Green growth and development : evaluating sustainability impacts of solar energy transitions in India

Abstract

1. Introduction This thesis locates itself within the emerging Green Growth-Sustainability paradox and its implications for India as an emerging economy. Last decade has witnessed an unprecedented transformation in dynamics of renewable promotion, facilitated by drastic reduction in production costs of various renewable energy technologies (RETs). A sharp decline in the costs of solar photovoltaic panels (> 80% between 2007-15) prompted Indian policy makers to leverage the untapped solar generation potential in the country. A target has been set to add hundred Gigawatts (GW) of grid connected solar generation capacity by 2022 under the flagship of National Solar Mission (MNRE,2010). Following that this study argues that the policy decision aiming at energy transition of such magnitude implies concomitant lock-in of substantial capital and material resources across the deployment process. Thereby potently influencing the trajectory of existing developmental pathways for Indianecessitating further evaluation. Renewable energy sector has been singled out to play a pivotal role in orchestrating global green growth. Policy-makers widely acknowledge the existence of important trade-offs between investing towards sustainable development and adequately supporting economic growth (Mercure et al, 2016). A topical predicament relates to articulating effective green growth policies in developing economies. This would entail innovations for not only minimizing environmental impacts of the growth process, but also techno-economic innovations for ensuring long run economic growth with cleaner technologies (Hallegate, 2011). In the case of developing economies, it also hem-in developmental concerns like inclusive growth, equitable wellbeing and alleviation of resource scarcities. Further, global expectations of greater role insustainability transitions by "leap frogging" to cleaner technologies also need to be accommodated effectively. Taking an exploratory route, the initial chapters (2-3) elucidate the critical links between energy, technology and sustainable development. Further, technology innovation system for Indian solar deployment is analyzed by compiling ecosystems for solar deployment and solar manufacturing. The study further develops a quantitative framework for mapping expansive impacts of investments in solar sector from sustainability perspective. Systems research framework-based Input-Output (I-O) analysis, Social Accounting Matrix (SAM) and Environmentally Extended Multiregional Input-Output (MRIO) analysis is performed to evaluate economic, social and environmental impacts (estimated in terms of embodied GHG emissions) of ground mounted grid connected solar photo voltaic (PV)1 deployment process.The thesis further analyses dilemma of designing a balanced domestic industrial policy that allows leveraging solar mediated local green growth possibilities without obliterating WTO obligations is analyzed. This is done by integrating comparative study on direct and indirect impacts of attaching domestic content requirement (DCR) criteria in Indian solar policy within the framework of analysis (Oliver, 2013). This comparison also forms the basis of evaluating technology localization impacts in the process of solar transition. Triple bottom line impacts (economic, social and environment) associated with solar deployment process (chapter 4-6) involved deployment category differentiated2 impact assessment with following objectives:i) Estimation of direct & indirect macroeconomic impacts associated with solar deployment process using input-output analysis to understand a) The process of solar deployment under DCR & open category leads to demand generation across economic sectors, b) Direct and indirect GDP and employment generation impacts of deployment process, c) Labor compensation distribution profile across low, medium and high skill labor categories for solar deployment. ii) Meso-economic evaluation of solar deployment process is used to evaluate social impact in terms of a) Income generation effects via deployment effects on sector, production factors and consumption pattern b) Distributive efficiency of solar scale up induced economic growth with respect to impacts on poor c) Determination of direct, cross-sectional and feedback impacts on Indian economy.Estimation of environmental impacts by estimating embodied GHG emissions and distributive efficiency of labor generation across multiregional boundaries to understand a) Embodied GHG emissions profile, within and across national boundaries, into major exporter countries to the solar sector b) Estimating GHG emissions per unit of employment generation within and across economies along with the qualitative mapping of compensation generation. The analysis structure integrates a comparison between DCR & open deployment for each of the above objectives. Under this backdrop Box 1 provides organizational structure of the thesis.2 Model Selection & Research Design This section details model selection criteria and research design for the work. Systems analysis framework was used to develop a sufficiently representative model. This involved structuring in impacts of solar deployment process and connecting it with regional growth and development perspective. This model could effectively analyze social, economic, technological and environmental impacts thus fitting in well with in the triple bottom line of sustainability frame.Estimation of economic impacts involved Input-Output (IO) based analysis. The methodology was based on the work of Caldes (2009) involving estimation of solar thermal installations impacts for Spain. India-specific solar block was compiled for integration of solar deployment as a new sector in existing national IO table in lines with Kulistic et al (2006) methodology involving compilation of biodiesel production block for Croatian economy. The solar block was constructed for both DCR based deployment where crystalline silicon (C-Si) solar panel manufacturing occurs within economy & Open category where solar panel is imported and manufacturing is an exogenous activity. Employment impacts and compensation distribution across the labor category were estimated using socio-economic satellite accounts in world input output database (WIOD, Dietzenbacke, 2012).This section details model selection criteria and research design for the work. Systems analysis framework was used to develop a sufficiently representative model. This involved structuring in impacts of solar deployment process and connecting it with regional growth and development perspective. This model could effectively analyze social, economic, technological and environmental impacts thus fitting in well with in the triple bottom line of sustainability frame. Estimation of economic impacts involved Input-Output (IO) based analysis. The methodology was based on the work of Caldes (2009) involving estimation of solar thermal installations impacts for Spain. India-specific solar block was compiled for integration of solar deployment as a new sector in existing national IO table in lines with Kulistic et al (2006) methodology involving compilationof biodiesel production block for Croatian economy. The solar block was constructed for both DCR based deployment where crystalline silicon (C-Si) solar panel manufacturing occurs within economy & Open category where solar panel is imported and manufacturing is an exogenous activity. Employment impacts and compensation distribution across the labor category were estimated using socio-economic satellite accounts in world input output database (WIOD, Dietzenbacke, 2012).Social impacts were modeled by the construction of a Social Accounting Matrix (SAM) in order to i) Link changes in value adding income to final demand through income-consumption effect ii) Study impacts of solar deployment across nine heterogeneous house hold categories for India3, leading to poverty alleviation impacts of solar deployment iii) Decomposition of multiplier matrix to estimate sector wise direct, cross sectional and feedback effects of solar deployment with respect to income and GDP multipliers. A discussion is made on the environmental impacts in the study by developing environmentally extended multiregional input output model (EE-MRIO). The model simulates impacts of solar deployment process both within India and across the main exporter countries (China & Germany) providing inputs to Indian solar sector. The analysis involved estimation of embodied GHG emissions associated with such deployments (Andrew, 2009) inclusive of trade.The estimation is augmented with topical debate on existing barriers for clean energy technology transfer to developing economies along with synergies emerging from rapidly growing global solar sector thus connecting it to sustainability discourse. 3 Data Description: Data was compiled from three categories of databases to construct representative and homogenized models involving: i) Technology specific data, ii) Balanced and homogenized macroeconomic data bases iii) Economy specific micro data bases. The data details are delineated in The quantity and value of inputs required for a unit of solar deployment sector was compiled from current market and specific project deployment reports. This covered thirteen key inputs of deployment process i.e. quantity of metal, panels, balance of system inputs, electrical and electronic equipment, transportation, concrete, labor and maintenance, human capital required for a Mega Watt (MW) of solar deployment. The desegregated value of component cost for C-Si manufacturing was integrated with the help of National Renewable Energy Laboratory (NREL) technology cost graphs (Goodrich, 2011)The data was compiled in monetary terms in a solar block and homogenized to be integrated with macroeconomic databases in the form of Input output tables (IOTs). The national IO tables, satellite accounts including socio-economic accounts and energy & emissions accounts were compiled using World Input Output Database (WIOD). The country specific micro data were obtained from National Sample Survey Organization (NSSO) 68th round reports for energy consumption and use, Household consumption and expenditure along with ruraland urban education and occupational statistics. The matrices were solved using MATLAB (2015). 4 Results & Discussion The results of the three modelling exercises detailed above were compared to understand impacts of technology localization through domestic content requirements in Indian solar policy. The first objective involved input-output analysis-based mapping of economy wide demand generation when a Megawatt (MW) of solar generation capacity is deployed. The analysis involved construction of a solar block and integrating it as a new sector in the IO tables for both DCR and open category deployment. The direct and indirect GDP, employment generation and distribution of labor compensation across high, medium and low skill categories.The analysis (Figure1, a-c) reveals that DCR based deployment has superior backward linkages in the economy leading to 24.74 % higher GDP generation when estimated in terms of direct and indirect value added. Further, DCR deployments generate 36.64 % more employment. The estimates of labor compensation distribution profile indicate generation of more medium skill (38.8 % & 40.1 %) compensation followed by high skill (31.1 & 35.5 %). DCR deployments however generates 35.4 % higher labor compensation. These results provide a qualitative insight into the known positive employment effects (Hillebrantdt, 2007) of solar deployment. The results indicate that localization of technology by using endogenously manufactured solar panels leads to higher GDP and employment generation up the value chain, a discernable positive trend for India’s developmental trajectory. Chapter 5 constructed a Social Accounting Matrix (SAM) by linking production sectors of the IO analysis to household income and consumption matrix. The analysis led to i) Identification of high impact sectors with respect to production, household income generation and associated consumption ii) Profile for household income distribution across nine occupational category iii) Direct, cross sectional and circular multiplier impacts of solar deployment with respectto income and GDP generation. Table 2 details the key results of multiplier dissociation for the two categories.The income distribution across the nine-household categories for the DCR & open deployments was estimated with the help of income multipliers from SAM. The technology localization by DCR leads to 35.84 % greater income generation across house hold. The income distribution is skewed towards urban households (53.2 %; 64.16%) in both the deployment categories though DCR generates greater rural income. The analysis with respect to income distribution across household categories reveals that technology localization by DCR based deployment triggers greater income generation the self-employed in non-agriculture (H2,37.27%,) and casual labor (H4, 29.80 %) categories in case of rural households. Higher income is generated for self-employed in agriculture (H1,26.4%) & regular wages categories (H5, 22.01%) for open category. In the case of urban household, income generation is highest under regular wages (H7, 68.56%) followed by self-employed (H6, 19.1%) for DCR. The household income distribution trend is more uniform for urban households in case of open category (23.85% - 26.51% across all the four households). This was followed by multiplier decomposition to segregate direct, cross-sectional and circularimpacts of the solar deployment for the two categories (Table 2). Results revealthat direct impacts of open category deployments (M1) is marginally higher than the DCR category. However, cross sector effects (M2) are predominantly under DCR with sectors like textile, paper & pulp, leather and footwear, water transport and private household sectors as the main beneficiaries.The circular effects were detected in both the categories. Community, social services and agriculture showed highest circular effects in DCR, while sectors like electricity and whole sale trade were highest in case of open category. Income multiplier’s direct effects (M1) are equal for both deployments, cross effect multipliers (M2) are largely in DCR for various household categories (Table 2). The results indicate a good backward integration of DCR deployment in the Indian economy not only at sectoral level but also in house hold income and consumption accounts. The M3 or the circular impacts are mixed for DCR and Open categories. Our analysis reveals that distributive efficiency of income effects for solar deployment is better under DCR projects with greater income generation for rural households. Further, highest income generation is indicated for households under self-employed in non-agriculture and casual labor category. The income quintile data reveal that 68.8 % of the casual labor falls in the lower two income classes, thus affirming that DCR based solar deployments provides greaterintegration in the local economy and better penetration efficiencies in lower income deciles indicative of better poverty alleviation impacts. The chapter 6 involves mapping environmental impacts of solar deployment process in India. The total embodied carbon dioxide emissions inclusive of emissions from imported inputs in the solar sector was estimated. The imports which was exogenously treated in previous chapters was modelled into the solar sector. This included modelling the process of solar panel manufacturing in China and inverter manufacturing in Germany along with the process of solar deployment in India. An environmentally extended multiregional input-output (EE-MRIO) analysis was performed. The analysis estimated GDP, employment and environmental impacts of a unit of Indian solar deployment into economies of India, China and Germany.5 Contributions of the Work The Green Growth – Sustainability paradox associated with Indian solar promotion was explored in this interdecipliniary study. The study developed an empirical framework to evaluate solar transitions underway in India intending to go beyond the prevalent industrial policy based discourse (Sahu & Shreemali, 2015) to relevant developmental perspective associated with process of renewable promotion .The study reveals that harnessing green growth potential of the solar scale up in India would be more effective if domestic localisation of technology manufacturing can be maintained. The greater benefits in terms of GDP , quantity and quality of employment generation occurs when solar panel manufacturing occurs within India, as indicated by estimates of domestic content requirement based solar deployment.5 Contributions of the Work The Green Growth – Sustainability paradox associated with Indian solar promotion was explored in this interdecipliniary study. The study developed an empirical framework to evaluate solar transitions underway in India intending to go beyond the prevalent industrial policy based discourse (Sahu & Shreemali, 2015) to relevant developmental perspective associated with process of renewable promotion .The study reveals that harnessing green growth potential of the solar scale up in India would be more effective if domestic localisation of technology manufacturing can be maintained. The greater benefits in terms of GDP , quantity and quality of employment generation occurs when solar panel manufacturing occurs within India, as indicated by estimates of domestic content requirement based solar deployment.Technology localization through DCR based deployments also has superior backward linkages integrating well in Indian economy. Further, there are substantial cross and circular linkages benefitting economy. Household incremental income generation is higher, estimated distributive impacts of the income generation reveal greater spread into low income households for DCR categories. Thus, incentives for establishing the solar manufacturing in India has greater positive effect with respect to poverty alleviation and inclusive growth synergizing well with sustainable development goals. The study also reveals that in-house solar manufacturing has higher environmental impacts in terms of embodied emission in manufacturing process, but it has the potential to generate more jobs per unit emissions for deployment. The results once again highlight the paradox between green growth and sustainability. The mechanisms of technology transfer for renewables into late mover economies largely focus on learning by using strategy circumventing a learning by doing curve which is known to create positive spill overs in termsof cleaner technology transfers and has a potential for economy wide improvement in process efficiency. Ensuring sustainable supply of energy is a critical challenge for an emerging economy like India posed with conditions of energy poverty, greater climate change vulnerabilities and high population growth rates. Thus, policies formulated for renewable energy scale up and deployment have to be scrutinized for their efficiency to meet multiple developmental goals. Therefore, evaluation of solar transitions in Indian economy should transcend the existing framework of conventional industrial policy strategy and free trade obligations to bring in perspectives of developmental strategy fine-tuned for alleviating intrinsic climate change vulnerabilities and aspired developmental goals.