How can India become self-sufficient in green energy technologies?

9 min readJan 12, 2021

The Paris climate agreement in 2015, to keep global warming to below 2C, requires deep decarbonization of all sectors by the mid-century. Three energy technologies — solar energy, battery storage, and green hydrogen[1] — are going to be key in achieving deep decarbonization of energy systems, including in India: solar energy for reaching power sector targets, battery storage for reaching power and transportation sector targets, and green hydrogen for all energy sector targets.

While this would require deployment of these technologies at scale, given Indian policymaker interest in developing the domestic industry in parallel, primarily from self-reliance perspective,[2] in this article we focus on the key role of policy in establishing domestic competence in development — i.e., research, development, and commercialization — of these technologies.

Before examining the role of policy, we take a step back, and start with what does a nascent industry need to do in order to become a significant global player in the long-term. Essentially, this industry needs to do the following:[3] (1) get to scale (or become competitive) in the short-to-mid-term, and (2) stay competitive in the long-term.[4] This eventually requires being able to compete on quality as well as on cost, in particular the latter given that the final product (i.e., energy) is not as differentiated[5] as many others, such as cars or electronics.

Now, we come to what is the role of the governments in this process. They can help in many ways, some of which would be (a) necessary, and some may be (b) sufficient. The former (i.e., #a) category of measures are typically on the supply side, whereas the latter (i.e., #b) category of measures are typically on the demand side. Our main argument is that governments needs to take a strategic point of view, from a long-term perspective, while using short-term measures where necessary. This strategic view may be pertinent, given limited government resources, in view of a country’s strengths and weaknesses.

In the former (i.e., necessary, or #a) category, which is focused on the supply side, the main goal should be the establishment of a National Innovation System (NIS)[6] that enables not only basic research but also ensures commercialization of research (whether domestic or global) at scale, while keeping in mind that we need both at the end of the day. This is where India has traditionally lagged;[7] and, this is where it can become a world leader, while learning from other countries (e.g., China and Korea) that have done so.[8]

For research, this would require the following measures (i.e., #1-#2): (1) support for basic science and engineering education, including establishment of appropriate programs in educational institutes and research labs; as well as (2) support for the research itself, including at academic institutions and research labs. This indicates the need to increase the research and development spending from below 1% of GDP to more than 3%, as is the best practice worldwide.[9]

For (pre-commercialization and) commercialization; this would require the following measures (i.e., #3-#7): (3) establishment of intellectual property (IP) protection regimes and (4) encouragement of academia-industry collaboration, to enable appropriate technology transfer; (5) training of manufacturing personnel and (6) provision of required resources and infrastructure (e.g., raw materials, energy, and transport), to ensure that manufacturing can occur at scale; and (7) a supportive regulatory environment, to ensure that business can operate without significant administrative and legal barriers.

Most of these measures in category #a are long-term in nature and may take quite some time to implement in an effective manner, with the Department of Science and Technology (DST) at the Ministry of Science and Technology (MST) as the lead implementer. In fact, many of these aspects have been highlighted in the Science and Technology Innovation Policy (STIP) of 2013,[10] and annually assessed.[11] The key would be to get these aspects implemented, and for the key technologies — i.e., solar energy, battery storage, and green hydrogen — for a green energy transition.[12]

In the latter (i.e., sufficient, or #b) category, the main goal should be the establishment of clear demand — both (8) long-term targets and corresponding development pathways over time, including appropriate regulatory support to remove hurdles to deployment. In addition, in some cases, a (9) carefully crafted protectionist policy; which may include domestic content requirements, import tariffs, etc.; can help the domestic industry in the short-to-mid-term (e.g., up to 5 years).

However, measure #9 should be used with caution given that not only it is typically welfare reducing given the negative impact on consumers[13] but also it can run afoul of World Trade Organization (WTO) regulations.[14] Finally, in some cases, a (10) subsidy regime, e.g., using a mix of capital, operational, tax, and financing instruments;[15] may need to be deployed as well; based on cost-competitiveness of the underlying technologies. These measures in category #b can be implemented effectively quickly, and with corresponding ministries as the lead implementers.

Now, what is possible, or even recommended, for the Government of India (GOI), for the three technologies of interest — i.e., solar energy, battery storage, and green hydrogen. While using the broad framework described above, GOI may need to think about different strategies, given the maturity of these technologies, sometimes referred to as technology readiness levels (TRLs).[16] We discuss strategies for each of the technologies below.

For solar energy, which is now an established technology at scale; given that Indian solar manufacturing industry has not been able to compete so far, which raises questions about India’s ability to catch up in research and development in solar energy (i.e., in category #a),[17] there may still be scope via category #b for developing just manufacturing competence. Here, fortuitously, measure #8 (i.e., demand) is already present, in terms of the ambitious renewable energy capacity targets, including for solar energy, to 2022 as well as to 2030, as 175 GW and 450GW, respectively; and measure #10 (i.e., subsidies) is no longer required given that solar energy is already cost-competitive.[18]

So, to promote domestic competency in solar energy manufacturing, GOI could use measure #9 (i.e., protectionist policy) to provide domestic manufacturers preferential access to the large domestic solar market in the short-to-mid-term. However, given Indian industry’s previous unimpressive record in staying globally competitive,[19] it is not clear if this would help in the long-term, especially when protections go away, and the market opens to dominant foreign manufacturers, such as from China.[20] Nevertheless, this approach may be worth exploring, given the renewed focus on self-reliance.

For batteries, which are not yet cost-competitive but are quickly becoming an established technology, there may be more hope via starting with category #b (i.e., demand side) and developing category #a (i.e., supply side) in parallel,[21] an approach that was successfully deployed by China in developing its solar industry.[22] For category #b, this would mean setting a 50GW-200GWh Battery Storage Mission[23] first (i.e., using measure #8, demand) — both for transportation and power sectors, by a joint effort of Ministries of Transport and Power — and complementing it with measure #9 (i.e., protectionist policy). Furthermore, given lifecycle cost parity, measure #10 (i.e., subsidies) may not be required for battery storage deployment either in the power sector[24] or the transportation sector.[25]

Using measure #9 for battery storage would allow development of category #a in parallel, allowing India to become a key global player, and provide the domestic industry a fair chance to become globally competitive even when protections eventually goes away. However, the implementation on category #a would need to be comprehensive across measures #1-#7 (i.e., both research and commercialization); and would need to be on battery technologies that go beyond currently dominant ones (i.e., Li-Ion), so that they can become serious competitors in the long-term; and would require some thinking about using materials that are easily available for the Indian industry.[26]

In this context, the recent move by the Niti Aayog, the government think tank, to incentivize advanced cell chemistries is a welcome one.[27] However, it may not be comprehensive enough, given that it focuses mostly on manufacturing (i.e., commercialization), potentially at the expense of indigenous research and development. This may hurt India’s long-term chances of becoming a significant global player, in batteries and other future energy technologies such as green hydrogen. Therefore, this move by the Niti Aayog, to promote commercialization of new battery chemistries, should have been complemented with equally ambitious policies to support domestic research and corresponding technology transfer, in collaboration with the DST. This is something that may be currently lacking,[28] and should be worth focusing on.

For green hydrogen, which is a nascent technology and not yet commercially competitive, this is where India can be early in the game, and simply engage now primarily via category #a (i.e., supply side), and complement it with category #b (i.e., demand side). In category #a, this would require focused and comprehensive efforts across measures #1-#7 (i.e., both research and commercialization), potentially coordinated with similar efforts for battery storage by DST. Even in category #b, only measures #8 and #10 (e.g., a Green Hydrogen Mission, with an appropriate subsidy regime) may be needed as a joint effort of Ministries of Transport, Power, and Industry; without necessarily the need for measure #9 (i.e., protectionist policy) to protect the domestic industry. As green hydrogen becomes cost-competitive in the next 5–10 years,[29] in India and globally, India would be in a globally competitive position by starting now.

This thought piece, using a common framework and applying it differentially, provides a comprehensive strategy for developing domestic competence in the three key energy technologies — solar energy, battery storage, and green hydrogen. By utilizing this strategy, GOI should be able to not only create a stronghold in these technologies but also, given the development of the basic infrastructure, be prepared for the next generation of energy technologies.

[1] See EFI (2020), https://static1.squarespace.com/static/58ec123cb3db2bd94e057628/t/5fda37fbad9c280a18a46304/1608136703124/EFI-Stanford-CA-CCS-SFPM-rev2-12.11.20.pdf

[2] See Aatmnirbhar Bharat Abhiyan in India: Gearing up for the Reformation (aatmnirbharsena.org)

[3] See Kumar and Shrimali (2020), https://www.sciencedirect.com/science/article/pii/S2352152X20316546

[4] See Kumar and Shrimali (2020), https://www.sciencedirect.com/science/article/pii/S2352152X20316546

[5] See Porter’s Generic Strategies — Differentiation Strategy — MBA Knowledge Base (mbaknol.com)

[6] See https://www.oecd.org/science/inno/2101733.pdf

[7] See India lags far behind China, US in R&D, says report — The Economic Times (indiatimes.com)

[8] See How India can become self-reliant — The Hindu

[9] See How India can become self-reliant — The Hindu

[10] See DST (2013), http://dst.gov.in/sites/default/files/STI%20Policy%202013-English.pdf, which recognizes the need to work at four levels: research, technology inputs, manufacturing, and services.

[11] See DST (2020), https://dst.gov.in/sites/default/files/English%202019-20_.pdf. DST (2013) highlighted the need for world class R&D infrastructure, and has resulted in many initiatives that are evaluated annually, e.g.: supporting basic science education (see INPSIRE) and R&D (see FIST), including in the private sector (see PURSE); enabling commercialization, while supporting intellectual property rights (see PFP), using public private partnerships and collaborative environments (see IBCC); etc. However, it is not clear whether these initiatives have been effective in getting to the goals set forward in DST (2013).

[12] In fact, while there exists a Clean Energy Research Initiative (CERI), there is minimum focus on basic R&D in solar and batteries, and no focus at all on green hydrogen (DST, 2020).

[13] This is a well-known result in economics, found in any of the standard textbooks, such as Managerial Economics by William Samuelson.

[14] E.g., see https://www.pv-magazine.com/2016/09/19/india-loses-solar-appeal-at-world-trade-organization_100026144/ for India’s failed attempt to enforce a domestic content requirement on solar.

[15] See Shrimali et al. (2017), https://www.researchgate.net/publication/311395319_The_effectiveness_of_federal_renewable_policies_in_India

[16] See Technology Readiness Level — an overview | ScienceDirect Topics

[17] See Sahoo and Shrimali (2013), https://ideas.repec.org/a/eee/enepol/v62y2013icp1470-1480.html

[18] See https://www.wsj.com/articles/solar-power-is-beginning-to-eclipse-fossil-fuels-11581964338

[19] See Sahoo and Shrimali (2013), https://ideas.repec.org/a/eee/enepol/v62y2013icp1470-1480.html

[20] See https://www.scientificamerican.com/article/why-china-is-dominating-the-solar-industry/

[21] See Kumar and Shrimali (2020), https://www.sciencedirect.com/science/article/pii/S2352152X20316546

[22] See Why China Is Dominating the Solar Industry — Scientific American

[23] See https://energy.economictimes.indiatimes.com/news/renewable/opinion-achieving-the-2030-target-of-450-gw-of-renewable-energy-a-prescription-for-india/79478511

[24] See https://www.energy-storage.news/news/competitive-procurement-means-renewables-plus-storage-can-beat-coal-indias