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LATEST NEWS UPDATES | THE FUTURE ISN’T GREEN by SL Rao

THE FUTURE ISN’T GREEN by SL Rao

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published Published on Oct 19, 2009   modified Modified on Oct 19, 2009


Energy security is a major objective of all countries. Some are proactive and aggressive in this pursuit, like China; others like India are slow and procrastinate on major decisions and allow hope to overtake realistic assessments. This makes energy security in the foreseeable future an uncertain goal for India.

Any discussion of energy security must keep in mind the Indian realities. Although in overall terms of commercial energy use to gross domestic product we seem among the most efficient in the world, this hides disturbing facts. Most farmers, many poor and urban households, and some industrial and commercial establishments are heavily subsidized on electricity. They either get it free, certainly in most cases below cost of delivery to them, and many of them steal electricity. This amounts to large subsidies, which have made our distribution enterprises, mostly state electricity boards, suffer huge losses every year. Generation, transmission and distribution are dominated by government enterprises. Especially in generation and distribution, they are inefficient. Even the National Thermal Power Corporation, the jewel in the public-sector crown, has a record of falling short of Plan targets for adding new capacities. In this time of global warming, India’s record on clean coal technologies is among the worst. While independent electricity regulatory bodies at the Centre and in the states are over ten years old, most state regulatory commissions are subservient to the state governments. Coal and gas, our principal fuels for electricity, are in the non-transparent control of the government.

India has a poor record on water management and pricing. Most of our cities and towns depend on bore-wells for water, consuming large amounts of electricity, and do little to recharge the aquifers. Ground water is the principal means for irrigation in agriculture, again consuming large amounts of electricity and with no metering or regulation on crops produced with that water. Excessively low water tariffs encourage excessive use of water in urban and rural India.

None of these problems can be speedily resolved. They are part of electoral politics. There is no political leadership to correct them. Unlike China, the Indian government has been hesitant, inefficient and relatively unsuccessful in negotiating and acquiring overseas energy resources. Clean coal technologies (supercritical boilers, carbon sequestration, and so on) are absent in India, resulting in excessive carbon emissions in relation to energy produced. Politics prevents governments from radical use of fiscal measures to cut the use of high-energy equipment for individual, commercial and industrial purposes.

After the Bush administration recognized India as a nuclear power, and nuclear technology and uranium supplies have resumed, nuclear power is expected to make a significant contribution to our power supplies by 2030. The expectation is far-fetched for many reasons. For one, India will remain vulnerable to the five existing nuclear powers squeezing us at short notice on supplies. The costs of nuclear plants from the West are expected to rise by 15 per cent per year, and the generation costs (at 20 cents per unit) are already much higher than thermal generation in India today (a maximum of 5 cents). With the constraints on raising tariffs in India, nuclear power will need substantial subsidies from government. Overseas investment is essential since the government and the private sector cannot find the funds by themselves. Foreign and private investors will need guarantees on returns. Worries about handling nuclear waste are resurfacing and will cause a slowdown.

We have ambitious targets for hydroelectric power. But hydroelectric power is an unlikely solution to our need for diversifying energy sources. This is because the maximum hydro-potential is concentrated in the states of the Northeast, Jammu and Kashmir and Uttaranchal. All have serious geological and seismic faults. They are very difficult to access and, in the case of Northeast, the problem of evacuating power is beset by geographic and political problems. Except for Uttaranchal, the other two are also beset with armed militancy and terrorists who can disrupt and destroy constructions. Each state also has local aspirations that could make land acquisition and evacuation of power difficult.

India purchases hydro power from Bhutan. This income has more than doubled Bhutan’s per capita income. Such trade is possible also with Nepal, which has large hydro potential. These projects could also help the control of floods in Nepal and in India. However, there is great suspicion of Indian motives and the feeling that India is cheating Nepal by offering a very low price for the power.

Global concerns about climate change, mainly because of carbon emissions, have made India and China the targets for immense pressure to reduce power generation by burning coal, their major fuel resource. India has now adopted a more nuanced response to this pressure by disclosing its plans and its willingness to have them inspected, without making commitments on emission targets. India’s plans on renewable energy must be more ambitious, and fiscal and statutory muscle must ensure that the targets are achieved for solar energy, wind, biomass and cogeneration. These are our best prospects for diversifying from coal-based electricity.

There are many other measures that India has not taken but should take. Thus the building codes must change to demand that buildings are more energy-efficient. Similarly, energy efficiency can be mandated for all electricity-using equipment. Water conservation during rains could be mandatory and save energy in pumping water. Public transport could be given differential tax concessions in relation to private transport. In estimating costs of renewables for tariff determination, incurred costs might be reduced to the extent of their social benefit. This will make renewables more competitive to others. Indian governance is so diffuse that there is little coordination between different ministries directly concerned with energy, let alone others that could facilitate improving energy supplies, like the ministries of external affairs and of defence, which should be coordinating closely with the ministries of power, oil and gas, water and so on. Some beginning apparently has been made with water, but it is very modest.

There is also considerable regulatory confusion, which prevents optimal use of available energy and initiatives in afforestation that could help to reduce India’s carbon footprints. For example, the power exchanges are prevented from futures trading in electricity because of the confusion as to whether the Central Electricity Regulatory Commission or Forward Markets Commission has jurisdiction. Over Rs 10,000 crore collected from the private mine owners for reforestation is lying unused because there is lack of clarity about who is to monitor its use.

There are thus many tasks to undertake if we are to move towards energy security. The pricing of electricity and hydrocarbons (petrol, diesel, kerosene and liquefied petroleum gas) have to reflect costs. Someone must have the political courage to exercise leadership. Independent regulators must function independently and this means that appointments, tenures and functioning have to be insulated from external influences. Even if the government cannot be restructured for better coordination, we can restructure the independent regulatory mechanisms by combining regulatory agencies for better functioning. The departments of water, power, oil and gas, and atomic energy, must have cells in the external affairs and defence ministries to ensure coordination with them.

We must be prepared for greater consultation with locals before we proceed with hydro projects. We must do the same with neighbouring countries so that we can restore their confidence. Insurgencies in areas with hydro potential are escalating. We must resolve the local socio-economic issues that cause insurgency. Incentives for private investments in renewable energy must be holistically thought through. Legislation to enforce green buildings, use of public transport, ground-water ownership, regulating water withdrawals and recharges and rain-water harvesting are urgently required. Heavy differential taxation will move demand towards energy-efficient equipment.

These suggestions and others are not new. They have just not been honestly implemented. That is what makes the prospects for India’s energy security so uncertain.
 
The author is former director-general, National Council for Applied Economic Research


The Telegraph, 19 October, 2009, http://www.telegraphindia.com/1091019/jsp/opinion/story_11614024.jsp
 

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