Mr. Ajay Shankar a retired IAS officer served as secretary, Government of India and currently distinguished fellow at TERI has authored a book entitled – Rising Ambition- India’s Energy Transition. The book traces India’s remarkable success in renewable energy and access to energy and offer a pragmatic roadmap for green transition. Distinguish fellow of RGICS and Senior journalist Mr. Rajesh Mahapatra discussed this book with Mr. Ajay Shankar. This is transcribed conversation between two on major issues covered by the book.
1. History of India’s Renewable Energy Transition
Rajesh Mahapatra: Hello and welcome. You’re watching Policy Watch. In this episode, we talk to Mr. Ajay Shankar on a topic that concerns every individual: climate change, or rather, how we prepare ourselves against climate change.
We are asking the question about India’s energy transition. How do we shed our dependence on fossil fuel-based energy and move increasingly toward non-fossil fuel energy? How do we reach the target of net-zero carbon emissions by 2070?
We will, in the course of doing this, will also be touching upon the book that Mr. Shankar has recently authored: Rising Ambitions: India’s Energy Transition.
Welcome back, Mr. Shankar. Congratulations on the book. What I liked about this book: every time people talk about climate and carbon emissions, one gets intimidated because it involves lots of complex issues, a lot of jargon. But this is a book which—and I’m not saying this to flatter you—it is actually simple, easy to read, and even a journalist like me can understand what you’re trying to say.
So let’s get into today’s topic. How is India’s energy transition plan going?
Ajay Shankar: I would say going far better than expected by us and by most observers in the world. I have no hesitation in saying that this is one area where our success is beyond expectations and is getting recognition not only within India amongst skeptics, but in the whole world. And the facts speak for themselves.
And one other reason which I would like to highlight or factor in is that this journey towards net-zero has been crafted by us on our own, with our own thinking, and it has not been shaped by foreign policy advice.
Rajesh Mahapatra: That’s an increasing rarity these days. Because in everything we see, you know, some stakeholders’ influence or some foreign government’s pressure. Now tell me, you titled your book as Rising Ambitions. Why do you call these ambitions rising?
Ajay Shankar: In the book, I have dealt in the first two chapters with describing the successes we have achieved, and these successes have been far beyond expectations when these programs were conceived.
The first chapter is not about energy transition in the current sense of the term, but it is how India was able to take electricity to every home in every village in the country in record time. The IEA (International Energy Agency) says that we took electricity to 500 million homes in about 6–7 years, and that was historically unprecedented.
When the program for taking electricity to every village and household began in 2005 with the launch of the Rajiv Gandhi Grameen Vidyutikaran Yojana, everybody was very skeptical about what would be achieved. In the early 2000s, the IEA had felt that India would complete electrification somewhere in the decade of the 2040s—early 2040s or by 2050. We have been able to do it before 2020. So, far beyond expectations.
In the first chapter, I describe the policy design which made this possible.
Rajesh Mahapatra: You were one of the men responsible for the National Rural Electrification Program, right?
Ajay Shankar: Yes, I was privileged to be part of the team which designed the process. And this marked a major departure in the way the Government of India tries to execute a program. In the chapter—it’s a chapter of basically economic policy history—this is the first major program where the Government of India used its Central Public Sector Undertakings (CPSUs) and their strengths to achieve outcomes in states which had a huge challenge, like Bihar.
It also bypassed the traditional mode of execution, which is the Central Government giving money to the State Government, the State Government giving money to its department, and that department going to spend that money. Here, concrete projects were bid out on a turnkey basis for electrifying a block or a whole group of villages, and the cash moved directly through the executing agency to the contractors. The contracts were turnkey contracts.
This enabled the country to electrify about 100,000 villages from about 2007, when the program actually took off, to 2012. And then from 2012 to 2019, it went on to take the wires and electricity to every home. So the program execution design was key in achieving success.
This was a program where, for the first time, the names of villages which had been electrified were put up on the net so that somebody from that village in Delhi or in the US could actually check whether what was being claimed was right or wrong. Therefore, factually correct reporting drove the process.
Further, the program had a major departure: 90% of the money came from the Government of India. 90% grant from the Central Government. Till then, we had been doing electrification by providing loans through the Rural Electrification Corporation (REC) to the State Electricity Boards, and they had reached a state where they were in financial difficulty. The more backward states or less-developed states had a more serious financial problem.
When the program began, about 100,000 villages were un-electrified, and they were all in the less-developed states of the Ganges Valley, starting from central UP going on to Assam.
2. India’s Renewable Energy Transition Achievements
Rajesh Mahapatra: Alongside this, we were also seeing a kind of takeoff in our renewable energy space. We were beginning to see success in our solar energy, on the wind energy front, and in fact, you have been part of some of these initiatives—the National Solar Mission, you were associated with that.
While they meant that India’s electricity demand would continue to grow as the economy grows and the coverage of electricity grows, also it put before it the other challenge in the global context, where there were growing calls to counter carbon emissions: Where does India stand? How does India respond to it?
In the COP26 meet at Glasgow, as you mentioned right in the introduction of your book, we set reasonably ambitious targets, perhaps encouraged by the success that we were seeing in some of these sectors. We set a target that we would reach 500 GW of electricity generation from non-fossil fuel sources. Just to give the audience some perspective: Delhi NCR consumes about 8 GW, so we were looking for non-fossil fuel energy that can power something like 50 National Capital Regions.
There were also targets set vis-à-vis carbon emissions and carbon intensity. How are we doing on these targets?
Ajay Shankar: Let me begin by going back a bit in time and explain why we got the confidence to have a rising ambition and make the announcements we made in COP26 at Glasgow.
When the Solar Mission was launched in 2010, the target was about 20,000–22,000 MW by 2022. That itself seemed impossible to achieve because we had barely 100 MW of solar power then. So it appeared gigantic and unachievable.
The reason we have had this extraordinary success with the Solar Mission is the design of the program. All the key features were evolved by us and went against the dominant paradigm and wisdom of how to do things.
The Central Electricity Regulatory Commission (CERC) had fixed a tariff of about ₹17.50 per unit of solar power. The power which the State Electricity Boards were buying then was about ₹4.50–₹5.00 from new projects. So there was this big gap, and government had no money to subsidize this, because budgets are always constrained for resources.
The innovative design of how to bridge this cost difference is a matter of detail, but the key innovation in the design was that we would invite bids from the private sector for setting up solar power plants. Whoever succeeded in getting the contract would have a long-term supply agreement for the life of the project at the price at which he won the contract.
Instead of a feed-in tariff—which is a standard price at which you will buy whatever people come and offer you in the market, which is what Germany had done—we decided to invite bids. At that stage, everybody said that this won’t work, because there were no developers, no suppliers, nothing in India. “You invite bids, you won’t get bids, nothing would happen, and the program will get discredited even before it took off.” It took a lot of effort for the consensus to be reached that bids would be invited.
The second innovation was that since it was a completely new kind of development, contracts would be given in the first year not only to the one who gave the lowest price bid (L1), but to the second and the third (L2 and L3), so we were very clear that a competitive industry structure had to emerge. It is rare that government decided that contracts would be awarded not only to L1, but to L2 and L3.
And we began with very small quantities. The idea was that people will do small projects, get the confidence, and grow. This worked far better than expected.
One lesson which is still relevant for everything that we want to do is that when you’re looking at private investment, the private investor looks at two things:
- The ability to sell what he produces.
- To sell it at a price at which he makes money / makes a profit.
This long-term Power Purchase Agreement (PPA) de-risked these two factors completely, because you would not bid at a price on which you won’t make money, and the government or its agencies would buy everything for 25 years.
In the first year, the bid price—because of this elimination of risk perception and risk mitigation—was around ₹12 a unit against ₹17 a unit settled by the Central Electricity Regulatory Commission. The other good thing that happened was that China achieved an incredible breakthrough in reducing the cost of producing solar panels.
The two together brought us to a stage where last year we had one of the largest additions of solar capacity in the world outside China, and everybody is talking about our success in solar.
This is what gave us the confidence to make those announcements in Glasgow, and we are well on our way to achieve the 500 GW of non-fossil fuel capacity by 2030 (give or take a year or two or some months).
One factor I should draw attention to is that since solar power is generated only for a few hours in the day, in a conventional sense, 4 MW of solar power will give you what 1 MW of thermal power will give you in a day. The very large numbers have to be understood in the right perspective.
3. Infrastructure and Systems Required for Future
Rajesh Mahapatra: In fact, not everything in this country fails; there are success stories, and we can say that the solar program has been a success story. We are now home to one of the world’s largest solar plants, with a capacity to produce almost 2.25 GW of power in Rajasthan [Bhadla Solar Park].
So we take it that, as you said, we are already at 300 GW now; 500 GW by 2030 seems achievable. Non-fossil fuel-based energy already accounts for more than 50% of our total capacity. 2025 was a pretty good year in terms of reduction in carbon emissions—growth was almost less than 1%, whereas in recent decades the average has been close to 5%.
Where do we go from here? This is the easy part; now lies, perhaps, the more difficult part as we transit to a net-zero scenario.
Ajay Shankar: The net-zero journey is, of course, very challenging. But right now, our immediate challenge is what we have experienced this year because of success being more than expected: we had the curtailment of solar power generation because the system couldn’t absorb that solar power.
This curtailment meant that free electricity was not generated, because the marginal production of solar power costs nothing. The challenge is to create enough storage capacity so that next year we have no solar power curtailment and we are able to use all the solar power that is generated.
The next frontier for us as a country on the electricity side is to create enough storage capacity. If we want to meet all additional demand using renewable electricity, then we need storage of a scale where the storage capacity is 20% more than the solar capacity, because at least 20% of the electricity is lost in storage. That’s a gigantic task.
Fortunately, battery storage prices have come down, and the time to install battery storage is very little. We should be able to create all the battery storage that we need to see that next year and the year after that, there is no curtailment of solar power generation.
However, battery storage depends on imports from China and on minerals which are part of the global market and supply chain, and we don’t know where availability and prices will go.
There are two other technologies for storage where we, as a country, need to move very fast, where we are not vulnerable or dependent on the global supply of rare earths or foreign technology:
Pumped Hydro Storage: You pump water up to a height and let the water fall down to generate electricity, like in any hydro power plant. The potential for this in the country is huge. You can do it on-river where there are existing hydro projects, and you can do it off-river wherever there is a height difference, which is all across the Deccan region. You create a tank above and a tank below, and the water can be pumped up and down. The first such project in Andhra Pradesh has already seen its first unit getting commissioned in good time and at good costs. In a recent tender, the price for round-the-clock (RTC) supply to meet peak demand during a day turned out to be lower than the price of meeting the same demand through a thermal power plant. This is a huge transformative inflection point. The settled view until two years back was that we need to keep building thermal power plants because we need to give our people cheap electricity. Now we have reached a stage where solar plus storage is cheaper than new thermal, provided we build enough storage. We would be doing our consumers a great service by ramping up storage and providing all additional demand through solar and storage rather than building thermal power plants. This is a major challenge to settled mindsets, because we believe that we have so much coal, it is cheap, and we have a right to burn that coal. Which is correct, but why should we burn it if that means giving our consumers more expensive electricity? That’s the new thinking that needs to sink in.
Rajesh Mahapatra: I have limited knowledge on this, but I’m curious to know: when you talk about storage, are there certain policy impediments that we need to address, or why has this whole thing not been taking off?
Ajay Shankar: I would put it like this: we have been a little late to recognize the need for storage because we didn’t expect to succeed so much with solar. Success has come faster, and therefore we’ve woken up.
The policy instrument which is working for storage is again the same which worked for the Solar Mission: a long-term supply contract where risk of price and offtake is completely taken care of, which is what the recent tender has done for round-the-clock supply.
We now have this policy instrument of a long-term purchase contract at a settled price for the life of the project, which works beautifully. We are pioneers in the world in using this policy instrument. It has been crafted by us, it has succeeded beyond expectations, and what needs to be appreciated is that the entire solar program and now the storage program is being driven by private investment—no public money, no subsidy—and smart government policy. There are lessons here for other countries.
Rajesh Mahapatra: Having said that, in the case of solar power or wind power, to build the infrastructure we have a lot of dependence on imports. As we increase the share of solar energy, our dependence on these imports—today we are hugely dependent on China to import a lot of intermediates for our solar plants, right?
Ajay Shankar: We are completely dependent on China. We should be honest enough to recognize the fact, and we are beneficiaries of China’s success in making solar panels very cheaply, far cheaper than anybody expected them to do.
The issue which we need to confront frontally is that we should aim to make solar panels in this country with full value addition. To do that, we have to recognize that whenever we attempt it and do it, it’ll cost more than Chinese imports.
The way forward, which is practical and which I have suggested in the book, is that you repeat the policy instrument for storage into manufacturing: you invite bids for supply of solar panels made in India with 100% value addition in India from the year the plant goes into production (say 2029 or 2030). You agree to buy everything for the next 10–15 years for the life of the plant, knowing that it will be more expensive than Chinese imports.
You keep repeating bids, as we did in the Solar Mission and are doing with storage, to create a competitive industry structure and start moving down the cost curve. You also can reduce costs by offering these manufacturers cheap electricity, duty-free imports of capital goods and raw materials, and land and environmental clearance to reduce risk perception.
A few years of production on scale with the latest capital goods should lead us to production costs moving downwards. Once they have moved down sufficiently, government can scale it up to see that our entire program is run with domestic production.
In the intervening period, the government should buy these more expensive solar panels and use them in its own programs:
- Rooftop solar program for 10 million households (PM Surya Ghar).
- State rooftop solar programs (e.g., Delhi Government).
- PM-KUSUM program for solar irrigation pumps.
- Government civil works programs (buildings, offices, universities, housing complexes).
These solar panels will not be that expensive compared to Chinese imports, so it’s affordable and can be dispersed across the board without needing explicit budgetary support through subsidies. Anything which requires subsidy on a large scale is unlikely to succeed because the government is always short of resources.
4. Challenges and Opportunities
Rajesh Mahapatra: What is holding us back then?
Ajay Shankar: This is a new approach. I hope the merit of this approach is understood by decision-makers.
We have tried to succeed through the PLI (Production Linked Incentive) scheme. The PLI scheme is a subsidy on achieving certain predetermined outcomes. But it doesn’t work where the technology has to be purchased and the demand for the higher cost of production is not seen by the private investor. It’s a change in the way of thinking which will lead to the right decision and good outcomes.
Rajesh Mahapatra: Right. So we now come to the last segment of our discussion, which is actually the larger part of your book: this entire journey to net-zero. What are the phases, and what are the likely challenges, and what could be a probable roadmap to—to go through this journey in a successful way?
Ajay Shankar: The roadmap today is far clearer in my mind than it was when I began writing the book. And I will now shift to what are called the hard-to-abate sectors. So basically, when is looking at decarbonization:
You have an electricity system which moves toward zero carbon emissions. Then you electrify as much of the economy—economic activity—as possible.
So you have two parallel trajectories:
- One is the decline in carbon emissions per unit of electricity produced.
- And the greater use of electricity in the economy.
So in the COP process, there is discussion of taking the share of electricity to 35%.
Now, India is moving in a direction where, as I said, all additional demand of electricity can be met today.
All additional demand for electricity can be met today by creating enough storage and solar capacity, and therefore not adding to carbon emissions at all.
And we can electrify all road transport because it is cheaper to run an electric vehicle than a conventional vehicle. I’ve been running an electric vehicle for 4 years, and I can testify that my running costs in a Tata Nexon was ₹1 a kilometer.
And as the country is discovering that it is cheaper, and similarly when we had this crisis of LPG, then there was a Hindu report saying that cooking with electricity is cheaper than LPG if the price of electricity is less than ₹8 a unit.
Now, most ordinary households get electricity at less than that. Many states are giving free electricity. So it’s very easy to promote the use of electricity for cooking, but it needs a government-led program, otherwise the transition would be slower.
So if we get all of cooking on electricity and all surface transport on electricity, including railways, then we achieve.
Rajesh Mahapatra: So what are you suggesting? The government makes or subsidizes what are those called—thermo cookers, thermoplates?
Ajay Shankar: No, no. All that government needs to do is to do what it did with LEDs: do bulk procurement of efficient induction stoves—Or the—the heat, the electric stove. And in bulk procurement, you’ll get it at a lower price and give it to the people you’re giving free electricity or subsidized electricity in installments. I’m not even suggesting subsidizing this. In installments, and they will discover that it is cheaper to cook on this.
Rajesh Mahapatra: Where should that bulk procurement be from? China or here, indigenous?
Ajay Shankar: No, no, these are made in India. So there is no need to import anything. There are enough Indian firms making it, and bulk procurement scaled up slowly should give us all that we need.
Now, this has an advantage to the country from a strategic sense, because the import bill comes down. The vulnerability to higher import prices comes down, and the consumer is better off because his costs have come down. So it’s a win-win situation.
So now the challenge is in the areas where electricity cannot substitute coal or gas or fossil fuels. These are called hard-to-abate sectors.
Now here, I am far more optimistic today because of what has happened in the market. So we are the cheapest producers of solar power, and we have the cheapest cost of storage. So that makes the production cost of green hydrogen the lowest in the world, because green hydrogen is made by electrolyzing water, or electrolysis of water, and breaking up the molecule using green electricity.
So using this green hydrogen, the government invited a bid for green ammonia and got a price which was unbelievably low, because it matched the price of imported ammonia, which was not green. And that imported ammonia was also so expensive because global fuel prices have gone sky-high because of Iran war and sanctions on Russia.
And the same firm has now got a big contract, reported in today’s paper, for long-term supply of green ammonia to consumers in Europe, because they were the cheapest in a global tender.
So India has already arrived in the global economy as a cost-competitive producer of green ammonia. Now you can extend it to every low-carbon product of the industrial economy: you can extend it to fertilizer, steel, cement, or whatever. But the key would be the long-term contract with government absorbing the higher cost of the first set of plants.
Government can do it, because government builds so much. You use that more expensive steel, the impact on per-square-foot construction is marginal. The same could be done with cement and everything else.
So I believe that if we now moved on to using the policy instrument of long-term procurement through a contract for production of low-carbon or zero-carbon output in the hard-to-abate sectors, then the next 4–5 years we would have leapfrogged into becoming a globally competitive producer of green products, something we’ve already achieved with green ammonia today.
So then we can become an advanced industrial economy which is globally competitive and green. And that is why I have ended my book with the conclusion that now there is a convergence in the path to becoming green and net-zero and becoming an advanced industrial economy.
So the old mindset that we need to develop first and move towards becoming green as a secondary goal—now the two goals are complementary or supplementary and can and should be pursued together.
Rajesh Mahapatra: So what you’re saying is India may have been a latecomer to industrialization, it fell behind many other countries, including China, way behind. Here is an opportunity actually for you to—to be a leader, or at least be in the lead, to become a green manufacturing nation. I mean, there is an opportunity.
Ajay Shankar: it’s a huge opportunity. Because we can become to the green manufacturing world what China has been to the normal world for the last 20 years. Because theoretically we have an advantage: China has to close a plant; we have to only build new plants.
And our costs are lower: our manpower costs are lower, we can make our infrastructure and other costs lower. So in theory we have that advantage. But yes, we need ambition and confidence.
5. Roadmap for Equitable Energy Transition
Rajesh Mahapatra: A last question: in all of this, where is the—how does the issue of equity rest? How do you ensure that these developments are equitable and there is—benefits are distributed in a more even manner among, you know, people for whom it is intended?
Ajay Shankar: So at one end of the spectrum, we are already seeing it: free solar panels for households in the villages for rooftop. Now the program is for 10 million households—1 crore—but I see democratic politics pushing it to cover all such households. Just as democratic politics has pushed the provision of free electricity to lower-income households or free electricity for agriculture. The PM-KUSUM program takes solar panels for irrigation.
Electricity used for cooking lowers real costs for weaker-section households, so that’s again equity.
In a larger sense, if we start using our biowaste, which is a renewable source of energy, for production of commercial energy—which I have suggested in the book, and I’ve also suggested that we should have a National Biowaste Mission—then we will see an increase in employment and incomes in a decentralized manner across all villages in India. Because then all cow dung can be bought, converted to commercial energy. All biowaste can be bought and converted to green hydrogen or whatever—methanol and green energy or biogas.
So there is a huge potential for decentralized job generation, job creation, and increase in income if we have a well-designed mission for using all the biowaste for commercial energy. This could be a mission designed and developed by any state government or could be centrally done, but it’s waiting to happen. It is not yet happening anywhere in the country.
Rajesh Mahapatra: I mean, let me rephrase the question: what could be the risks, policy-related risks, that could distort equity? I mean, what is it that we need to be mindful about, what is it that we need to keep an eye on, that we ought not do this because it could yield—because one of the arguments that you are making, that electricity at the end of the day has to be affordable. So where could we, you know—
Ajay Shankar: I would—I would argue that, differing from you, I would say that the least risks are in accelerating the energy transition, because solar power will be generated in India, storage can be done in India, import dependence and vulnerability on supplies will—price goes down. And you start using biowaste, it’s a renewable source of energy and creates jobs across villages, across India, and cash incomes.
So I see a risk mitigation or a lowering of risks in this development trajectory vis-à-vis the current development trajectory.
Rajesh Mahapatra: We—I mean, we talked about storage. I mean, transmission and distribution, every time we talk about power, also becomes a critical aspect.
Ajay Shankar: So on distribution, I would say that distribution is a very key issue in the politics of the state governments. And therefore, politics has been driving state governments to provide free electricity for agriculture, which is a good thing; free electricity to lower-income households, which is a good thing.
And because of the Electricity Act, the state governments have been providing the subsidies for these. So that’s a very positive development.
But the state governments have still had difficulty in getting the distribution companies to become financially healthy.
So in the—the desire to keep tariffs low, or the political economy of not improving governance in this sector—which is very large and predominant in the states—the financial health of the distribution companies are still a matter of concern. They were a matter of concern 20 years back; they are still a matter of concern.
But the success of the energy transition has happened notwithstanding that. Going forward, I think the states at the political level have a huge opportunity of making this history, because once you are giving free electricity or practically free electricity to all lower-income households in the state, which is 80–90% of the population, and to agriculture, you can then have cost-reflective tariffs for everybody else, do away with cross-subsidy, and make the distribution business financially healthy.
Once that happens, the requisite investments in last-mile connectivity, etc., would happen.
And the other challenge distribution companies have is to plan for storage, plan for peaking power, and make adequate arrangements. And this is a new world, because the need for peaking power when summer temperatures go up to 42 degrees and air-conditioning demand soars—these are new developments. These can be taken care of with storage, but they have to think and plan and act for it, which requires capacity building and leadership, but doable in my view.
6. Closing Remarks
Rajesh Mahapatra: Well, as we come to the close of our conversation today, I would seriously recommend that any policy analyst, student of public policy, or policy wonk dealing with climate change, climate finance, energy economics, all of that, do buy a copy of this book. It’s really, really very helpful.
Mr. Shankar has very comprehensively argued how India can reconcile growth, universal energy access, energy security, and climate responses. He has offered a very clear roadmap to what could be a win-win energy transition for India in time to come.
He’s been rather pragmatic in his approach here. I mean, this is where his hands-on experience as an administrator and now his academic engagement and academic queries—all of that have come together to offer us this very helpful guide on India’s energy transition.
And I think before I end it, I must say what stands out in this book: he is not talking in terms of targets alone; he’s talking about how to build systems. And there are—he is offering institutional and tech choices that government and policymakers must weigh in.
Thank you so very much, Mr. Shankar. I think our audience would like it—would have liked it—and I think they surely will procure a copy of the book, not just procure it, and read it.
Book Detail- Rising Ambition: India’s Energy Transition, Publisher- The Energy and Resource Institute (TERI), New Delhi, ISBN- 978-93-94657-19-9
Transcription of video interview was done using AI tool- www.perplexity.ai
