Moving to alternative energy sources is no longer a choice, but an obligatory step to save the earth from potentially devastating problems wrought by climate change.

In the race to achieve this, 197 countries have signed agreements, passed legislation, provided tax breaks and established reduction targets for their countries’ carbon footprints, but in the process have buried other implications of the transformation process.

India, at COP26, announced its intent to achieve 500 GW of its capacity through non-fossil fuels with 50 per cent of its energy requirement from renewables by 2030. India’s current renewable energy (RE) capacity is only about 100 GW, according to the Central Electricity Authority’s Report on Optimal Generation Capacity Mix for 2029-30.

Of the targeted capacity, solar power would contribute 280 GW, wind energy about 140 GW, and the remaining by other hybrid sources.

However, generating renewable energy is not a cinch. It requires expertise in not just manufacturing, but in putting up a well-oiled supply chain.

To generate renewable energy, the world requires lithium and cobalt for EV batteries, steel for wind turbines, and polysilicon for solar panels. Geographically, these minerals, like oil, are concentrated in a few regions.

China has grabbed the opportunity and has been at the forefront of investments in this industry, making the world heavily dependent on it; just like the world was heavily reliant on West Asian oil.

EV batteries need push

Cobalt and lithium, needed for EV batteries, are heavily concentrated geographically with the Democratic Republic of the Congo. It has 65 per cent of the world’s cobalt reserves.

Although a majority of lithium mining occurs in Latin America and Australia, China owns 70 per cent of the capacity for the conversion of cobalt ore into compounds used in the battery sector. No wonder then, China supplies more than 75 per cent of the world’s battery demand and around 80 per cent of the world’s refining capacity for EV materials.

India imported lithium and lithium-ion cells worth almost ₹9,000 crore in FY21, despite which Indian electric vehicle (EV) manufacturers are struggling to source lithium-ion batteries, prices of which are sky-rocketing. They are seeing delays in shipments from China and a four-fold increase in shipping costs this year compared to last year.

Solar power

China produces 45 per cent of the world’s polysilicon, and roughly half of all solar panels sold internationally contain polysilicon. The country is currently the world’s largest exporter and installer of solar panels.

Until 2010, India was one of the largest exporters of solar modules. However, factors like financial challenges, inconsistent government policies and implementation issues, lack of scale, and competition from low-priced Chinese imports led to the undercutting of India’s domestic module manufacturing growth.

Apart from the policies and regulations concerning the industry, there are considerable techno-economic risks involved in the configuration and operation of module manufacturing facilities in India.

According to government data, India’s imports of solar wafers, cells, modules and inverters were worth $2.55 billion in 2019-20. Efforts are on to encourage domestic manufacturing by imposing Basic Customs Duty from 2022. The reality is that India’s present domestic manufacturing capacity is not enough to fulfil the solar target of 280 GW.

Wind turbines

The US Energy Department points out that China supplies one-fifth of all imported blades for wind turbines. Between 2011 and 2020, China became a major exporter of wind turbine nacelles, before which all Chinese output was sold domestically.

China’s OEMs (original equipment manufacturers), based in China and the West, both increased their exports of Chinese nacelles (per US International Trade Commission).

Fortunately, the Indian wind manufacturing industry is better positioned (than the solar industry) and majority of the wind turbines — that is, around 80 per cent — are manufactured in India, with only a few minor products imported from China.

Although the world has established a low-cost supply chain through manufacturing relocation to China, what it needs is a sustainable and reliable supply chain not concentrated in any one region. Prior experience has shown that it could lead to a global domination by a few regions.

Therefore, it’s time to reinvest in global supply chain re-engineering, particularly in the areas of technology, skill development, encouraging domestic manufacturing, automation and advanced manufacturing, and amending environmental regulations as needed. The EU and the US are already making noises and building a relationship aimed at reducing dependency on China, but only with time this will pan out.

It is indeed a long course for the world and for India. But for starters, it will be a journey driven by a helpful policy environment.

The writer is a member of American Petroleum Institute Committee. Views are personal

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