Fire up or power out?

Can India fuel its economic surge without melting half the Arctic? Terry Slavin unpacks the mother of all energy challenges.

How can the fastest-growing country in the world be expected to cut its CO2 emissions when more than half of its people don’t even have access to electricity?

It’s a question that must have Indian policymakers waking up in a cold sweat in the middle of the night. The numbers are frightening. India is already the sixth largest energy consuming country in the world, yet by 2030 its ballooning needs will put it in third place.

“India’s booming economy is set to make it the world’s third largest user of energy”

India’s Planning Commission reckons the country will need to quadruple its primary energy supply – and increase its electricity supply by a factor of between five and seven – over the next two decades, if it is to feed its mushrooming economy and population. Surely the idea that such ravenous need for energy could be satisfied without melting vast swathes of the Arctic is a pipedream. Or is it?

Climate change economist Sir Nicholas Stern believes India can do quite a lot, if policymakers approach it the right way. “India should recognise that this is an inequitable story, but draw the right conclusions from it, not the wrong ones,” he says. “Growth, energy security and climate change can be brought into harmony by good policy, the right kind of taxes, the right kind of prices.” And besides cleaning up India’s noxious coal industry, says Stern, energy efficiency should be the prime focus of the battle.

For many, the most critical energy efficiency task for India lies in upgrading the plethora of state-owned electricity grids. A 2001 government report said that up to 50% of energy was being lost before it even reached users in some states, due to low investment and unplanned grid extension.

Vikram Mehta, chairman of Shell Group in India, says Indian companies are some of the most energy inefficient in the world. “Indian companies need to recognise that it’s an issue that will hurt them economically if they don’t address it,” he said. “It’s not just enough to switch off the lights. They have to invest heavily in R&D.” And it is not only industry that has to clean up its act. As Rajendra Pachauri has emphasised, consumers, too, need to be targeted through both education and savvy market instruments [see “We need a new Gandhi”].

On paper, India has already done a lot. It’s one of the first developing countries to adopt European emissions standards for transport fuels, and it has recently introduced mandatory energy labelling on white goods. Building codes have imposed energy efficiency standards, and a new Green Building Council has just been set up. One of the first announcements of prime minister Singh’s new council on climate change was a proposal to use carbon credits to subsidise a mass conversion to energy-efficient light bulbs. Singh said this alone has the potential to save 240 million tonnes of carbon dioxide and 10,000MW of electricity a year.

Ritu Kumar, European director of TERI (The Energy Resources Institute), sounds a note of caution about recent initiatives. “The proof is always in the pudding,” she said. “Our track record on enforcement is not good.” Mehta at Shell India says the fact that there are seven different ministries responsible for energy means companies are wary about making long-term investments in R&D. “There should be one energy ministry that has executive authority to develop a co-ordinated energy policy.”

Subsidies – good and bad – will be a crucial factor in the success or otherwise of India’s efficiency drive. Nicholas Stern argues for scrapping the hefty subsidies on LPG and kerosene, widely used for domestic cooking and lighting. The government should ensure “energy is priced properly, not always given free,” he says. “As long as it is given away, you’ll have it used wastefully.”

India’s various biogas schemes (which turn methane from livestock waste into cooking fuel) would undoubtedly stand a much better chance of competing in the marketplace if LPG’s subsidy advantage was removed. “All we want,” says Dr G Vasudeo, of Tamil Nadu-based energy NGO VK Nardep, “is a level playing field for biogas. Then it would really take off.”

Mark Runacres, former UK deputy high commissioner and a senior fellow at Teri, thinks the money should be used to promote green alternatives to kerosene. “If you could transfer it across to solar you could make a big difference.” It is already making a difference in West Bengal: Gon Choudhuri, head of the state’s renewable energy development authority, recently received an award from the European solar industry for his scheme to redirect the state’s kerosene subsidy to help bring solar lighting to 6,000 villages. It builds on his dramatic success in ‘solarising’ Sagar Island, via a mini-grid that’s brought electricity to thousands of islanders, and which won him an Ashden Award for Sustainable Energy.

“The government’s basic job,” says Ashok Khosla, chairman of NGO Development Alternatives, “is to remove bad subsidies.” Shifting them to small-scale renewables like solar and biogas might be helpful to kickstart those sectors, he says, but warns that: “Subsidies get hijacked by the wrong people; you have to be very careful how you design them.” A study found that 50% of the subsidised kerosene never even reaches households because it is diverted to the black market. Even for large-scale energy like wind power, straightforward subsidies have a mixed record. Spurred by special tax incentives in the 1990s, the wind industry rapidly took off. But what really gave it wings was the decision by the government of Tamil Nadu to guarantee to buy wind-generated electricity for the state grid at a decent price, coupled with attractive credit terms. Within three years, its proportion of electricity generated by wind rocketed from 3% to 25%. Result? India is now the fourth largest wind-energy generating country in the world. Ernst & Young reckons it has the potential to generate another 48GW from onshore wind alone. But wind is the exception. A recent UNEP report, Global Trends in Sustainable Energy, worryingly ranked India with Africa as lagging behind other developing countries in terms of investment in renewable energy.

There are signs, though, that this may be changing. The country currently ties in second place with Britain on Ernst & Young’s quarterly index of the attractiveness of global renewable energy markets for investors. And while the focus is still on wind, other technologies have entered the picture since the government set up the Ministry for New and Renewable Energy in 2005.

The market for solar water heating systems has surged since the ministry mandated their use in all new public housing. Grants covering half the capital costs have encouraged investment in projects to trap methane from landfill sites. And the use of biomass to generate power both in villages and in industry is spreading.

The government has an ambitious goal of using biofuels to replace 20% of its diesel requirements by 2012, which is attracting investment from the likes of BP. Most of the attention is on jatropha, but ethanol also has great potential to help re-energise the troubled sugar industry, says Ritu Kumar. “The sugar industry is in the dumps. A lot of mill owners are looking at ethanol and biogas [derived from ethanol] to supply to the grid.”

But it is solar which is seen as the brightest hope for India in the short run. Spurred by scores of success stories featuring solar entrepreneurs and enterprising NGOs across the country, the ministry announced a major program to bring light to the 100,000 villages that are not connected to the grid.

Not everyone’s convinced. Leena Srivastava, member of an expert committee set up by the Planning Commission in 2005 to develop an integrated energy strategy for India, is cautious about the country’s renewables prospects. She thinks alternative energy can only account for between 8% and 10% of India’s energy supply – about the same proportion as nuclear. Biomass gasification and solar both have a lot of potential to bring electricity to rural villages with no access to the grid, she says, but the technologies remain expensive, and a lot of investment is needed. “Unless we have an enormous technological breakthrough on solar or gas hydrates [hydrogen], so that they become technically and economically viable, I don’t think we will have revolutionary change.”

But Runacres points to major investments that have already been made in the solar sector by Moser Baer, the world’s biggest CD maker, and energy giant Reliance Industries. “These guys have the resources and liquidity and they are determined to push the technology to its limits to make it affordable for the Indian market,” Runacres said. Reliance’s chairman Mukesh Ambani recently told a conference that the costs of solar electrical systems would be halved over the next few years. “The large-scale generation of solar energy is imminent,” he promised.

Can black be green?
Terry Slavin is a regular contributor on energy and environmental issues for The Guardian and Green Futures.

10 January 2008

Terry Slavin

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