Countries, which have access to more sunshine and good wind speed, could become energy-rich. There’s an opportunity here for India Inc.
There are many ways to classify countries. They can be divided into rich or poor nations; democratic or undemocratic; energy-rich nations or energy-deficient nations.
The last classification is interesting. In the last three years, rising crude, gas and coal prices have slowed growth in energy-deficit nations while energy exporters have seen a boom. Crude prices (and natural gas) have fallen 30 per cent in the past two months. However, prices are still very high in historic terms. The three-year trend of high fossil fuel prices has prompted more investments in renewable energy than ever before.
New insights into various alternate energy sources have become available as these have been deployed on larger scales. There is now far better basis for comparison of competitiveness of various renewable technologies versus fossil fuels, hydel and nuclear.
In transportation, it is apparent that electric hybrid vehicles have a future. Alcohol, biodiesel and biofuels mixes in various ratios can be easily adopted by end-users. Brazil’s experience suggests biofuels can be competitive and even profitable versus crude above $30/barrel. But renewable bio-fuels have a dark side. In North America, arable land has been diverted to bio-fuel production leading to a sharp rise in food prices. In South America, there has been rain forest degradation caused by clearance for biofuel plantations.
Wholesale adoption of biofuel would need to work around these two problems. India may have an edge. It has excess sugarcane production capacity that can be turned to ethanol and also large swathes of wasteland can be utilised for jatropha cultivation. There are a lot of players in bio-fuels ranging from Praj Industries to Reliance. A government policy of enforced mixing has driven adoption.
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In electricity generation, nuclear and large hydel are the cheapest options over the lifetime of a plant. But nuclear plants cost huge amounts to decommission. There are potentially deadly waste disposal problems, quite apart from the risks of accidents like Chernobyl and Three Mile Island. Large hydel causes massive environmental damage at construction, and land acquisition is contentious. Among thermal fuels, coal is cheaper than gas, naptha and diesel.
At current crude and gas prices, wind-based power generation is cheaper than gas and crude-based fuels. It is a little more expensive than coal. Wind power is becoming cheaper due to economies of scale. R&D has helped raise load factor and reduce cost of materials.
That is why wind power is the fastest growing power generation technology. Projections suggest that as much as 30 per cent of global electricity generation capacity could be wind-based by 2030– currently it’s just over 1 per cent. Incidentally India has around 5 per cent wind penetration. Almost half of the capacity controlled by private power producers (14 per cent) is wind. Wind also has downsides. Turbines are noisy and hazardous to bird-life. Generation is intermittent and erratic due to wind speed fluctuations. One way to tackle some problems is offshore wind farms. But offshore generation complicates evacuation to grids.
Solar generation is also clean and like wind, sunshine is a free resource. But solar power is yet to lick major problems. The coating on solar panels is very expensive and requires periodic renewal. Solar also faces storage and intermittence issues. As a result, solar power is around 5 times as expensive as coal-based thermal. Massive technological breakthroughs are required to bring costs down to acceptable levels.
India has great potential for enhancing its wind and solar capacity along with some advantages in bio-fuel adoption. At one level, it needs supportive policy for renewables to grow to full potential. That support is available in terms of tax-breaks and other incentives.
Good access to technology (or good R&D capabilities) is another necessary condition for a viable renewables industry. Here, Indian competencies are not outstanding. Suzlon is a major player in wind but there are no comparable competencies in solar. Neither utilities nor equipment manufacturers have put much money into renewables research.
In the geo-political sense, the definition of energy-deficit and energy-rich nations could change. Nations, which have access to more sunshine, good wind speeds, spare agro capacity for biofuels, etc. could become energy-rich. This assumes the technological capability will keep pace with potential. There’s an opportunity here for India Inc.