al., 2013, p. 179). There are, however, significant challenges with installing enough capacity for coal washeries in India, for example, because of technology needed and associated costs (ibid, p. 189). Secondly, India has considerable resources of crude oil that are located both on and offshore. By 2019, the Central Statistics Office issued an estimate of 594 million tonnes of crude petroleum located largely in and off the west coast of Gujarat and as well as in the state of Assam located in the North-East of India (2019, p. 19). With only little growth rates, the production has remained steady at about 1 billion barrels per day since 2011 (EIA 2016). Figure 2 depicts the distribution of crude oil production in the main regions. While the amount of onshore extraction is constantly declining, offshore sourcing is expanding its share (ibid). On a global geopolitical scale, the crude oil resources and production capacity of India remain, however, relatively insignificant compared to other countries such as Iran, Russia, or the US.

- 23 - Figure 3: Source wise Estimated Potential of Renewable Power in India in 2018. Data retrieved from Energy Statistics 2019 (Central Statistics Office 2019) Third, India has considerable resources of natural gas that are located both on- and offshore. By 2019, the estimated gas reserves amounted to a total of 1339 billion cubic metres (BCM), 62% in offshore fields and the remaining 38% again mostly in western India as well as in Assam. At the same time, the net production of natural gas increased slightly to almost 32 BCM per year. In the longer term, however, the production rates of natural gas in India are declining compared to the peak of roughly 51 BCM in the year 2010 (EIA 2016). This is the result of diminishing oil fields and slow exploration of the offshore resources. Besides fossil fuel resources, India also has significant potential for the exploration of renewable energies. According to estimates of the Central Statistics Office, India has a potential for renewable power generation of up to 1,096GW (2019, p. 20). As depicted in Figure 3, this potential can mainly be utilised by solar and wind power while other sources only play a minor role. For solar power, the states with the highest potential are – in descending order - Rajasthan, Jammu and Kashmir, , and . Apart from Jammu and Kashmir, these states are all located in the central west of India. The potential for wind power both on- and offshore is most concentrated on the coastal states of Gujarat and Maharashtra in the west as well as , , and in the southeast. There is almost no potential in states other than these. In total, Rajasthan is the state with the most estimated potential for renewable energies (14.8%), followed by Gujarat (11.14%), Maharashtra (10.39%), and Jammu and Kashmir (10.27%). Almost half of the total renewable energy potential is thereby located in these 4 out of 36 states in India. By 2019, the installed capacity of renewable energies reached 116GW and thereby represents 29% of the total power production capacity installed.

- 24 - Energy consumption and usage by sector

India consumption of primary energy is experiencing rapid growth across all energy resources but particularly in the private and industrial demand for electricity. The total national energy consumption amounted to 553,904 kilo tonnes of oil equivalent (ktoe) in 2017/-18 and according to the new policies scenario is expected to grow up to almost 1,000,000 ktoe by the year 2040 (Central Statistics Office 2019; IEA 2018). Thereby, India is expected to become the single largest source of global energy consumption growth within the next 20 years. This section will shortly depict the energy consumption in India before moving to a more detailed analysis based on primary resources. Finally, the sectoral demand for energy is considered. Energy consumption in India has more than doubled between 1990 and 2013 and continues to grow (EIA 2016). As depicted in Figure 4, the per capita energy consumption has increased from 19,614 megajoules (MJ) per capita in 2011/12 up to 23,355 MJ by the year 2017/-18. To compare, roughly 42,000 MJ equal one kiloton of oil equivalent. Thus, the energy consumption per capita in India has increased from 0.46 ktoe per capita to 0.55 ktoe per capita in only six years. Moreover, this growth is taking place despite a constantly growing population of about 1.4 per cent per year (World Bank 2020). Figure 5 depicts the consumption of energy by source in 2017-18. Most important for energy consumption are coal and lignite with a combined share of 46%. These are closely followed by crude petroleum as the second most important source of energy with a share of 34%. The remaining 20% is covered by energy sourced from natural gas (7%) and electricity from nuclear, hydro as well as other renewable sources (13%). Following data from the Central Statistics Office, the consumption of all energy resources is growing while consumption from electricity and coal/lignite expand the fastest at 7.4% and 8.7% between 2008 and 2017 (2019, p. 60). At the same time, the consumption growth of oil and gas reduces to 2.7% for crude oil and 4.1% for gas when comparing it to the previous year (ibid). Thus, while the energy consumption in India growth across the various sources, these sources grow at different rates. In other words, coal and electricity from hydro, nuclear and other renewables expand their share relative to the other sources of energy and the consumption growth of oil is decreasing. Importantly, not only the share of the energy sources consumed in India differs but also their consumption in different sectors. While the production of electricity is overall the most important usage of primary energy sources there are significant differences for example between coal and oil. Finally, the largest share of electricity is used for industrial purposes.

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Figure 4: Per Capita Energy Consumption from 2011-12 to 2017-18. Retrieved from Energy Statistics 2019, p. 58 (Central Statistics Office 2019)

Figure 5: Source wise Consumption of Energy during 2017-18. Retrieved from Energy Statistics 2019, p. 57 (Central Statistics Office 2019)

- 26 - First, as identified before, coal is currently the most important source for energy consumption in India. Most of the coal in India is consumed to produce electricity (576 million tonnes or 64.3%) (Central Statistics Office 2019, p. 62). Secondly, coal is consumed in the energy-intensive steel and washery industry (6.5%) and a variety of other industrial branches such as brick and cement production or the refinement of sponge iron (26.9%). Particularly the use of coal in the steel and washery industry has increased from only 16.6 million tonnes in 2008/-09 to 58.5 million tonnes in 2017/-18, an average annual growth of 13.4%. Lignite is generally used in similar industries but with 84.7% almost exclusively for the production of electricity because of its lower calorific value (ibid). Thus, coal and lignite are mainly consumed for the production of electricity as well as for the mining and refinement industry. Crude petroleum as the primary energy form needs to be refined and is then consumed in a variety of products. Out of a total 206.17 million tonnes of oil products, 81 million – almost 40% - are used in the form of high-speed diesel oil used directly by resellers/retailers (86%), in the transport industry such as train locomotives as well as other industries relying on engines (Central Statistics Office 2019, p. 64ff). Secondly, 24% is used in the form of petrol and LPG mostly for private mobility and domestic distribution. The remaining 76.2 million tonnes are used for a variety of products such as kerosene or petcoke which are again distributed to final consumers. Different from coal, products derived from crude oil are not primarily consumed in the production of electricity but rather as fuels for transport, private mobility and running various kinds of engines. Natural gas accounts for 7% of the energy consumption in India. Of the overall 52 million cubic metres, 60.7% are used for energy purposes such as electricity generation and transport/ distribution networks while the remaining 39.3% are used for non-energy purposes such as the production of fertilisers and other petrochemicals. With an annual total consumption increase of about 4.1%, the use for energy purposes is further increasing while non-energy usage decreases. Thereby, natural gas is currently mainly used in the energy industry and contributes to the production of electricity. Electricity in India is mostly consumed by the industry, domestic and agricultural sector. As depicted in Table 1, 41.5% of the electricity produced in 2017/-18 were consumed in the industrial sector. While the agricultural and domestic sectors combined are together responsible for another 42.3% of the energy consumption, the commercial sector is less energy- intensive and plays a relatively small role just as traction and railways or other uses. Importantly, the electricity consumption in India is growing at a very high rate of about 7.4%

- 27 - Table 1: Consumption of Electricity by Sectors in India. Retrieved from Energy Statistics 2019, p. 71 (Central Statistics Office 2019)

annually and has almost doubled between 2008/-09 and 2017/-18. Thereby, it is the fastest- growing source for the expanding energy demand and consumption in India.

Energy imports Because India does not have enough resources to fulfil its energy consumption purely based on domestically sourced energy it relies on the import of fossil fuels. The amount of energy produced from each source as well as import and export are displayed in Table 2. First, India relies on imports of coal, crude oil, and natural gas to sustain its current primary energy supply. At the same time, nuclear, hydropower as well as other renewable sources are entirely sourced domestically. They do, however, only amount to 3.5% of the primary energy supply. In terms of coal, India imports roughly 135,000 ktoe and thereby 25% of its total energy sourced from coal. Similarly, natural gas is complemented by an import rate of 44%. For oil, on the other hand, India imports close to 87% of its energy supply. Thus, in terms of oil India is almost entirely reliant on oil imports to fulfil its energy supply with only little contribution from domestic production. Still, many of the refined oil products are exported again so that it actually achieves a surplus in the balance of oil products. Overall, India is dependent on the import of energy to meet its energy demand. While imports are necessary for all fossil fuels, particularly regarding oil the country is almost entirely reliant on imports from other countries.

- 28 - Table 2: Energy Balance of India for 2017/-18. Retrieved from Energy Statistics 2019, p. 76 (Central Statistics Office 2019)

2.2 Reflection in energy policy

India’s energy policy is designed to establish and sustain energy security and to address potential challenges arising from the energy situation outlined in section 2.2. This section now discusses the reflection of the material situation in the current energy policy and institutional design. The first part of this section describes and discusses India’s energy policy and energy strategy based on current policy documents. Thereafter, the second part of this section describes the institutions and ministries that India has set up to enact its policy and address its material energy situation. Finally, the third part of this chapter discusses India’s policy to attempt the energy transition and the divided responsibility between national and state governments.

2.2.1 Reflection in policy

Both the central government and state-level policies are relevant for energy policy in India; the overarching policy objectives are energy access, energy security and climate change mitigation. First, India’s political system as a federal union of 28 states and 7 union territories has a shared legislative responsibility for energy-related matters. Therefore, while other countries such as China or Germany develop an energy policy solely based on the national level, an analysis of both central government and state level are necessary to assess energy policy in India. As laid out in the constitution, the central government and the state legislation can either have sole responsibility for a policy issue or shared responsibility (IEA 2012, p. 12). Indeed, different energy policy issues fall into different categories. First, mineral and oil resources and thereby the general exploration of resources as well as atomic energy are placed with the central government. Second, gas and gas-work are the responsibility of state legislation. Finally, both the central government and state legislative share responsibility for the production and transmission of electricity. In effect, the federal political system with coalition-based politics and differentiated responsibilities make the composition of an all-encompassing energy policy very difficult (ibid, p.15).

- 29 - As a result, the first overarching energy policy deemed ‘Integrated Energy Policy’ (IEP) was only introduced in 2018. As the first comprehensive energy roadmap, the IEP identified energy challenges that must be addressed, including meeting energy demands, securing the supply of energy and mitigating climate change e.g. through the expansion of renewable energies (Badrinarayana 2010). One of the most salient features in the IEP was the harmonisation of energy policy, e.g. in terms of taxes and regulation, to provide equal access to public and new private companies in the energy sector and to support the GDP targets. In other words, the strategies set out are “energy diversification and efficiency; catalysing investment in energy diversification and energy by a combination of market competitiveness, regulatory intervention, energy pricing changes, and effective subsidies; strengthening diplomacy; and demanding accountability for environmental externalities” (Badrinarayana 2010, p. 2). While the IEP sets out goals until 2032 and is still the only adopted overarching energy policy in India, a second policy framework called the ‘Draft National Energy Policy’ (NEP) is currently being developed and under consultation. In this, “access at affordable prices, improved security and independence, greater sustainability and economic growth” are identified as the four key objectives of revised energy policy (NITI Aayog and 2017, p. 4). Furthermore, the NEP proposes establishing permanent coordination of energy policy in the central government to guide policymaking, implementation and enforcement across the country (IEA 2020). Second, energy is part of the five-year plans that India has published as general political strategy papers between 1951 and 2017. Issued by the central planning commission as a sub- administrational body of the central government the overall twelve five-year plans traditionally had the main objective to set the goal for the GDP growth in the foreseeable future. The plans also feature brief chapters on policy issues such as energy that generally outline goals and administer their development; the states were not consulted in the development of the plans. However, the five-year plans were not binding and the economy and policy often missed the targets set out initially as they did not have direct implications for the fiscal budget (IEA 2012, p. 22f). In 2017, the five-year plans and the national planning commission were substituted by a ‘Three Year Action Agenda’ (3YAAG) developed by NITI Aayog. NITI Aayog is a governmental institution that works as a think tank considering the sustainable development of India based on both the involvement of the central as well as state governments. In the 3YAAG, Energy is discussed as one of many ‘growth enablers’ and extensively elaborates on goals in the security of energy supply including import dependency, the enhancement of efficiency as well as the growth in renewable energies. Still, the content is non-binding and, in this aspect, similar to the five-year plans utilised up until 2017.

- 30 - Third, India’s policy on climate change mitigation features sections on energy and the energy transition. The main objective is the mitigation of climate change effects, the reduction of environmental pollution and bringing these in accordance with the aspired economic development and growth of the country. In 2008, the National Action Plan on Climate Change (NAPCC) introduced concepts such as limited per capita emission and emphasised the special responsibility of developed countries in reducing global emissions (Prime Ministers Council on Climate Change and Government of India 2008). Furthermore, eight initiatives labelled ‘missions’ were implemented. The Jawaharlal Nehru National Solar Mission (JNNSM) and the National Mission for Enhanced Energy Efficiency (NMEEE) are directly energy-related and structure a set of topic-related measures such as market-based mechanisms, financial support mechanisms and general advisory programs (IEA 2012). The Nationally Determined Contribution (NDC) ratified under the Paris Agreement in 2015 was the first policy document featuring concrete goals for the reduction of emissions by 2030. For example, the energy intensity of the GDP should be reduced by 33-35% compared to the level of 2005, a share of non-fossil-fuel-based power capacity of 40% and programs to strengthen efforts in climate change adaptation. In sum, energy also plays a key role in India’s efforts to mitigate and adapt to climate change. As a result, the energy policy is likely to be adapted accordingly. Thus, India’s energy policy is determined not only in a dedicated energy policy paper but also significantly influenced by national strategy and climate change policy. The differentiation of responsibilities and sometimes shared responsibility, e.g. for electricity between the central government and state legislation, create challenges to India’s energy policy and energy security. Moreover, policy related to energy has recently shifted in its underlying assumptions about the political-economic structures of the sector – e.g. from a centrally organised to a more market-based solution for the provision of energy. Thereby, considering all three policy types is vital to form an understanding of energy policy in India and its ability to address the challenges originating from the material energy situation. An overview of the energy-related policies, their main objective and overall content is presented in Table 3.

- 31 - Table 3: The main energy policies in India. Own composition, derived from IEA 2012, p. 21ff.

Policy type Policy example Main objective Content Energy policy Integrated Energy Policy (2008) Energy policy Energy access, energy efficiency, energy harmonisation security, transition to market economy Draft National Energy Policy (2017)

Strategy Five-Year Plans (until 2017) Political economic strategy Support GDP growth, political-economic structure, short energy section Three Year Action Plan (since 2017/18)

Climate Change National Action Plan on Climate Change Climate Change mitigation Per capita emission, several missions to (2008) enhance energy efficiency and foster renewable energy development Nationally Determined Contribution under the Paris Agreement (2016)

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2.2.2 Reflection in institutional design

The shared responsibility for energy policy also reflects in the institutional design of relevant ministries and agencies. There are currently four different ministries on the central government level: The Ministry of Power (MoP), the Ministry of New and Renewable Energy (MNRE), Ministry of Petroleum and Natural Gas (MoPNG) and the Ministry of Coal (MoC). Each of these has a different focus and several affiliated commissions, bureaus, or authorities. An overview of the energy sector administration is depicted in Figure 6. The institutional design of the energy sector in India is complemented by the central government as the overseeing body to the ministries, the governments of states and union territories as well as the NITI Aayog think tank as an advisor. Similar to the energy policy discussed above, the entirety of these actors needs to be considered to comprehensively analyse ongoing dynamics such as the energy transition.

The Ministry of Power was established in 1992 as a successor to the former Ministry of Energy Sources. It governs the electricity sector in India and hosts the Bureau for Energy Efficiency (BEE) and the Central Electricity Authority (CEA), which acts as an advisor on the technical co-ordination, programme supervision and data collection (IEA 2020). It had an allocated budget of ₹15,046.92 crores (approx. $2.1 billion) in 2018. The MoP’s central objective is the oversight of electricity production, distribution, access, and development across the country. To fulfil this task, it interacts with both the central and the state governments in the planning and implementation of projects. Moreover, it oversees some of the largest public-sector undertakings in power production and grid operation. Just as the MoP, the Ministry of New and Renewable Resources was established in 1991 as a successor to the Ministry of Energy Sources. The MNRE is mainly tasked with the development of solar, wind and other renewables in India (ibid, p. 27). It had an allocated budget of ₹5,146.63 crores (approx.$720 million) in 2018. The MNRE is supported by the National Institute of Solar Energy, the National Institute of Wind Energy and the Indian Renewable Energy Development Agency that provides financing for projects as a non-banking financial institution. Biofuels, however, are not part of the MNRE but are managed by the MoPNG. The Ministry of Petroleum and Natural Gas (MoPNG) is tasked with the oversight and development of policies relating to the petroleum and natural gas sectors. Set up in 1985, it is by far the biggest energy-related ministry with an estimated budget of ₹42,901 crores (approx. $6.0 billion) in 2020/21. The MoPNG houses the public-sector undertakings such as India’s largest oil and natural gas producer Oil and Natural Gas Corporation Ltd., the largest refiner

- 33 -

Figure 6: Energy sector administration in India. Retrieved from India 2020 Policy review (IEA 2020, p. 27)

and retailer Indian Oil Corporation Ltd. as well as the large state-owned gas company GAIL (formerly known as Gas Authority of India Ltd.). Almost all of the oil and natural gas-related activities – both politically and economically – originate from the MoPNG. Fourth, the Ministry of Coal (MoC) is the oldest and by now smallest energy-related ministry in India. Set up in 1979, its budget in 2018/19 amounted only up to ₹770.91 crores (approx. $110 million). The MoC is responsible for the exploration, exploitation and the development of coal and lignite resources in India. The Coal Controller Organisation as an affiliated institution is responsible e.g. for the sampling of coal, the permission for operating coal mines and collecting relevant statistics. Furthermore, it houses Coal India Limited (CIL) as the countries’ largest coal mining company. Overall, the structure of the energy sector administration in India reflects the countries complex material energy situation driven by the constantly rising energy consumption across the sectors and throughout the country. Although the separation of tasks allows for specialisation in their sector, the ministries are also at risk of competition between the different energy forms. This way, they often do not directly act in conformity with national energy objectives (IEA 2012, p. 20).

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2.3 Conclusion

This chapter has analysed the energy situation in India and reviewed its reflection in energy policy as well as institutions created. Overall, the energy sector in India is tasked with the fastest growing consumption of energy worldwide while experiencing severe limitations in local resources and access to energy by large parts of the country. Thus, India’s energy policy needs to address both the import dependency in terms of fossil fuels as well as the creation of a nationwide applicable energy structure at the same time. Indeed, as argued above, this reflects both the in the energy policy and the institutional design of the energy-related administration. Moreover, the political-economic structure of energy in India is also in transition from a government centralised to a market-oriented organisation. This holds particularly in light of climate change and the attempted energy transition. Because most renewable energies are very different in character than traditional energy sources, their implementation in the Indian political economy of energy creates various challenges. The reasons for and the challenges of the emergence of the energy transition in the period from 1990 to 2019 will now be explored in Chapter 3.

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3. The political economy of the energy transition emergence in India between 1990 and 2019

This chapter analyses the political-economic circumstances of and reasons for the emergence of the renewable energy transition as a part of the national energy security strategy in India between 1990 and 2019. In these last 30 years, India has experienced rapid economic development coupled with population growth that caused a significant increase in the consumption of energy. As a result, securing the supply of energy to support the continued growth of GDP has been one of the major issues in the political economy of India. Part of the energy strategy is an energy transition with, among others, the increased use of renewable energy sources. However, varying policy strategies and the ongoing transformation from a state-central organised economy to a market-based economy have led to different outcomes particularly regarding the attempted energy transition and the development of renewable energy. Therefore, the analysis conducted in this chapter aims to answer the following research question:

How did the political economy of India determine and shape the emergence of the energy transition in India between 1990 and 2019? - What are the key political and economic developments on a niche, regime, and landscape-level? What are the relevant trends? - How did the political economy of India influence the energy transition at different points in time?

The chapter is organised as follows: First, section one presents a political-economic overview of the key events and developments between 1990 and 2019. Three distinct periods are identified for the use in the subsequent analysis, namely 1990 - 2003, 2004 - 2014 and 2014 – 2019. Thereafter, section two analyses the emergence and design of the energy transition in the different periods and based on the relevant political-economic circumstances for each. Following the MLP framework, this section argues that changes in the niche and landscape levels reflected in the political economy and strategy on the regime level. The resulting design of administrative bodies, as well as the motivation for the energy transition, are analysed in detail. Finally, the third chapter concludes by briefly reviewing the trend of the energy transition in comparison to the current capacity development goals.

- 36 -

Figure 7: GDP per capita in India between 1960 and 2018 (in US$). World Bank Database. Accessed on May 15, 2020, https://data.worldbank.org /indicator/NY.GDP .PCAP.CD?locations=IN

3.1 Identification of periods

The last 30 years between 1990 and 2019 represent one of the most significant growth and transition periods in the political economy of India since it gained independence from colonial rule in 1947. As depicted in Figure 7, the GDP per capita in India has increased from USD 82.19 in 1960 to USD 367.56 by 1990 up to an astonishing USD 2,009 in 2018. The growth of the GDP per capita increases particularly from the year 1991 onwards. Indeed, this can be seen as a reflection of the liberalisation and transition of the political economy of India in the same year. In 2016, Kar and Sen have identified a total of four distinct growth periods in India (2016) First, they characterise the period between 1950 and 1992 as a phase of “stagnation and a nascent recovery” (p. 29). Second, the time between 1993 and 2001 is described as the “onset of high growth” (p. 45). Third, they find that the period between 2002 and 2010 is characterised by “rapid growth and limited structural transformation (p. 57). With only limited data reaching post-2010 at the time, they outline a trend for a “growth slowdown and a debatable partial recovery” that characterises the fourth and final growth episode. Together with the insight of GDP per capita growth form Figure 7, it is thus particularly the recent period between 1990 and 2019 that determines the current political economy of India and is therefore chosen for this analysis. While the overall number of three growth periods remains, an energy transition specific determination differs slightly because of political events and relevant policies published. Thus, the analysis will be categorised in the following periods: The emergence of

- 37 - the energy transition from 1990 until 2003, the design and fast acceleration of the energy transition from 2004 until 2014 and the bottlenecks of the energy transition from 2014 until 2019. Each period is determined by distinct political-economic characteristics on a niche, landscape and regime level that will be analysed. This is, however, first preceded by a brief summary of the political economy in India before 1990.

3.2 Brief summary of political economy in India before 1990

Following India’s independence, its political economy was shaped by a hegemonic party system and state-centralised structure of the economy. Economically, the annual GDP per capita grew by an average of only 1.85% in the period between 1950 and 1992 although it increased over time (Kar and Sen 2016, 30). Almost all economic activity was subject to licensing and thereby under control of the centralised political administration. The licensing system effectively prevented the market entry of new participants and thereby resulted in the aggregation of economic activity in publicly owned and, from 1980 onwards, large private companies that came to dominate in their respective economic sectors. Energy-related companies were entirely owned and controlled by the central government. Politically, the system turned from a one-party dominated hegemony with the ‘’ (INC) party forming the national government almost all of the time to more of a multi-party, minority governments with the support for the INC deteriorating over time. The government strategically followed the five-year plans as set up by the planning commission to ensure the growth of GDP while keeping import dependency to a minimum and striving for a subsistence economy. As a result, India’s political economy up until 1990 remained in a relatively stable, state-dominated and centralised condition that achieved a steady growth of GDP but did not foster much private activity from both domestic and foreign actors.

3.3 1990-2003 The emergence of the energy transition

The period between 1990 and 2003 can be characterised as the emergence of the energy transition that closely followed the transition to a more liberalised and market-oriented political economy. Whereas the 8th five year plan outlined a loose long term energy strategy for the first time, the period ended with the establishment of the Electricity Act in 2003 that liberalised the power market; thus providing the first established political-economic conditions for the development of electricity production from renewable energies (Ministry of Power 2003). At the same time, the research and development of renewable energy technologies increased during the period.

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Developments on the Niche level Between 1990 and 2003 the development of renewable energy technologies was very limited and the technology still inefficient both in the use of energy and the utility cost. Global growth of investment in research and development of renewable energy technologies, however, led to the first installed trial plants with slowly increasing efficiency and decreasing costs over time. For example, the first test station in India was installed in India in the state of Tamil Nadu in 1998 (Jolly and Raven 2015, p. 1006). This was a cooperation project with the national energy laboratory of Denmark which has been one of the main drivers of wind energy technology development on a global level from the start. Because renewable energies did thus not represent an attractive investment solution between 1990 and 2003 yet, capacity building for the development of renewable energy technologies in India remained very slow. While the research and development of renewable energy technology had increased over time in some countries such as Denmark, the technology development lagged in India at the time.

Developments on the landscape level Between 1990 and 2003 India was exposed to numerous developments on the landscape level that presented a significant change from the time before 1990. In 1991, the rising oil price caused by the gulf war led to a macroeconomic challenge for India. While most of its economy was previously designed in a centralised structure with a domestic focus the country still relied on the import of oil. In effect, the rising oil prices on the one side and very low export on the other side created a very large current account deficit that even caused the country’s GDP to decline in 1991 and 1992 (Kar and Sen 2016). Overall, the exposition to global energy price developments caused by the energy import dependency remained intact throughout the entire period. This had a major impact on the design and approach of the regime level to the political economy which is discussed in the following section. After 1992, the country’s landscape level was still dominated by the rural and subsistence-oriented structure as a result of the political economy established before 1990. The largest part of the population was working in the agricultural sector and many had an income below the poverty line. Confronted with increasing economic growth, this started several landscape-level developments that would continue to shape the country well beyond 2003. First, the population expanded from 873 million in 1990 to a total of 1.11 billion by 2003, surpassing the level of a billion residents in 1997 (World Bank Dataset). Secondly, the economic growth, particularly in urban and metropolitan areas, lead to processes of urbanisation across the country. As a result, the urban population expanded to 317 million residents in 2003 from a former 216 million in 1990 – increasing much faster than the overall population. Moreover, this also led to a larger part of the population gaining

- 39 - access to energy products with 64% of the population being connected to the electricity network in 2003 compared to 50.9% in 1993 (ibid). Indeed, the accelerated growth rates in GDP were furthermore caused by an expanding industrial and business sector. In sum, all of these developments on the landscape level led to significant growth in the demand for and consumption of energy in India in the period between 1990 and 2003. All things considered, the period following the macroeconomic crisis in 1991 was shaped mainly accelerating economic growth, population growth and urbanisation as well as increasing demand for energy. In other words, the period was primarily shaped by larger parts of the population gaining access to the economy which led to a significant increase in the country's energy consumption – thereby increasing the dependence on global energy provision developments to sustain the supply of energy.

Effects on and developments on the regime level Confronted with the landscape challenges outlined above, the regime level approach in India between 1990 and 2003 was mainly focussed on the transformation of the political economy towards a more liberalised and less centralised economy and sustaining a stable supply of energy to support the resulting economic growth. Most importantly, the macroeconomic crisis of 1991 led to a change in the political-economic ideology among the political actors. To prevent a similar crisis in the future, the approach changed from an “anti-business approach to a strongly pro-business approach” in the aftermath of the crisis (Kar and Sen 2016, p. 56). This resulted for example in the abandoning of the restrictive centralised licensing in 1993, effectively reducing the control of the administrative bureaucracy over the economic development, the formation of business relations as well as reducing trade restrictions. At the same time, the structural changes also reflected in the political system. Dominated by a hegemonic party before, the elections started becoming more contested with the rise of the Bharatiya Janata Party (BJP) as the second-largest party. Indeed, the BJP won the national elections and got to power in the second half of the period between 1998 and 2003. Confronted with the challenge of continued energy supply security to support the economic growth, the structural changes in the overall political economy also reflect in the regime level policy on energy. Relevant policies for this period are the 8th and the 9th five-year plan respectively as well as the Electricity Act established in 2003. The 8th five-year plan covers the policy objectives for the period from 1992 to 1997 and, different from the short term oriented previous plans, establishes the first long term planning of energy (PC 1992). The plan emphasises the “energy end-use as well as an efficient strategy of long-run energy supply” (ibid, Sec. 8.15.1).

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To reduce the import dependence particular on oil, the short- and medium-term priorities feature primarily the reduction of the energy intensity in the economy and the substitution of petroleum products by domestically sourced coal, natural gas, and electricity. Thereby, this is a direct reflection of the gulf war and the resulting oil crisis in 1991 on India’s political economy (of energy). Interestingly, in this context, the 8th five-year plan also mentions a long- term transition to renewable energy as desirable. Acknowledging the then technological and economical status of renewable energy technologies the plan further aims to “promote technologies of production, transportation and end-use of energy that are environmentally benign and cost-efficient (ibid, Sec. 8.16.1). Thus, the eight five-year plan aims to strengthen the domestic sources of energy and considers for the first time in India’s regime history that renewable energies can contribute to this goal in the long term. The 9th five-year plan covers the policy objectives for the period between 1997 and 2002. Similar to the 8th five-year plan, the primary objective is the reduced energy intensity with lower import dependency. Furthermore, the economic liberalisation starts to reflect in the vision for the structure of the energy sector: “The policy to promote private participation in the Energy Sector programmes is guided by the need for additional investment and competitiveness” (PC 1997, Sec. 6.41). The 9th five-year plan then proceeds to lay out a reform of the power sector (which is most relevant to renewable energies). It aims to promote investment by separating the generation, transmission, and distribution activities of power to dissolve the monopoly held by a limited number of publicly owned electricity bodies at the time. Moreover, tax incentives and tariff reforms are suggested so that “a certain assured rate of return to the investors has been granted” (ibid, Sec. 6.42). The suggestion of tax incentives to increase private investment in the energy sector is clearly different from the political economy of energy in India before 1990. Indeed, the 9th five-year plan also introduces a strong case for energy production that “needs to move away from depletable to inexhaustible resources viz. solar, wind, biomass energy etc.” (ibid, Sec. 6.47). In a distinct section on ‘Energy and the Environment,’ the planning commission states raises clear environmental concerns, e.g. in the form of pollution and its effects on human health, for the first time. Thereby, the 9th five-year plan presents a much more detailed and developed version of energy- related policy that can indeed be considered the first concrete vision of an energy transition and its role in the sustained energy security of India. This strategy resulted in the formulation of the Electricity Regulatory Commission Act (ERCA) in 1998 and the Electricity Act (EA) in 2003. Together, they replaced the Electricity (Supply) Act enacted 50 years before in 1948. While the ERCA was mainly designed as a mandate for the regulatory commission, the EA represents the first comprehensive policy

- 41 - framework for power in India following the shifts in the political economy on the regime level in 1993. Most importantly, under the EA the generation of power was de-licenced and freely permitted to any interested actor as long as it upheld the required technical standards – effectively opening up the power sector not only to private investors but also to more decentralised and other forms of power production such as wind or solar energy. The transmission, distribution, or trading of electricity, however, remain subject to licensing. Thereby, although state electricity boards as formerly monopolistic energy providers were restricted in the generation, they remained central in the transmission and distribution of electric power.

Overall, the results show that the strategy for an energy transition in India started to emerge in during the period from 1990 until 2003 while the main focus of the regime strategy was on the liberalisation of the country’s political economy. As a consequence, the political economy of the energy transition is only slightly influenced by either the niche or the landscape level development. Particularly the 9th five-year plan and the Electricity Act did, however, laid important foundations for the future development of the energy transition. Particularly emphasised was the need for increased investment to strengthen research and development in the until then still inefficient and mostly niche-based renewable energy technologies.

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3.4 2004-2013 The design and fast acceleration of the energy transition

The period between 2004 and 2013 is characterised by the design and the fast acceleration of the energy transition in India. Following the previously enacted substantial economic reforms, this period is marked by a rapidly growing national economy and thereby also increasing energy consumption. At the same time, renewable energy technologies start to become viable for the scaled-up production of power. Whereas the 10th five-year plan for 2002-2007 generally follows the previous plans in the energy policy, the 11th five-year plan for 2007-2012 presents a detailed strategy for the development of renewable energies. Furthermore, the Integrated Energy Policy (IEP) is developed in 2006 and the Ministry of New and Renewable Energy (MNRE) formed.

Developments on the Niche level Between 2003 and 2014 the efficiency of renewable energy technologies increased even further and started to reach competitive prices per produced unit of electrical power. Effectively, renewable energy technologies such as wind or solar power have left the technological niche on a global average and are increasingly added to the production of energy. Figure 8 presents the cost levelled cost of energy per energy unit (kWh) in USD for onshore wind and the installed capacity worldwide between 1983 and 2018. Between 2003 and 2014 the average price has dropped from 0.104 USD/kWh in 2003 to 0.075USD/kWh in 2014. Furthermore, the data shows that the installation of onshore wind capacity has particularly increased from 2000 onwards. In comparison, Table 4 presents the addition of wind power generation capacity in India until the year 2012. While 1666.8 MW of generation capacity in wind power was installed in the time up to 2002, the annually added capacity increased drastically to 1742.05 MW in 2006/-7 and almost doubled to 3196.7 MW in 2011/-12. In total, India then had a total generation capacity from wind power of 17315.6 MW by the end of 2012. Other technologies such as photovoltaic power production have gone through similar developments. Thus, by 2004/-05 at the latest wind energy started accelerating rapidly although three to four years after the global start of large-scale wind power installation. From this stage onwards, ‘common renewable energy technologies’ such as wind or solar power have emerged from the technological niche and are employed and developed complementary to other sources of energy. Still, significant challenges remain particularly in the integration of renewable energy sources into the existing political economy of energy and the power grids.

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Figure 8: Levelized Cost of energy for onshore wind energy projects on globally weighted average and global capacity addition between 1993 and 2018. Retrieved from IRENA International Renewable Energy Agency 2018, p. 33.

Table 4: Years wise wind power capacity addition of different Indian states since 2002. Retrieved from Khan and Khan 2013, p. 180

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Figure 9: Installed wind power capacity in India between 2002 and 2011 (in MW). Retrieved from Sharma et al. 2012, p. 1160 Developments on the landscape level

Between 2004 and 2013 the increasing economic growth, high energy prices and the start of global talks on addressing climate change are three key developments on the landscape level that influenced the emergence of the energy transition in the political economy of India. During this period, the country’s economy got further integrated into the global economy and the continued growth started a structural change in the economy of India with a shift in the sectoral distribution. While the primary sector continued to dominate the economic development, manufacturing and particularly business and services experienced rapid growth rates and became an important part of the economy (Kar and Sen 2016). The communications sector GDP, for example, grew by an average of 23.07% annually between 2002 and 2010 (ibid, p. 59). At the same time, the manufacturing sector GDP per capita grew at a moderate 7.38% annually and the agricultural sector at only 1.46% per year. Thus, the sectoral distribution of economic activity in India’s economy started to change significantly between 2003 and 2014. Moreover, the increasing concentration of economic activity in single sectors and companies also leads to more powerful economic agents such as companies. Kar and Sen find that this is the first period which shows characteristics of rentier-like economic activity (2016). Second, the period between 2004 and 2013 is shaped by a global spike in energy prices. As reviewed in the second chapter, India is particularly dependent on imported oil to sustain

- 45 - its energy security. While a barrel of the oil type Brent was priced at an average of 28.85 USD in 2003, the price almost quadrupled to a peak of 111.63 USD per barrel in 2012. An overview of the oil price development with the period marked is presented in Figure 10. Combined with a constantly increasing consumption of oil products and derivatives in the domestic market this led to an increasingly negative impact of energy imports on India’s trade balance and current account. Third, climate change and global warming became more salient issues on the global political agenda and the United Nations Framework Convention on Climate Change (UNFCCC) developed towards the first internationally agreed upon and binding accord for actions against climate change. Most prominent during this period were the Conference of Parties (COP) 15 in Copenhagen, the COP 16 in Cancun and the COP 17 in Durban that took place in 2009, 2010 and 2011. All three manifested the issue of climate change as a high priority on the international political agenda and were intended to agree upon a common approach to global warming and the consequences. Indeed, the COP 15 failed to reach its goal particularly because of the opposition of China, India and other economically developing countries that did not intend to abide by binding emission reductions. On the COP 17, all parties agreed to a non- binding resolution of limiting global warming to no more than 2°C. On COP 18 in Durban, the parties agreed on a platform of precise measures against climate change that was to be adopted by 2015. Overall, these three conferences finally manifested climate change as a highly salient issue for the global political agenda. In effect, by 2011 almost all countries agreed that climate change needs to be addressed and that there is a need to reduce the global emissions. Thus, the UNFCCC conferences established the responsibility for every country to reduce their emissions particularly in the production and consumption of energy as a highly polluting sector.

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Figure 10: Development of Brent Oil Spot price between 1988 and 2018. Energy Information Agency (n.d.), edited by author. Retrieved from https://www.eia.gov/dnav/pet /hist/RBRTED.htm

Effects on and developments at the regime level The period between 2004 and 2013 continued to be shaped by regulatory liberalisation, increased economic and political participation and the attempted high-level growth of GDP. Different from the period between 1990 and 2003, the issue of global climate change starts to reflect in the energy development in India. Relevant policies for this period are the 10th five- year plan for the years 2002-2007, the 11th five-year plan for the period between 2007 and 2012 as well as the Integrated Energy Policy (IEP) enacted in 2006. This section briefly discusses the overarching political developments during this period before moving to a chronological review of the relevant policies as indicated above.

Although the government of India was led entirely by the congress party with Manmohan Singh as the prime minister, the underlying political structure changed significantly between 2004 and 2013. With the continued rise of smaller regional parties, the national election in 2004 did for the first time not result in a majority share of parliament seats for one party. Two alliances formed on a national level: The congress party led ‘United Progressive Alliance’ (UPA) and the BJP party led ‘National Democratic Alliance’ (NDA). In effect, the political system became multi-polar rather than bi-polar (Varshney 1998). As a result, governance became more complex and subject to the influence and support of small parties. Coinciding with the rise of rentier sectors of economic actors on the landscape level this supported the formation of interest group politics and sometimes questionable proximity between elite-business and political decision-makers. The underlying agenda for the political-economic development of India, however, continued to be determined by the Central Planning Commission. Regarding energy policy, the 10th five-year plan largely continued the efforts of de- regulation, the introduction of market-based structures and harmonisation of the political- economic structure set out in the 9th five-year plan. For example, the legislation of the

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Electricity Act and de-licensing of electricity generation originated in the 10th five-year plan with its focus on the deregulation of commercial energy prices (PC 2002). The principle of ‘market-based pricing’ provides the underlying assumption for the entire plan and the energy section in particular in the form of technology-specific subsidies. Additionally, it is the first five-year plan to recognise the domestic renewable sources for sun, wind, and biomass and to set forth goals for the development of renewable energy production. For example, in the 10th five-year plan the planning commission aimed for a total of 4 billion kWh of wind power to be produced by 2006/2007. 2006 represents an important year for the emergence of the energy transition in India because the first comprehensive energy strategy document is published and the Ministry for New and Renewable Energy (MNRE) formed. Both the Integrated Energy Policy Report (IEP) and the MNRE continue to be fundamental to India’s evolving energy situation and the energy transition until today. Most importantly, the IEP establishes that the secure and affordable supply of energy is critical to sustaining a high growth of GDP and thereby to the goals of the country. One particular challenge is the high dependence on energy imports and the reliance on coal for the production of energy (PC 2006, p. v). To achieve sustained security of energy supply, the IEP centres around the need for the diversification of energy supply and the need for energy demand management/ efficiency on the other. Different from other policy documents, the IEP presents scenarios on and determines goals for the energy situation in India by 2031/2032. For the diversification of the energy supply, the IEP presents 11 different scenarios ranging from a continued coal dominant case to a scenario with forced alternatives such as natural gas as well as the forced development of renewables. Whereas coal and oil are expected to remain the primary sources for energy in India by 2031 at 41.1% and 22.8% each, renewable energies in the forced development scenario would make up 5.6% of the total energy supply. This scenario is based on the development of “30,000 MW wind power, 10,000 MW of solar power, 50,000 MW of biomass power, 10 Mt of bio-diesel, and 5 Mt of ethanol by 2031-32” (ibid, p. 41). The trajectory is displayed in Figure 11. In this way, the development of renewable energies is seen as a mechanism to achieve greater diversity of energy supply among many other factors rather than an end in itself. Furthermore, the figure indicates that the energy demand in India is expected to grow up to 1,370 Mtoe by the year 2031. The IEP therefore additionally emphasises the need for demand-side management and efficiency measures to limit the growth of the energy consumption.

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Figure 11: Fuel mix year wise in the forced renewables scenario of the Integrated Energy Policy Report. Retrieved from Integrated Energy Policy report, Planning Commission 2006, p. 43

This is, for example, to be achieved through at the time 30% efficiency in thermal coal power plants to 40%, the shift of freight to rail transportation or to increase the number of mandatory energy audits for high energy consumers. For private households, the IEP aims to strengthen the use of efficient heating and cooling installations as well as fuel-efficient cooking utilities (ibid, p. 85f). Again, this part of the policy is clearly directed at the objective of ensuring sufficient and affordable energy supply to support the GDP growth. Indeed, the data shows that an energy transition as a combination of energy conservation and renewable energy development was only perceived as a relatively small contributing factor to the long-term security in India. Although the policy acknowledges i.e. the production cost of renewable energy technologies with wind power in particular over time, the data clearly shows that the energy transition was not yet a primary priority in the Indian political economy of energy by the end of 2006. Nevertheless, mainly as a response to the IEP, the Ministry of Non- Conventional Energy sources was restructured into the designated Ministry for New and Renewable Energies with the objective to support and incentivise the development of renewable energies in India. The findings from the IEP report were ultimately implemented in the 11th five-year plan that served as the policy agenda for the period between 2007 and 2012. For the energy transition, it reemphasises that renewable energies will provide a small contribution to the energy mix in India in the medium and long term. Nevertheless, the 11th five-year plan states

- 49 - that “given the growing concerns for climate change and energy security, it is imperative that this energy in the longer term will substantially increase its share in the fuel-mix” (PC 2007, Sec. 10.11). Indeed, it is the first five-year plan to mention climate change and the possible use of the energy transition in this regard – thus reflecting the increased salience of climate change in international politics on the landscape level. Once more, it also calls for increased research and development in the sector to work towards efficient and clean power plants and the energy/power delivery system. Thereby, the data from the 11th year plan shows that the framing of the energy transition started to change. Whereas the previous plans and the IEP only regarded the energy transition as a complementary feature to the conventional energy challenges, the 11th five-year plan emphasises the potential of an energy transition in tackling climate change and cutting down pollution. Overall, the data shows that the political economy of the energy transition emergence in India between 2004 and 2013 was shaped by growing import dependency and beginning climate change concerns on the landscape level as well as the availability of efficient and almost cost-competitive renewable energy technologies on the niche level. As a result, the installation of energy production capacity from renewable energies was desired and realized very quickly particularly in the years between 2006 and 2013. Indeed, an exemplary comparison of the previously discussed Figure 9 with the goals set out in the 10th and 11th five- year plans reveals that the actual capacity installation met these goals for the development of wind power. In fact, as shown in Table 4, the annual installation of wind power generation capacity has increased from 651.2 MWh to 3,196.7 MWh. Thereby, the period between 2004 and 2013 marks a phase of the design and rapid acceleration of the energy transition in India.

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3.5 2014-2019 The bottlenecks of the energy transition

The comparatively short and recent period between 2014 and 2019 seems characterised by ever-larger political ambitions to develop renewable energies while actual installation lacks behind. In other words, the political economy of India in the energy sector presents several significant challenges that emerge as bottlenecks to the energy transition. At the same time, the reform of the economic structure continues with the Planning Commission being substituted by ‘NITI Aayog’, an administrative think tank tasked with the development of a strategy for the future development and in consultation with many actors such as the states. As a result, the 12th five-year plan is substituted by the ‘Three Year Action Agenda’ (3YAA) that also reflects the change in politics following the election in 2014.

Developments on the niche level Between 2014 and 2019 renewable energy technologies were truly established as price- competitive sources for the production of electrical energy. While the average production cost of wind power decreased below 0.1 USD /kWh in 2006, photovoltaic lagged in the price development for a longer time and only reached a production price of 0.1 USD/kWh ten years later in 2016. The development of total installation cost, the and the levelized cost of electricity from solar PV are depicted in Figure 12. Still, the overall production costs of wind energy remain significantly lower for the time being. Considering that photovoltaic energy technology has matured only recently technological advancements and economics of scale might indeed lead to production power parity with wind energy in the future.

Developments on the landscape level The period between 2014 and 2019 in India is characterised by a slowly decreasing growth of GDP and the manifestation of a global action framework to act on climate change. Strictly numerically, the GDP continued to grow at an average of 7.51% during the period between 2014 and 2018. The calculation of the GDP has, however, been changed in India in 2013/-14 and resulted in increased values for GDP growth. For the year 2014/-15, for example, the new GDP growth rate had been set to 7.4% while estimates based on the earlier method of calculation only reached 5.5% of annual growth for the GDP (Kar and Sen 2016). Indeed, the problem is not the difference to the previous calculation method but that “the new series also do[es] not match the economic outlook based on other current economic indicators such as the

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Figure 12: Global weighted average total installed costs, capacity factors and LCO for solar photovoltaic between 2010 and 2018. Retrieved from IRENA International Renewable Energy Agency 2018, p. 22 growth in bank credit, the index of industrial production and corporate performance” (ibid, p. 79). In other words, while the growth of other relevant indicators has slowed down this trend does not reflect in the development of the GDP. Moreover, a comparison of the GDP growth computed before and after the change of the calculation method is likely to produce misleading results. In sum, while the economy and respectively the GDP continued to grow in India between 2014 and 2019, it is disputable to what extent the economic development reached the target value of 8% annual growth. Second, the approach to climate change changed during the period, particularly because of the Paris Agreement reached at the COP21 in 2015. All signing parties – India among them – declared to work towards limiting global temperature increase to a maximum of 1.5°C compared to the pre-industrialisation level. To achieve this goal, all signatory countries would have to contribute by quickly decreasing or at least limiting the growth of emissions through self-declared and country-specific nationally determined contributions (NDCs). This flexible structure allowed developing countries to arrange their needs with emissions reductions while former agreements had always discussed a unanimous and categorical reduction (e.g. Keohane and Oppenheimer 2016; Young 2016). Although there is not yet enough data on the success of the continued pledge and review mechanism the formation of NDCs put pressure on all signatory countries to contribute their share. Combined with strong monitoring mechanisms, the period between 2014 and 2019 was thereby also characterised by a lot of attention on climate change as well as global political pressure to reduce and limit greenhouse gas emissions.

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Effects on and developments at the regime level During the period from 2014 to 2019, the regime level introduced further significant reforms of the political economy and reframed the energy transition as a contribution to global action on climate change. Indeed, with the attempt to combine both strong economic growth and a low level of pollution the country aims to become a global leader. Politically, the period is shaped by the election of Narendra Modi as the in 2014 and the BJP forming the government. Relevant policy documents are the 12th and last five-year plan for the period between 2012 and 2017 as well as the Three Year Action Agenda (3YAA) published by the newly created public thinktank NITI Aayog. Following the 2014 national election, Narendra Modi became the prime minister of India after winning an absolute majority of votes with his party the BJP. After an era of increased political party fragmentation, the BJP was expected to win together with the National Democratic Alliance, but the strong result of 282 out of 543 seats in the lower house parliament came as a surprise to many. Indeed, this victory was based on the successful track record of Modi as a state minister in Gujarat and the narrative to achieve the same economic development for the entire nation (Torri 2015). As explored by Andrew Wyatt, the campaign was based on the improvement of economic growth, the generation of employment as well as the reform of public institutions (2015, p. 47). But while business confidence returned in light of expectable economic development and further liberalisation, the economic growth lacked behind in the following years. The beginning of the period was still characterised by the 12th five-year plan covering the timespan from 2012-2017. In general, the energy section follows the overarching trends established in the previous plans by highlighting the efficiency effects of deregulation and the contribution of renewable energies towards national energy security and a reduced import dependence (PC 2012). Different from the previous versions, it is the first five-year plan to concretely discuss the implementation and development of renewable energies such as wind and solar power. Rather than discussing the technologies in general, the report highlights that the cost of power production from these technologies has decreased rapidly and is close to competitive. For wind power, in particular, the plan states that a domestic manufacturing sector has developed with competitive technology that might also be used for exports. Additionally, it outlines some key issues for the increased development in India: First, the regional concentration of renewable energy potential, arguing that the lack of a distributing power grid mostly restricts renewable energy usage to the production regions. Second, the transmission away from the energy production sites to requires immense investments that are currently not accounted for. Third, due to regulatory issues state utility companies as the only buyers of

- 53 - power are unlikely to pay the at the time higher prices for power from renewable energy sources in the absence of power purchase obligations and adequate certification. Fourth, there are financial barriers as renewable energy investments still entail a lot of risk factors which are unlikely to be pursued without dedicated financial instruments and budgets by banks. Finally, renewables have a low penetration for urban and industrial applications as e.g. there is no regulatory framework or support for the installation of solar water heaters which remain costly and inefficient (ibid, Sec. 14.188). As a result, although “particularly wind and solar power should be [issued] through an open competitive bidding process”, the remaining obstacles in the political economy of India limit the expansion of renewable energies. Thereby, the 12th five-year plan is the first policy paper to specifically address the issues of renewable energies expansion rather than discussing its implementation as an abstract idea. Compared to the previous versions, it thus features not only the possibilities but also the challenges for the emergence of the energy transition in the political economy of energy in India. In 2015, the energy transition was presented as a cornerstone of the country’s contribution to reduced greenhouse gas emissions. First, however, it reiterates the need for GDP growth to achieve the country’s development goals and argues that it can therefore not be compared to the “path […] hitherto followed by others at corresponding level of economic development” (Government of India 2015, p. 29). Still, the NDC postulates the following goals for renewable energy development: A total of 175GW installed capacity by 2022, with 60GW of wind power and 100GW of solar power as well as minor contributions from biomass energy and small-scale hydropower. Moreover, it aims to achieve a 40% share of non-fossil fuel-based electric power capacity by 2030 with the help of technology transfers and international finance. Thereby, the energy transition goals in the NDC respond to the availability of competitive renewable energy technologies emerged from the niche level and the landscape trend of increased international attention on the issue of climate change. Indeed, the Three Year Action Agenda laying out India’s national political-economic strategy for the years from 2017/18 to 2019/20 picks up on these commitments. Importantly, the 3YAA substitutes the five-year plans and is no longer issued by the planning commission but by the newly formed think tank NITI Aayog. Reflecting the public sector reforms enacted by the newly elected Modi government, NITI Aayog is established as a public sector body that develops strategy recommendations with the consideration of national- and state-level actors and seeks additional advice from knowledgeable institutions or people. Thereby, different from the centrally organised planning commission, NITI Aayog follows more of a bottom-up design that acknowledges the role of states and is thereby more encompassing for the entire political economy of India and not just centralized institutions. Consequentially, the energy section

- 54 - increasingly features necessary activities to be conducted on the state level, such as the introduction of effective transmission and purchase support through a “robust market for renewable power” (NITI Aayog and Government of India 2017, sec. 13.62). The key objectives for the use of renewable energies now are increased energy security, energy efficiency, de- carbonisation, and sustainability. Again, for example, the goal of de-carbonisation represents a reflection of the global attention on climate change and the required reduction of emissions. In effect, between 2014 and 2019 the development of renewable energy is increasingly reframed as a contribution to global action on climate change rather than solely the advancement of energy security. As a result, the additional motivation for the development of renewable energy leads to higher capacity installation goals.

Actual development of the energy transition These ambitious goals for the installed capacity of renewable energies, however, are difficult still be reached considering the development of the installed capacity in recent years. Table 2 depicts the installed capacity of wind and solar power from 2016 to 2019 in comparison to the goal for 2022. Although there are three years of potential development up to 2022, the data clearly shows that the trend of additionally installed capacity decreased for both wind and solar energy between 2016 and 2019. Indeed, if the trend continues the installed capacity for wind energy by 2022 will fall short 15.6 GW of the goal and the installed capacity of solar power will likely fall short 50.6 GW of the goal. While solar energy will overtake the installed capacity of wind energy soon, the development of each has slowed down in recent years. Because the capacity addition starts to deviate from the politically outlined goals, there need to be other factors than political goals inhibiting the accelerated development of renewable energies. Indeed, the issues identified in the 12th five-year plan point to possible reasons emerging from the political economy of energy in India.

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Table 5: Recently installed energy generation capacity in India. Data retrieved from the Ministry of New and Renewable Energy (2020), Government of India (2015) & own calculations

Installed 2016 2017 2018 2019 Trend for 2022 Goal for capacity in (based on 2022 average capacity addition) Wind power 26.8 GW 32.3 GW 34.1 GW 35.6 GW 44.4 GW 60 GW Solar power 6.8 GW 12.3 GW 21.7 GW 28.2 GW 49.6 GW 100 GW (photovoltaic)

3.6 Overview of Multi-Level Perspective analysis and final remarks

The analysis of the political economy in India between 1990 and 2019 clearly shows that the energy transition emerges as a result of innovation on the niche level, pressure from the landscape level and adaption on the regime level. An overview of the results is displayed in Table 3. On the niche level, renewable energy technologies such as wind and solar power have emerged as efficient and almost cost-competitive sources of power production throughout the period following significant efforts in research and developments as well as technology transfer. On a landscape level, India is exposed to rising prices of energy and continued growth of its economy, the population, and the resulting energy consumption. Additionally, environmental concerns increase over time and lead to the adoption of the Paris Agreement on climate change with a strong focus on the reduction of global greenhouse gas emissions. In effect, the regime level primarily pursues the energy transition as a mean to the reduction of import dependency and the diversification of energy sources. With growing pressure from the landscape level and innovation from the niche level, the energy transition is increasingly fostered to reduce the energy intensity of the country and to reduce the emissions in the energy sector. As a result, the goals for the development of renewable energy productions increase over time but accelerate significantly in recent years. At the same time, the period between 2004 and 2013 has seen the highest growth in capacity addition from renewable energies whereas a recent slowdown has endangered the successful implementation of pledged capacities by 2022. Together, these factors form the political economy for the emergence of the energy transition in India.

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Table 6: Overview of results

1990-2003 2004-2013 2014-2019

Niche level Development of first technology Technologies become more cost- Technologies almost cost-competitive prototypes efficient, particularly wind power Solar power emerges from the niche Inefficient production costs Increased efforts in research and development of renewable energy Scaling up of solutions provides Need for intensified research and technologies efficiency gains development

Landscape level Import dependency on fossil fuel, oil Continuous high-level economic Moderate GDP growth crisis following the gulf war growth Continued socio-political trends such as Agricultural economy High energy prices, particularly oil urbanisation and increasing energy consumption Accelerating the growth of GDP and Beginning structural change of the energy consumption economy Global attention for climate change

Regime level De-regulation of the economy, ease of Continued de-regulation Continued deregulation, transformation market access and trade of the public sector administration Rapid expansion of wind power Diversification of energy supply installation Energy transition to diversify energy sources, reduce import dependence and De-licensing of energy generation Focus on energy conservation to reduce greenhouse gas emissions Energy transition as a potential Energy transition to complement energy from the energy sector contributor to the energy security of security of India India

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4. Case study: The political economy of wind energy development in Gujarat

This chapter introduces a case study of wind power development in Gujarat to analyse the political economy of the energy transition. Considering a concrete example allows for the specific analysis of state policies and the structure of the local political economy – shaped both by national- and state-level policy. Gujarat is one of the states with the largest potential for renewable (wind) energy in India and is often considered a role model when it comes to the political-economic development of other states. Thereby, considering the structural setup, measures and tools introduced to foster the development of wind energy help to identify key issues in the political economy that are vital to the success of the attempted energy transition. At the same time, the case demonstrates how the power production technicalities of wind power compared to e.g. coal power make the continued increase of installed capacity much harder to integrate into the local political economy of electrical power. In effect, the study of the relatively effective and advanced state of Gujarat and its approach on wind power development provides valuable insights about both best practices as well as challenges that other states might face in the future when attempting to increase the share of intermittent renewable energies such as wind or solar power in their power production. Thus, chapter 4 responds to the following research question:

- What are the state-specific policies and the structure of the local energy economy? - What kind of measures where when introduced and in how far did they succeed? - What are potential learnings of the case?

The analysis of the political economy of wind energy development and the power sector in Gujarat is structured as follows: First, a short section motivates the selection of Gujarat for the case study of the energy transition on a state level. Adding to this, the material conditions for and the potential of wind energy generation capacity in Gujarat are reviewed with a focus on both on- and offshore suitable sights and local capabilities for project development. Thereafter, the second section introduces the political economy of electrical power and the development of renewable energies in Gujarat. It considers both political/administrative actors as well as private actors such as companies or interest groups. Indeed, Gujarat has developed three different wind power specific policy papers from 2007 on to provide regulatory frameworks for its development. Section 3 proceeds to briefly discuss the regulatory framework’s effect on private developers. Finally, the fourth section summarises and concludes by identifying best

- 58 - practices as well as challenges observable in the case study that could advance the development of wind energy in other states in India.

4.1 Case motivation

The case study of wind energy development in Gujarat is chosen for two main reasons. First, as established in Chapter 3, wind power has been installed for a prolonged time so that an analysis of the development is possible. Second, Gujarat is one of the most economically developed states in India with a high GDP, established infrastructure and comparatively high energy consumption. Additionally, based on current estimations Gujarat has the highest potential for the development of both on- and offshore wind energy with 84,431.33 MW followed by the state of Karnataka with about 35% less added capacity. Thus, wind energy development in Gujarat will be crucial to the development of renewable energies in India in the future. Indeed, because Gujarat is relatively advanced for example in the installation of grids, the relatively high GDP and the high per capita consumption of energy, it is likely that an analysis of its political economy for the development of wind power will yield insights on best practices implemented and challenges faced that other states might rely upon for their own design of the energy transition.

Wind energy potential and development conditions in Gujarat Gujarat is the state with the highest potential for wind energy development in India. Because of its long coastal line, the state provides many suitable conditions for both on- and offshore wind turbine installation. Figure 13 and Figure 14 depict the wind atlas of Gujarat with mean wind speed at a height of 100m – hub height for most currently available wind turbine types. Following Wizelius (2015), sites with an average wind speed of more than 5 to 6 m/s present favourable conditions for wind energy development. Thus, the areas depicted in green, yellow, or red can generally be considered for effective wind power development. Figure 13, for example, indicates that particularly the west coast and the south of India are suitable for wind energy development. At the same time, Figure 14 indicates that Gujarat with its large coastline of 1,600km representing about 24% of India’s total coastline provides large areas for wind energy development. Moreover, sites towards and off the coast are particularly suitable based on the average wind speed. Another important factor for successful wind turbine installation is local circumstances such as roughness of the terrain, mountainous areas, or exposure to extreme weather conditions. While most of the terrain in Gujarat is relatively flat, easily accessible and of low roughness with a semi-desert climate, extreme weather events such as

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Figure 13: Wind Atlas India, wind speed at 100m hub height. Edited by author, retrieved from Global Wind Atlas (Technical University of Denmark 2019). cyclones do occur in the region. Thus, site development requires careful consideration of local circumstances. In 2015, a European Union-funded project labelled FOWIND (Facilitating Offshore Wind in India) exemplarily conducted a specific analysis of local circumstances for offshore wind energy development and preliminarily identified a total of eight suitable sites that could be used for turbine installation (FOWIND 2015). The result is depicted in Figure 15 with six proposed development sites on the southern and two off the eastern coast of Gujarat. Overall, the conditions for wind energy development in Gujarat are thus favourable with large suitable sites both for on- and offshore installation of wind turbines. As a result, according to current estimates, Gujarat is the state with the highest potential for installed renewable energy capacity from wind power in India.

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Figure 14: Wind Atlas Gujarat, wind speed at 100m hub height. Retrieved from Global Wind Atlas (Technical University of Denmark 2019).

Figure 15: Heat map for the preliminary selection of suitable offshore wind sites. Retrieved from Facilitating Offshore Wind in India (FOWIND 2015, p. 23)

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4.2 The political economy of electricity and wind energy development in Gujarat

This section analyses the political economy of electricity, state-specific wind energy policy and the role of wind energy project developers in Gujarat. As demonstrated before, the responsibility for energy is shared between the central and the state governments/administrations. Particularly relevant for the development of wind power, however, are the local design of the electricity (regulatory) structure and the specific measures introduced such as feed-in tariffs (FIT) or renewable purchase obligations (RPO). Therefore, this section aims to answer the following sub questions:

- What are the state-specific policies and the structure of the local energy economy? - What kind of measures where when introduced and in how far did they succeed?

First, the administrative structure of electricity regulation and the development of the political economy of electricity in Gujarat are analysed. Second, the section reviews the state-level wind power policies and discusses the measures established to foster the development of wind energy capacity. Finally, the response of (private) developers to these framework conditions and the overall impact on capacity addition are analysed. Overall, it is argued that the political economy of electricity and wind energy development in Gujarat has been reformed, particularly following the introduction of the Electricity Act on the national level in 2003 and that the wind power specific frameworks have become more sophisticated over time. Although capacity addition has increased over time, the development continues to be curtailed by struggles of private developers to implement smaller-scale generation sites in a political-economic structure designed to encompass large, often publicly owned power plants with stable electricity generation.

Political economy of electricity Between 1990 and 2019 the political economy of electricity in Gujarat has transitioned from an untransparent structure shaped by populist measures such as low flat-rate tariffs for the agricultural sector to a more regulated structure with higher accountability and effectivity. This development was distinctively shaped by achieving a 100% village electrification very early by 1991, significant growth in GDP and resulting high growth in energy consumption. Up until 1997, the Gujarat Electricity Board (GEB) was in charge of all matters related to electricity. Quite exceptional among Indian states, Gujarat achieved nearly full village electrification by 1991 and aggregated technical and commercial losses of only 18.7% by 1996/7 (Sareen 2018, p. 99). However, the Gujarat Electricity Regulatory Commission - 62 -

(GERC) established in 1999 found that aggregated conversion and transmission losses amounted up to 34% in 2000/-1 compared to the GEB’s claim of only 20%. Indeed, the data in the electricity sector had particularly been skewed by the use of flat-meter tariffs in the agricultural sector and low accountability leading to widespread theft of power. Thereby, Gujarat’s “electricity sector is a good microcosm of the issues facing ESI [Electricity Supply Industry] reform in many of the states in India” (Hansen and Bower 2003, p. 11). With hefty subsidies on the electricity prices amounting up to 1.5% of the total national GDP, they claim that short-term electoral advantage has for a long time been prioritised to medium- and long- term consequences of an inefficient power system (ibid, p. 14). Moreover, the authors showcase that by 2002 only 71.9% of all households were electrified with significant differences between households with different income levels – thus clearly pointing to political influence on the power distribution (ibid, p. 18). Notably, the ownership of electricity generation started to change in 1991 and reached a 24.1% private sector share by 2002. As a response to the issues outlined here, a number of institutions such as the GERC and the Gujarat State Electricity Corporation Limited (GSECL) were implemented in 1999. The GEB was, however, fully restructured in a reform responding to the measures from the nationally imposed Electricity Act in 2003. During the reform, the GEB was unbundled into seven different companies with functional responsibilities for electricity trading, generation, transmission, and distribution that were subsidiaries to the newly established Gujarat Urja Vikas Nigam Ltd. (GUVNL) as a supervisory body. This structure prevails until today and is depicted in Figure 16. While the GSECL remains the publicly owned company for electricity generation, the Gujarat Energy Transmission Corporation Ltd. (GETCO) builds, operates and maintains the state’s transmission network. Four regional distribution companies, or DISCOMs, labelled PGVCL, DGVCL, UGVCL and MGCVL undertake the electricity distribution and retail supply in the state of Gujarat (Energy and Petrochemicals Department 2017). Thus, in line with the policy goals postulated in the EA, electricity generation was made more accessible to market entry while transmission, trading and distribution remained entirely in the control of the state and state-owned companies. Politically, Gujarat was governed continuously and largely uncontested by the BJP party since 1998. This prolonged dominance is one of the key determinants of the development and reforms of the regional political economy (of energy) in Gujarat. With Narendra Modi governing the state for a period of more than 13 years between 2001 and 2014 the reputation of the state government to foster good governance and a strong culture of commerce has grown over time. Indeed, these principles and their supposed successful outcome have turned Gujarat

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Figure 16: Structure of the Gujarat Electricity Board. Retrieved from Research Report on Energy Sector in Gujarat (Energy and Petrochemicals Department 2017, p. 13) into a role model of the BJP’s and Modi’s visions of a renewed political economy that contributed significantly to the success in the 2014 national elections. The strong focus on economic growth, however, has also widely been criticised as exacerbating societal inequality and resulting in too much influence of big capital (e.g. Jaffrelot 2015; Kale 2014). Indeed, Jaffrelot states, the BJP’s approach of slim government in Gujarat resulted in the formation of a ‘neo-middle class’ that ensured continuous electoral victory and adverse effects for lower- income groups and minorities – two groups with significant overlap and mutually reinforcing discrimination (Jaffrelot 2015, p. 822ff). Still, while the success of Modi’s and the BJP’s model of ‘development’ remains disputed, the reforms undertaken during their governance in Gujarat have changed the electricity administration in Gujarat from an outdated and ineffective state electricity board into a well-performing sector that consistently stands out in comparison to other states in India (Sareen 2018, p. 96). Consequently, the share of privately owned power generation has risen from a 24.1% share in 1991 to 48.45% in 2016 (Energy and Petrochemicals Department 2017, p. 20). Thus, the BJP led state government in Gujarat implemented a power sector reform that made the power sector more transparent and increased the share of private power generation ownership. At the same time, the consequences of this liberalisation will likely harm lower-income groups and minorities. Indeed, the power sector reform process was not only influenced by the state government but by several interest groups leaning either towards a sector with state-owned control or towards liberalisation, reform, and privatisation. During the design phase of the reforms, Hansen and Bower identified different actors that aimed to steer the status quo towards their interests (2003, p. 31f). An overview of the influential actors is depicted in Figure 17. Most important drivers towards liberalisation are the Gujarat Government, private

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Figure 17: Forces in the Gujarat power sector reform process. Retrieved from Hansen and Bower 2003, p. 33 developers/investors both foreign and domestic, renewable energy advocates as well as international institutions such as the Asian Development Bank, the World Bank or development cooperation agencies. On the other hand, actors from the agricultural sector that had previously profited from strongly subsidised power rates and various groups representing the existing administration resisted the reform. For example, these consist of farmers unions, employee unions and the powerful GEB management. Evidently, the pre-reform structure of the power sector in Gujarat seemed to hinder the development of new forms of electricity generation. As noted by Hansen and Bower, the focus would have to shift from the old power production technologies based on economics of scale towards a more distributed generation (DG) that may help to provide stable power supply particularly in rural areas (Hansen and Bower 2003, p. 46). Clearly, the finally implemented electricity sector reform is a product of the influences and concerns explored. On the one hand, the liberalisation and privatisation of power generation satisfied most of the actors functioning as driving forces. At the same time, continued control of the state administration over electricity transmission and retail resolved many of the

- 65 - concerns of the resisting forces. Moreover, particularly the unions successfully preserved many of the privileges for its members. Thereby, the reform represented a compromise between the driving forces and their interests for a new political economy of electricity in Gujarat. Indeed, this compromise also laid out the framework for the later fostered development of wind explored in the following section.

Wind power policy and measures The government of Gujarat has published three dedicated wind power policies until today. Most importantly, they determine periodically adjusted tariffs for the purchase of power units produced from wind energy and provide a more and more encompassing framework for the goal of increased wind energy development. While more than 600 MW of wind power capacity had already been installed up to 2006/07, the three policies published in 2007, 2013 and 2016 correlate with an increase in installed capacity up to a total of 6.09 GW by 2018/19. The first wind power policy for Gujarat was enacted in 2007 and featured the first cornerstones of a wind energy development framework. It establishes that wind power as a “non-polluting, environment friendly and relatively reasonably priced” source of energy that is important particularly in light of “volatile costs of fossil fuel, global warming and climate change” (Government of Gujarat 2007, p. 1). To foster its development, the following key measures are defined: First, wind power producers may use existing transmission networks for wheeling of their power to consumers with the same payment of transmission charges applicable to other, ‘normal Open Access Customers’. Second, wind energy may be sold to GUVNL (the state electricity oversight authority as explained before) and its distribution licensees. Third, the GUVNL will purchase power generated from wind parks at 3.50 INR per unit of electricity. Fourth, wind power may be counted towards the 10% of renewable purchase obligations (RPO) that have to be fulfilled as directed by the GERC. Finally, to speed up wind park development, developers are obliged to make a 500.000 INR down payment to GETCO that forfeits if - depending on the project size - more than one, two or three years pass before the fully planned capacity is installed. This is an example of the ‘non-squatter clauses’ recommended by Mani and Dhingra (2013b). Thereby, the 2007 wind power policy provided the first set of measures to harmonise the development conditions for wind power. The following two wind power policies of 2013 and 2016 largely follow the 2007 policy regarding the transmission of energy, its applicability for RPOs and the deposit strategy to prevent undeveloped projects after allotment. Different to 2007, the preferential tariff for wind power units was increased to 4.15 INR per unit of electricity in 2013 (Government of Gujarat 2013). Moreover, the 2013 policy was accompanied by measures enabling for a tax-based

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Accelerated Depreciation (AD) of effectively 80% in the first year of installation. As a result, the tax load on wind power projects developed after 2013 decreased significantly. Thus, the 2013 wind power policy established a set of powerful incentives to fuel the development of wind energy projects. In the 2016 wind power policy, however, these incentives were reduced significantly. First, the universal fixed-rate feed-in-tariff for power from wind energy was abolished and replaced by project-specific rates that resulted from a competitive bidding process for development sites (Government of Gujarat 2016). Secondly, the AD was reduced to 40%. In effect, this drastically lowered the capacity addition incentives for wind power projects from 2016 onwards. Interestingly, both the 2013 and the 2016 policy emphasise that “any individual, company, body of individuals […], or any artificial juridical person will be eligible for setting up Wind Turbine Generators” (ibid, p. 2). Thereby, the policy reiterates that the generation of wind power is fully liberalised and open to any interested party. Instead of requiring a licence or other forms of permission, developers may install wind power production sites in any of the allotted areas. As of today, the 2016 wind power policy is still in place with plans for a renewed policy and updated measures for wind energy projects developed after 2020/21. Indeed, the measures described in this section have directly influenced the addition of wind energy generation capacity. This relation is briefly explored in the following section.

Capacity development in Gujarat In the twelve years between 2006/07 and 2018/19, an average of 455 MW in wind power capacity has been added in Gujarat. Figure 18 depicts the continued installation of power production capacity from wind energy in Gujarat. The total installed capacity has grown from 636.6 MW to 6.10 GW in the same period. In effect, wind power now contributes to more than 22% of the currently installed power generation capacity in Gujarat. Compared to a 6.2% share in the installed power capacity in 2007, the data indicates a rapid growth that significantly surpasses the average growth of installed capacity from 11.05 GW in 2007 and 27.46 GW in 2018. Thereby, only coal power with about 50% of the installed capacity is more important for the production of power in Gujarat. Different from power production based on fossil fuel, however, wind energy does usually not generate power at its full capacity but rather at an average of 30% depending on local wind conditions as well as technical efficiency and availability (Wizelius 2015). For this reason, the installed capacity needs to be considered differently for renewable energy technologies such as wind and conventional power production based on fossil fuels.

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Figure 18: Newly installed wind energy production capacity in Gujarat since 2002. Own design. Data retrieved from Inwea. (2019). Wind Power Installation. Retrieved May 10, 2020, from http://www.inwea.org/wind-energy- in-india/wind-power-installation/

Three years are particularly striking in Figure 18: 2007/08 with 616.4 MW added capacity, 2011/12 with 789.9 MW added capacity and 2016/17 with an astonishing 1,392 MW newly installed capacity. These represent the three years with the highest absolute capacity addition of wind power capacity in Gujarat. Indeed, they correlate with adjustments in the political economy of wind power in India. First, the strong result in 2007/08 almost doubling the total installed capacity at the time is likely to follow the implementation of the wind power framework in 2007. The newly granted guaranteed feed-in tariffs for a prolonged time of 25 years, open access to the transmission grids as well as rigid RPOs for the GUVNL made the business case for wind power development much stronger than before. 2011/12 as the second year with high capacity addition coincides with the end of the regulatory framework postulated in 2007. With some uncertainty about the new political-economic framework for the development of wind energy post-2013, developers likely secured favourable conditions available at the time. However, as described above, the 2013 wind power policy actually ended up raising the universally determined feed-in tariff and introduced tax rebates through AD. Similar to the high installation in 2011/12, developers rushed the construction of many wind power parks in this year in light of the foreseeable reforms for the time after 2016/17. Indeed, a study of the Global Wind Energy Council (GWEC) finds that particularly the end of the flat rate generation incentives and the reduced AD led developers to ‘lock in’ the favourable conditions presented in the 2013 wind power policy (2016, p. 11). Thus, the analysis indicates

- 68 - that the capacity addition correlates strongly with the regulatory framework and the respectively granted incentives. Because these are guaranteed for 25 years after installation, many developers aimed to secure favourable conditions particularly when the following framework was not clarified yet or was expected to have negative consequences.

Overall, the results from the analysis of the political economy of electricity and the framework for wind power development in Gujarat provide many insights into the energy transition on the state level. First, reforms of the formerly inefficient power sector have led to the entry of new forms of electricity generation. At the same time, however, the focus of the political economy of electricity is continuously debated by two sides pushing for more liberalisation and privatisation on the one hand and more control and state ownership on the other. While the consequences of the political-economic reforms of the power sector are debatable, the reform required a stable political environment for the changes to manifest. Indeed, the wind power policy of 2007, 2013 and 2016 and the measures introduced have supported the development of wind power generation capacity in Gujarat. While it looks like a success story at first, the continued development of wind power rests largely on periodically valid development frameworks. The last section of this chapter, therefore, considers the challenges that still curtail the development of wind energy in Gujarat while also identifying best practices that had positive effects in the past and, as a result, potential learnings for other states that can be derived from the Gujarat case.

4.3 Identification of best practices, challenges, and learnings

The case study of the political-economic framework for wind energy development indicates that the added capacity largely depends on policy-specific incentives such as feed-in tariffs or renewable purchase obligations rather than competitive equal access to the political economy of electricity in India. First, the analysis of the regulatory frameworks and its effect on the wind power capacity addition in Gujarat laid out above demonstrates that renewable energy development so far requires the existence of favourable incentive structures at different points in time. Indeed, the challenges to increased power production from renewable energies are twofold. While the political economy of electricity was traditionally designed for large and centralised power production units, wind energy development with its intermittent nature of production and new ownership structure faces investment as well as socio-economic challenges. On the one hand, the political economy of electricity in Gujarat is historically built to suit large scale, publicly owned power producers with the main challenge of efficiently transmitting this power to consumers. This is, for example, represented by the GUVNL with - 69 - its quasi-monopoly on the purchase of energy. In effect, a more distributed generation of energy would challenge this structure and require more upfront capital investment by a different kind of actor (Hansen and Bower 2003). While the GEB reforms have eased market entry for small scale generation, the underlying political-economic conditions such as available finance continue to differ. Moreover, wind energy with its intermittent nature of power production increases the complexity of electricity networks. Indeed, Sharma and Sinha (2019) report that wind power was as times not purchased by the GUVNL because of insufficient grid capacity. Moreover, financial barriers and socio- economic barriers continue to curtail the development of wind power. For example, the consequences of competitive bidding for newly added capacity or continuous policy change have adverse effects on wind energy development programmes (ibid, p. 7). Interestingly, a study on the determinants of wind energy development indicates that the already installed capacity is a stronger influence on capacity addition than policy factors such as RPOs or feed- in tariffs (Thapar, Sharma, and Verma 2018). This can, however, be explained through the powerful emerging economics of scale from increased capacity installation. In contrast, more recent studies indicate that policy incentives indeed do influence capacity addition by leading to high capital and installation costs and –consequentially – a lack of investment from both the public and private sector (Elavarasan et al. 2020, p. 22). Therefore, policy incentives clearly do influence the business environment of renewable power production sites such as wind energy.

Thereby, the case indicates that Gujarat is “well ahead of the curve among Indian states” and the experiences from the development of wind power capacity can serve as learnings to other states (Sareen 2018, p. 15). First, a comprehensive and transparent political-economic structure for electricity administration is crucial for the market entry of renewable energies and distributed generation in general. Second, policy incentives such as feed-in tariffs or RPOs have a positive effect on the capacity addition because they provide stable conditions for financing and installation of projects. While flat rate tariffs are at risk of subsidising technologies at a higher cost than necessary, there is not enough data to evaluate the impact of competitive bidding schemes to determine feed-in tariffs. Finally, because wind power development is planned to be developed by private actors the development of an efficient production and maintenance sector is important to maintain the addition of renewable energy capacity. Still, the multiple interests interfering in the electricity sector of Gujarat also demonstrates that the political-economic framework for a successful energy transition will require continuous effort and learning.

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5. Discussion and Conclusion

The results of this thesis’ analysis demonstrate that the energy transition in India has become more important between 1990 and 2019 for the provision of energy security. Most importantly, the utilisation of renewable energy production technologies such as wind or solar power can decrease the import dependency on fossil fuels while reducing greenhouse gas emissions at the same time. These developments have, however, not originated randomly or suddenly but as a slowly emerging response to ongoing change on niche and landscape level. Furthermore, the introduction of a more decentralised energy and power production has coincided with significant reforms of India’s political economy in the past 30 years. As a result, this thesis aims to contribute to a growing understanding of energy transitions in general but also particularly in context of rapid economic development in countries of the Global South and structural reformation. In the end, India as the soon to be most populated country on earth with a constantly growing consumption of energy will determine the success of both an energy transition and action against climate change on the global level. Responding to the first research question on national level policy and implemented policy frameworks, the results show that the energy transition has become a more salient issue over time. Whereas policy in the first period between 1990 and 2003 focussed mostly on the deregulation of the economy by easing market access aiming for a diversification of the energy supply, renewable energy production technologies were actively sought and supported between 2004 and 2013. Of particular importance here has been the Electricity Act of 2003 that effectively liberalised the generation of electricity, thus only enabling the decentralised production of power and private investment. Indeed, the results show, this change on the regime level towards the energy transition are framed as a response to India’s import dependency on increasingly more costly fossil fuels. At the same time technological innovation and development on the niche level only made the technology available. In other words, the increasing cost-effectiveness of e.g. wind power generation made renewable energy technologies an effective response to energy challenges. Still, without the landscape level challenges, however, the niche level innovation would not have sufficed to start the development of the energy transition on a regime level. This becomes more evident in the third time period analysed, where the energy transition is increasingly framed not only as a diversification of energy supply but also as a response to climate change and the reduction of greenhouse gas emissions between 2014 and 2019. In light of global action such as the Paris convention policy frameworks fostering the energy transition got strengthened further and capacity addition goals increased. In effect, the results support the hypothesis that the Indian

- 72 - energy transition is more of a response to exogenous landscape level pressure rather than sole technological innovation. Overall, it remains notable that the emergence of the energy transition closely followed the transformation of the political economy in India. But while increased private investment, deregulation and administrative transformation have significantly increased the development of renewable energy technologies first, the addition of capacity has slowed down recently as more fundamental structural challenges start to curtail the development. Effectively, the ‘lowest hanging fruits’ seem increasingly plucked and further development will require increased efforts. This is also observable in the case study of wind power development in the Gujarat state. Indeed, Gujarat is often seen as the political economic role model for development and, as other studies have shown, Modi’s advance from the chief minister of Gujarat to the prime minister of India is largely based on the states supposed success story (e.g. Torri 2015). Therefore, the second hypothesis has postulated that wind energy development in Gujarat can also serve as a role model for other states in India. Although large amounts of wind power generation capacity have been added particularly since 2007, continued structural challenges limit its contribution to a successful energy transition. On the one hand, administrative reform of the state electricity board and the introduction of designated wind power policy frameworks with development incentives have led to significant capacity addition. At the same time, the local regime is the outcome of a very context specific set of political economic actors. Therefore, the second hypothesis is rejected. Still, the case certainly yields insights on selected measures and practices. Most importantly, a strong and transparent regulatory framework determines the development of new renewable energy generation capacity. Although economic incentives remain important, they become less relevant with renewable energy technologies becoming more cost efficient. Overall, the case study furthermore shows exemplarily how much potential Gujarat and India in general have for the development of renewable energies. Before moving on to the wider implications, it is important to understand the limitations of this study. First, the theoretical framework inspired by the Multi-Level Perspective theory was developed to study socio-technical transitions, e.g. through the implementation of the steam engine in the 19th century. Although energy transitions and renewable energy technologies can certainly be viewed as a socio-technical transitions, the framework with niche, regime and landscape level change is limited because current renewable energies will not be able to fully replace fossil fuel technologies in the foreseeable future. Therefore, there likely is interference with other variables in the observable change on all three levels. For example, the landscape development of rising resource prices such as for oil exerts pressure on the regime to diversify the country’s energy supply. While renewable energy technologies also contribute

- 73 - to this, other developments such as a transition from a coal and oil run energy economy to a gas driven structure are neglected by the framework. Indeed, although the MLP theory is only recently being applied to studies of energy transitions, others also start to observe these tendencies. In a study of the German Energiewende, for example, the authors conclude that the MLP framework holds limited explanatory power if the innovations are not substantially challenging but only incrementally adjusting a given system (Hölsgens, Lübke, and Hasselkuß 2018). Similarly, Dong and Mori emphasise the importance of considering exogenous pressure on all three levels for the analysis of developing countries (2017). Their study of the energy transition in Kenya highlights the influence of external actors such as foreign companies and the pressure they exert on a regime level. On the other hand, they find that the MLP framework is well able to identify variables that determine the development of an energy transition. Thus, the results of this analysis also need to be considered in the relevant context and with other potential actors in mind. In sum, while the MLP framework is well suited to cover developments in a given context, it easily neglects factors outside of the chosen frame. This applies particularly to the time period chosen for an analysis with the MLP framework. Considering the transition of the political economy in India, for example, there is widespread agreement that the reforms of 1991 are a key determinant of rising economic growth in the following time. On the other hand, scholars such as Kohli argue that the Indian state started prioritising growth since about 1980 and that the 1991 reforms only add adverse political and distributional consequences to the game (Kohli 2006). Still, although the influence of the 1991 reforms on economic growth acceleration is debated, the period is remarkably shaped by an almost constant GDP growth of 6% per year. Thus, the main argument of this thesis with the growth of GDP as a key determinant of a growing energy consumption holds, nevertheless. But indeed, as shown above, the selection of a priori time periods is likely to neglect detrimental influences on transitions of all kinds. Therefore, increased attention will need to be paid to the identification of time periods with the application of the MLP framework. Furthermore, the results of this analysis are based on a very specific set of data. Different than initially planned, due to the circumstances of the Corona pandemic the interviews could not be conducted. Although the technicalities such as informed consent forms and semi-structured questionnaires were developed and several participants agreed to interviews initially, the evolving measures against the pandemic have restrained their ability to ultimately share their insights in this research. Therefore, the argumentation rests on a selection of descriptive and policy/document data. Because these mainly represent the outcome of the political economy of emerging processes, the interviews were designed to provide insights onto the participating actors, their strategies, and underlying motives. In other words, interviews

- 74 - would have added to the understanding of the energy transition emergence process and complemented the results displayed. Moreover, interviews would have been a suitable tool to reduce the timeframe and variable bias outlined before by effectively pointing out determinant factors that might have been outside of the initial scope of research. Hence, the selected data holds more descriptive rather than decisively explanatory power. For this reason, particular attention has been paid to the identification and systematic selection of relevant policy documents. Nevertheless, the results have implications for the wider debate on energy transitions in countries of the global south with rapid economic growth, increasing energy consumption and environmental problems such as pollution or greenhouse gas emissions. First, the study underlines the importance of energy security for sustained economic growth. The availability of stable and affordable energy production in particular continues to represent a key concern to countries aiming to develop their economies. The analysis shows that factors such as a growing population in combination with a rising per capita consumption caused by urbanisation and increasing purchase power lead to a significant growth in the energy demand. Thus, securing the supply of energy is crucial to the successful development of political economic systems. Regardless of the type of desired system, their implementation will not be possible without considerate strategies for energy security. This leads to the second implication from this research: The energy transition in India has not emerged because of good will or to combat climate change but primarily to diversify its energy supply and reduce the dependence on fossil fuel imports. As the data shows, the energy transition is decisively framed as a response to landscape level changes such as rising energy prices and to satisfy the rising demand for energy. Only in the recent years the energy transition in India is also advanced to address climate change and reduce pollution. Still, this concern is only secondary to its role for economic development. As India has outlined in its contribution to the Paris Agreement:

“The desire to improve one's lot has been the primary driving force behind human progress. While a few fortunate fellow beings have moved far ahead in this journey of progress, there are many in the world who have been left behind. Nations that are now striving to fulfil this 'right to grow' of their teeming millions cannot be made to feel guilty of their development agenda as they attempt to fulfil this legitimate aspiration. Just because economic development of many countries in the past has come at the cost of environment, it should not be presumed that a reconciliation of the two is not possible.” (Government of India 2015, p. 1).

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Moreover, the NDC states that “India, even though not a part of the problem, has been an active and constructive participant in the search for solutions” (ibid, p. 2). Thus, the insight that India’s energy transition is primarily motivated by the provision of energy security rather than the reduction of greenhouse gas emissions holds important implications for example for the negotiation of further global accords such as the Paris agreement. With decisive criticism towards the already industrialised countries, the behaviour of actors such as the EU and their leadership approach become even more important (Parker, Karlsson, and Hjerpe 2015). Finally, the results from the case study demonstrate the potential for renewable energy development in Gujarat. With a currently estimated potential of up to 84.43 GW both on- and offshore, the region could develop a strong wind energy support cluster with manufacturers and developers to support the energy transition in India. In effect, the large-scale development of wind energy certainly is possible in Gujarat/India and states are increasingly introducing favourable conditions with economic incentives and more specifically designed policy frameworks. The results show, however, that economic incentives such as Feed In Tariffs tend to carry problems for local energy authorities in the long term because they are at risk of underestimating the technological advancement and economic profitability. At the same time, in the political economy of energy in India with electricity trading, transmission and delivery publicly owned by state electricity boards the implementation of renewable purchase obligations (RPOs) is vital to the successful development of renewable energy production technology. Thereby, the results indicate in which ways the political economy of a country determines the design and outcome of an attempted energy transition. Interestingly, the energy transition in India is mainly expected to be executed by private actors rather than the public structures already in place. With installation potential diminishing in other regions of the world such as northern Europe, the future development of wind power will likely be determined in other regions and under different political economic circumstances. In spite of the limited scope of this research and the forceful reliance on a narrow set of data for the analysis, the argument of this thesis demonstrates clearly that studying the energy transition in India can reveal insights both into India’s political economy as well as energy transitions and a low carbon economy on the global level. With its growing population and rapid growth of GDP India is likely to become an even more important in the global energy structure. Different from other countries and regions such as Russia, the US, or the Arabic Gulf, however, India is not one of the resource rich energy exporting countries but will instead turn into one of the biggest consumers of energy globally. Indeed, the review of the material energy situation in India indicates that this energy demand will largely be fulfilled through energy imports, thereby increasing the already prevalent import dependency. The analysis has shown

- 76 - that the energy transition and the development of renewable energy can help to significantly reduce this dependency and to improve its energy security. At the same time, the high energy intensity of the economy and the political structures continue to support the growth of fossil fuel consumption. Therefore, the study of regional political economies and its influence on the design, structure and development of energy transitions need to be studied in more detail in the future. Accordingly, further research could focus on the development of solar photovoltaic and other types of renewable energy technologies that would allow for a direct comparison between the technology regimes. Indeed, this might help to identify technology types ‘ideally suited’ to the political economy of a state and could thus be developed quickly. Importantly, future research will also need to focus on the division of renewable energy potential between different states and the implications for the nationally attempted energy transition, e.g. the difficulty of setting common standards for a renewable energy power share across states. In effect, these might result in varying degrees of energy security and import dependency for different states. Furthermore, as concluded in the analysis, the removal of flat rate economic incentives will likely influence the future development of renewable energies. In effect, while this thesis traced the emergence of the energy transition between 1990 and 2019, the wide-scale implantation and success will be determined by India’s political economy of energy in the coming decades.

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