Achieving India’s ambitious energy transition goals pledged by the Prime Minister at the Conference of Parties (COP 26) in Glasgow depends on several factors.
A significant pillar of this strategy is the transition to green energy and action on climate change — a shift in mobility through electric vehicles (EVs) and upscaling solar and wind power generation. These points were underscored in the Budget of 2022-23.
A report by the International Energy Association (IEA) titled “Net Zero by 2050: A Roadmap for Global Energy Sector” points out that more than 60 per cent of passenger car sales must be EVs by 2030, which is 18 times more EV sales than in 2020. Such a move would help the world to be on track to net-zero greenhouse gas emissions by 2050.
The IEA also projects that the total critical mineral demand for EVs will grow almost 30 times from 0.4 million tonnes in 2020 to 11.8 million tonnes by 2050, based on its Sustainable Development Scenario. The growth in battery demand for EVs translates into increasing demand for lithium use, which will grow 30-fold by 2030 and be more than 100 times higher in 2050 than in 2020 (IEA, 2021).
The demand for lithium is expected to grow from 19,830 tonnes in 2020 to 8,59,270 tonnes in 2040, and those for graphite from 1,41,030 tonnes to 35,56,840 tonnes in the same period. To meet this increasing demand, the IEA believes that nearly 200 giga- factories of batteries need to open every year till 2030 and the need for higher density batteries to electrify long-haul trucks.
Similarly, demand for nickel will grow from 80,470 tonnes in 2020 to 32,86,000 tonnes in 2040 and copper from 1,10,320 tonnes in 2020 to 31,19,350 tonnes in 2040, says the IEA report. While copper is used in EVs and charging infrastructure, nickel is used in EV batteries.
However, to achieve net zero emissions by 2050, power generation from solar and wind energy also needs to rapidly scale up. They need to achieve annual additions of 630 gigawatts of solar photovoltaics and 390 Gw of wind by 2030, four times the record levels set in 2020, says the IEA report.
The Budget and government statements have, therefore, rightly focused on clean and sustainable mobility, and productivity-linked incentives (PLI) to augment the manufacture of solar modules.
Strategic metals
This shift to mobility via electric vehicles and rapid scaling of power generation via renewables will be a non-starter without an adequate supply of metals such as copper, aluminium, lithium and nickel. For instance, while an electric vehicle requires about 83 kg of copper and a plug-in-vehicle 60 kg, an average internal combustion vehicle requires just 23 kg. These strategic minerals, however, are difficult to access and for which the country is mainly dependent on imports.
India, a net exporter of refined copper, turned into a net importer in 2018-19. The rise in imports may be attributed to the closure of the Sterlite plant, which produced 400,000 MT per annum and contributed 40 per cent of the country’s total copper production.
The Indian primary copper industry can produce 1 million tonnes per annum. A further 0.5 million tonnes of capacity will be operational by 2025, sufficient to cater to domestic demand. Yet, refined copper imports at the end of FY20 were 0.35 million tonnes. It rose from less than 10 per cent in 2012 to 35 per cent by the end of 2020. In financial terms, refined copper imports led to a forex outgo of $1.9 billion in FY20.
Similarly, imports of copper scrap into the country rose to 2,33,671 tonnes in 2020-21 from 1,81,000 tonnes in 2015-16. Developed countries dump low-quality copper scrap, unfit for copper extraction, in countries like India.
Minerals consumption to rise
The push for green energy will quadruple the consumption of these minerals, further exposing the country’s import dependence. These dangers have come to the fore in the Covid-19 pandemic and recently during the ongoing Russia-Ukraine conflict.
The risks are apparent in the backdrop of sanctions against Russia following the war in Ukraine. Nickel prices at the London Metal Exchange (LME) have soared to $100,000 a tonne in March 2022 from $20,537 per tonne in January 2022, forcing the LME to halt trading. Russia is the world’s biggest producer of high-grade nickel, which produces 9.3 per cent of international output.
Analysts predict that the war will result in a deficit of roughly 100,000 tonnes of nickel, approximately the same level as global stocks, threatening global green energy transition plans, which are critically dependent on the mineral. It would also add to China’s muscle in leveraging its dominance in mining and refining rare piles of earth and non-ferrous metals for its geostrategic needs.
Ensuring domestic self-sufficiency in metals and minerals production is paramount if India is to control not only its clean energy transition but also its growing infrastructure needs. As of April 1, 2015, India’s total nickel reserve was 189 million tonnes, copper 1.51 billion tonnes, bauxite 3,896 million tonnes, and graphite 194.89 million tonnes, according to the Bureau of Mines. While it is impossible to be completely self-sufficient, the government must ensure adequate supplies of these minerals.
The government has shown its intent by augmenting the manufacturing capacities of vital industrial inputs through PLIs and direct infrastructure spending to crowd-in private sector capital. The PLI schemes will incentivise the manufacturing of electric vehicles, solar photovoltaics and automotive cell (ACC) batteries, according to Crisil.
But the vagaries of trade policy and environmental regulations are significant bottlenecks that need urgent reforms. For instance, the import duty on copper concentrate (raw material for the copper refining industry) is 2.5 per cent compared to the zero rates of India’s competitors like China, South Korea and Japan.
Compounding the problem, free trade agreements have made imports of refined copper entering India duty-free, thus creating an inverted duty structure for the primary copper industry.
It is only natural to emphasise the need to check the continuing environmental degradation, both due to rapid industrialisation and growth on the one hand and widespread poverty and underdevelopment on the other. However, inconsistencies in environmental laws, regulations and standards can undoubtedly be ironed out, and institutional mechanisms at the State and central levels redesigned to facilitate better integration of sustainable development's economic and environmental objectives.
The writer was Senior Economic Advisor, Ministry of Civil Aviation