Saturday, August 21, 2010

India - Energy and Policy Crisis

Indian energy policies are blindly following EU's policies and not addressing our energy problems. Our energy needs are significantly different. We are a growing economy with a huge energy deficit (in 2005 our deficit was 11% peak and 7% off-peak - of a 140000+ MW installed capacity) and our energy demand is growing roughly at 4% year on year. To just maintain the same level of growth, we need to double our energy generation every 15 years (excluding any growth due to higher living comforts). We need to have 320 GW by 2025 and 640 GW by 2040! Compare this to 160 GW established in the last 60+ years.

EU (and even US) have a very low electricity growth rate compared to India. Their electricity generation infrastructure is well established and any renewables they are adding is just for greening up their infrastructure. India is at growing stage, we need policies that should address energy growth, security (indigenous resources to provide price insulation) and climate change. So EU's policy of feed in tariffs to green electricity infrastructure addresses only climate change but not renewables growth. Consider this, Germany - leader in solar industry just installed - 8.87 GW in the last 10 years. We need to install 160 GW in the next 15 years !!! We need policies that make renewables compete with coal in free market, not feed in tariffs which is still a licensed and regulated market draining govt resources.

Our policies should put renewables on par with coal. Since renewables pay for itself in 7 ~ 10 years (with large scale manufacture and deployment pay back will come down), our policies should help finance the renewables. First solar and Green Tech media ppl both tell me that high initial cost is putting off investments in renewables. So why not take away incentives for coal to help finance the renewables or provide low cost capital? We should not subsidize renewables but rather provide the initial capital for investment.

As a post script, a note on feed in tariffs. It accelerates the pay-back but with feed in tariffs

1) It is no longer a free market so less opportunity for innovation and slow growth. In India solar is projected to grow only to 22GW in 10 years.
2) It drains the govt resources - our present solar feed in tariff policy will cost govt 14,00,000 crore rupees.