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Vikram S Mehta writes: The road to energy atmanirbharta

Vikram S Mehta writes: Leadership to balance short-term pressures of elections with longer-term imperatives of sustainability is needed

Prime Minister Narendra Modi

The Prime Minister has called for “Energy Atmanirbharta” by 2040. I offer below 10 suggestions for achieving this objective.

First, definitional clarity. Atmanirbharta translates literally to self-reliance. Many interpret it to mean self-sufficiency. That should not be our goal. Energy self-sufficiency is infeasible and uneconomic. A better statement of intent would be “strategic autonomy”.

Second, prioritise access to fossil fuels. The transition to a green energy system will take long. American factories took four decades to shift from steam power to electric power. This was because they had to be redesigned, if not rebuilt. Our policy must continue to emphasise affordable and secure access to oil and gas. Part of this objective could be met by intensifying domestic exploration. We must recognise, however, the low probability of finding substantive, additional domestic resources of hydrocarbons. Our geology is complex. Also, the fact that even if we were successful in making discoveries, it may be difficult to produce them on commercially viable terms. This is because of high exploration and development costs. The larger point is our PSUs do not have an impressive track record in this respect. We must ask, therefore, whether scarce public resources should continue to be directed towards this high-risk, capital-intensive activity. Should it not be driven instead by the private sector? Might it be time to privatise the ONGC?

Third, prioritise access to the building blocks of green energy. We have ambitious targets for renewables. The Central Electricity Authority (CEA) has forecast that wind and solar energy will make up around 51 per cent of the installed power generation capacity of 830 GW by 2030. This will be an increase from 22 per cent today. The sine qua non for realising this forecast will be cost-competitive access to minerals/components (copper, cobalt, lithium, semiconductor chips etc) required to build EVs, solar panels, wind turbines and batteries. The problem is these commodities are concentrated in countries that are not on the same political page with India. A study by S&P Global has noted, for instance, that 38 per cent of copper is produced from Chile and Peru. These countries have left-wing governments unreceptive to private sector mining. Further, China controls 47 per cent of copper smelting and 42 per cent of copper refining. Rajesh Chadha and Ganesh Sivamani (CSEP ) have noted in their paper, “Critical Minerals for India: Assessing their criticality and projecting their need for green technologies,” India has some resources such as cobalt, nickel and heavy rare earth metals but it has done little to expedite their mining and processing. Their message is clear. India must remove the obstacles to domestic mining and develop strategies to manage the dynamics of market concentration, global competition and unfavourable geopolitics.

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Fourth, infrastructure development. The German economy is today in a perilous state. This is because it is not connected by pipeline to the LNG import and regassification facilities built by Spain. Germany has no option,therefore, but to source Russian gas. That in recent months has been weaponised. India cannot afford such vulnerability. GAIL is investing in the development of a national gas pipeline grid. In addition, we must expand our strategic petroleum reserves to cover at least 30 days of consumption and upgrade the transmission grid and battery storage systems to scale up renewables and smoothen its supplies. We will need to develop innovative financing mechanisms to fund green infrastructure. It should be emphasised that all such investments will get impaired if state discoms are financially insolvent.

Fifth, green incentives. The government’s production-linked incentive scheme (PLI ) offers benefits for investment in green energy. The investor response has so far been encouraging. Other governments are, however, going down a similar route. They are also looking to attract private capital to help them meet their net carbon zero targets. The US CHIPS and Science Act has offered, for instance, tax credits and subsidies that are a multiple of that offered under PLI. (viz $30 billion subsidies plus 10-year tax credit for solar panels/wind turbines/batteries; $30 billion for green utilities; $5 billion tax credit for blue hydrogen; $27 billion for a green bank). We may have to go back to the drawing board to retain the interest of potential investors.

Sixth, demand conservation and efficiency. In the face of high gas prices (at its peak, the oil equivalent of $500/barrel), Europe is discovering the disproportionately positive benefits of demand management. In India, the latter has not attracted as much attention as supply-side issues. This must be corrected. Energy usage norms must be standardised and tightened. Legislation should be contemplated to ensure compliance.

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Seventh, retraining and upskilling. The nature of jobs and their location will change with the progressive transition to a green energy system. There might be, for instance, less need for maintenance workers on oil rigs and more for technicians on solar farms. The consequential requirements for training/skilling should be anticipated and delivered.

Eighth, energy diplomacy. Our diplomats should add the arrows of energy diplomacy to their quiver. This is because of our dependence on the international energy supply chains. Success in navigating the cross-currents of economic and geopolitical uncertainties will rest greatly on skilful diplomacy.

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Ninth, holistic governance. The current siloed structures of energy governance are suboptimal. A root and branch administrative overall is required. Institutions should be created to facilitate integrated energy planning and implementation.

Finally, political statesmanship. Mark Carney, the former Governor of the UK central bank coined the phrase “the tragedy of horizons” to highlight the differing time horizons of politics, economics and society as regards the energy transition. Jean-Claude Juncker, the former president of the European Commission said “we all know what to do but we don’t know how to get re-elected once we have done it”. These two comments strike at the nub of our challenge. We need leadership that can reconcile temporal differences and balance the short-term pressures of elections with the longer-term imperatives of sustainability.

The writer is chairman and distinguished fellow, Centre for Social and Economic Progress

This article first appeared in the print edition on September 5, 2022, under the title, ‘Building the Future’

First published on: 05-09-2022 at 03:30 IST
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