India's Go Green Initiative And The Copper Conundrum

Green growth got a thumbs up in Budget 2023. Finance Minister Nirmala Sitharaman did announce a slew of schemes to support her green growth initiatives. As a matter of fact, India has of late consistently articulated the need to decouple economic growth from greenhouse emissions.

Just consider these short-term goals:

• Indian Railways has set a net zero emission target by 2030.

• The Ujala LED (light emitting diode) bulb campaign to pare emissions by 60 million tonnes a year.

• Increasing renewable capacity to 500 GW by 2030.

• Meeting 50% of energy requirements from renewable sources.

• Reducing cumulative emissions by one billion tonnes by 2030.

• Reducing emissions intensity of India’s gross domestic product by 45% by 2030.

Indeed, the Indian leadership has shown willingness to fight climate change. The country’s vision is to achieve net zero emissions by 2070, in addition to attaining the above-mentioned short-term targets.

The accelerated thrust on electric vehicles and the stepped-up focus on renewable energy must be read against this broader backdrop of an all-encompassing green growth strategy.

In fact, India has set an EV sales penetration target of 30% of private cars, 70% of commercial cars, 40% of buses and 80% of two- and three-wheelers by 2030. In absolute numbers, these would amount to having eight crore electric vehicles on the road by 2030.

Fixing a target is one thing. Hitting the target, however, is quite another. The road ahead for the EV appears to be bumpy. This isn’t surprising. For, the country is now facing a conundrum of an unusual kind.

The copper imbroglio has already pushed the country—which was a net exporter of the commodity a few years ago—into a net importer situation. Since 2018, India has become a net importer of the metal. This was primarily the result of the closure of the Sterlite Copper plant at Thoothukudi in Tamil Nadu, which catered to around 40% of the domestic demand. 

The Tamil Nadu Pollution Control Board ordered the plant's closure after protests by locals, social and environmental activists, who alleged that the facility was causing widespread and severe pollution in the area, leading to many suffering from serious diseases. The board took the extreme position of ordering the shutdown of the plant in the wake of police firing on protesting crowds, which resulted in the death of 13 people.

The issue has since gone up to the highest court in the country. Even as the issue is caught in a politico-cum-legal tangle, Sterlite had announced its intention to sell the Thoothukudi plant. Recent reports suggest that Sterlite is, in fact, considering scrapping the plant altogether.

The Sterlite plant closure, in its wake, has put the copper-using industries in a huge spot of bother. Read in the context of the evolving copper scene, doubts have arisen over the efficacy of the go-green plan of the central government, which has set an ambitious target for EV production by 2030.

The International Copper Association, a leading advocate for the copper industry and a non-profit organization, commissioned IDTechEx, a couple of years ago to do a study on the growing EV thrust and its impact on copper demand.

The study, titled "Copper Intensity in the Electrification of Transport and the Integration of Energy Storage”, provided an insight into the important role that copper plays in EV technology.

The key findings are as follows:

• Copper’s use in electro-mobility may become greater with the emergence of energy-independent vehicles that use copper-powered solar photovoltaic panels to harness renewable energy.

• Each type of EV uses considerably more copper than traditional vehicles with internal combustion engines.

• Internal combustion engine uses 23 kg of copper.

• Hybrid electric vehicle consumes 40 kg of copper.

• Plug-in hybrid electric vehicle requires 60 kg of copper.

• Battery electric vehicle needs 83 kg of copper.

• Hybrid electric bus (E-bus HEV) uses 89 kg of copper.

• In addition, each EV charger will add 0.7 kg of copper.

• Fast chargers can add up to 8 kg of copper each.

No doubt, copper is going to be the key resource that will lead the transformation of India into a carbon-neutral country. The copper intensity of EVs, however, is four times as much as traditional vehicles. With India currently being a net importer of copper, it could potentially face a shortage or fail to achieve the 30% EV vision by 2030.

India has also set itself a target of 500 GW of renewable energy capacity by 2030. Estimates suggest that over 3,000 kg of copper is required for generating 1 MW of power via the solar photovoltaic and onshore wind platforms. Power generation via offshore wind is even more copper-intensive, requiring over 8,000 kg of copper per MW.

Propelled by strong policy reforms across sectors, the post-pandemic demand for copper grew over 27.5% in India in FY22, according to a recent report by the International Copper Association, India.

The demand for the red metal stood at 12.5 lakh tonne in FY22, compared to 9.78 lakh tonne in FY21, on the back of growth across power, infrastructure, real estate, consumer durables, and industrial sector in the country, the report said.

“The copper demand will grow little over GDP growth. After three years, the demand is likely to hit 1.3 million metric tonnes per annum,” said Mayur Karmarkar, director, International Copper Association, India.

“India’s current installed capacity of refined copper production is one million MT per annum. A further 0.5 million metric tonnes will be operational from December 2024, as the copper smelter of Kutch Copper Ltd. will commence operations,” Karmarkar said.

Out of this one million, Hindalco Industries Ltd. manufactures 0.4 million from its copper smelter in Dahej and Vedanta Ltd. manufactures 0.2 million from their refinery in Silvassa (using blister copper as raw material).

On paper, the country’s present installed capacity should be sufficient to cater to the annual domestic copper demand of 1 million metric tonnes. However, despite having sufficient capacity, refined copper imports at the end of FY20 were 0.35 million metric tonnes. Refined copper imports have increased to 35% of the domestic market by the end of FY20. 

After 18 years, for the first time in 2018, India became a net importer of copper due to reduced domestic supply. This was mainly because of the closure of the Sterlite plant in 2018.

In financial terms, refined copper imports led to a forex outflow of $1.9 billion in FY20. With the demand projected to escalate, in view of the series of green initiatives, ensuring domestic self-sufficiency in refined copper production is paramount for India to be in control of its clean energy transition.

“We will require more copper to get where we are going, and native copper manufacture would be a key in that process,” Karmarkar said.

In the future, demand for copper will grow due to a rise in power generation via renewables and a shift in mobility via electric vehicles.

India must do a couple of things quickly. The Indian copper industry should get into product segments, such as battery grade copper foils, which are used in lithium-ion batteries. Also, there is a pressing need to extend the copper smelter capacity in the country.