Opinion Frittering away our energies

The energy sector is currently in a state of transition. It is headed in a direction that will bring changes comparable in impact to those engendered by the invention of the steam engine in the 19th century or liquid-fuelled transportation in the 20th. It is not possible at this point to put a timeline to this transition or to define precisely the architecture of the future energy system. But it is credible to posit that the combined impact of technology,increased investment in “alternatives” and growing public sensitivity to the environment will radically reconfigure the existing order. It can also be stated that the governments that wish to influence the direction and pace of this transition will have to formulate and implement their energy policy within an integrative and collaborative decision-making structure — one that aligns technology,infrastructure,markets,people and policy — for all energy sources and facilitates partnerships between public and private stakeholders. This is particularly apposite for India as today it looks at energy through a fragmented and siloed prism. There are,for instance,seven Central agencies involved in energy — the ministries of petroleum and natural gas,coal,atomic,new and non-conventional,power,the Planning Commission and the PMO. Each is headed by a cabinet minister; most have a phalanx of PSUs under their jurisdiction and are bent on protecting their turf. The integrated energy policy document prepared by the Planning

Commission some years back is gathering dust. Change is seldom linear and unconstrained. This is particularly true for the energy sector as it is hugely complex; it has massive embedded capital; the consumption patterns are difficult to alter and there are vested interests protecting the status quo. Radical change is possible only when technology and infrastructure are locked into a synergistic embrace. The development of one without compatible and timely investments in the other cannot lead  to a system wide overhaul.

Technology,per se,has seldom been a blocker for the energy sector. Industry has almost always managed to find a technology answer to existing and emergent problems. The Cassandras of “peak oil”,for instance,who have maintained that the world is running out of petroleum,have had to push back the date of their peak because of the resources unlocked by new technology. The commercialisation of unconventional oil/gas (shale,coal-based,etc) is just the latest example of this fact. One can be fairly confident,therefore,that technology will find solutions to the challenge of moving the world onto a low carbon trajectory. The problem is that technology can provide the necessary conditions but it cannot meet the sufficient requirements. That will hinge on the creation of compatible infrastructure for bringing the technology to the market. The nature of this problem is best explained through example. Edison flipped the switch that electrified JP Morgan’s offices in New York in 1882. It was not,however,until the 1930s that factories in America switched from steam power to electric power. This was because they had to be redesigned,and in many cases,rebuilt. Similarly,wind turbines were first installed in the US and Denmark in the early 1980s. Notwithstanding,three decades later,wind energy accounts for a very small share of the energy basket. The constraint here again has not been technology but infrastructure,and specifically,land. Were America to replace all of its coal-based power plants with wind energy,it would require land the size of Gujarat.

India defied conventional economic wisdom by leapfrogging from a predominantly agriculture-based economy to a service-dominated economy (Economics 101 has the development sequence running from agriculture to domestic industry to exports to services). An opportunity now exists for India to leapfrog onto a new energy architecture. This will take many more years than it took to reshape our economy,but that does not take away from the fact of this opportunity. The question is whether India can put in place the the enabling environment to steer the energy sector through its current travails (as underlined by the CEOs) and at the same time,encourage technology and innovation,attract investment into “smart” infrastructure and reshape consumption habits to reach its longer-term destination of a sustainable energy future built on modern clean technology? The PM’s decision to formalise a regular dialogue between the various energy ministries would be significant if it helped create such an environment.

The writer is chairman of the Shell Group in India. Views are personal