American industry tries to power its way into the Indian renewable energy market
HAZEL O'Leary's visit early this month has renewed the conviction that, as she promised, India retains a high-priority status in America's renewable energy establishment. The US energy secretary's agenda for promoting her country's commercial and environmental interests is backed by its industry. American enthusiasm has obviously been energised by growing economic liberalisation and the de-circuiting of old trade hurdles.
During her last visit in July 1994, O'Leary had said that cooperation between India and the US in this field would significantly reduce India's foreign exchange drainage by reducing import of fuels by a practical potpourri of managing energy-related environmental impacts and capping capital investments in the conventional energy sector. During his visit last year, the Indian minister of state for nonconventional energy, S Krishna Kumar, had engineered deals worth about US $1 billion.
A US team that visited India between January 27 and 30 had 2 days of closed-door meetings in Agra with officials of the ministry of nonconventional energy sources (MNES) and a core group of industrialists. They drafted policy recommendations on rural energy, power generation from renewables, demand-side management and decentralised utilities. "Our focus was essentially renewable electricity," says Keith Kozloff, senior associate at the World Resources Institute (WRI), Washington, DC. WRI and the Tata Energy Research Institute were co-organisers of the meet.
Krishna Kumar later called this a "landmark interaction", adding that India should try to exploit the fruits of expensive American experiments on renewable energy sources. "I seek the support of the government of the USA in exploiting the full range of available technologies," Kumar prayed.
He announced the setting up of a policy analysis and development cell to evaluate inputs for the formulation of a national renewable energy policy. A new act would be placed before Parliament this year. He assured the visitors that "we are removing all obstacles and minimising government controls for the flowering of private enterprise".
American companies are obviously eyeing the mushrooming renewable energy market in India. The MNES reports put this sector's total annual turnover (goods and services) at around Rs 1,500 crore. Ajit Gupta, MNES director, power, estimates, "If we aim at a 5 per cent share of the total installed power capacity (conventional and nonconventional) in the country by AD 2010, it would amount to 5 giga watt of capacity for renewables. This would involve investments of about US $15 billion."
With customary American frankness, US ambassador to India Frank Wisner admitted, "This interaction has outlined the scope for real business opportunities for my country." Wisner said that his embassy is setting up a renewable energy support office here.
The enthusiasm generated in the US could be gauged from the wide cross-section of technology experts who met the Indian negotiators. There were experts on marketing advanced wind turbines and turbine controllers; others who specialised in data recording and monitoring equipment; and experts on solar thermal commercialisation activities and biomass-electric technology.
But bonhomie apart, problem areas were transparent. The Americans came with a clear idea of the barriers to increased reliance on renewable energy in India. Kozloff says that the sector has been noted for distorted price signals, biased decisionmaking in energy supply, and inadequate private initiative to commercialise.
The Americans discovered that power sector reform in India is a complex affair. "Evidently, renewable energy alone cannot drive power sector reforms. We need a much broader coalition," observed Kozloff.
The US team wanted India to give priority to reforming energy pricing before offering subsidies for renewable energy, and to reduce existing subsidies on conventional energy sources, bringing the prices closer to marginal costs. MNES subsidies should be linked to commercialisation barriers, and implemented consistently and predictably.
Creating false markets through insulating indigenous technologies from competition had to go, the US team insidted. They wanted protections enjoyed by the Indian renewable technologies manufacturers to be lifted. They also wanted the government to integrate renewables in all aspects of power sector decisionmaking and target financial resources to those states which have implemented reforms.
The MNES is working out leverages to achieve this. Says L M Menezes, MNES secretary, "We want our utilities to look favourably at renewables and integrate them with the grids. We have to legislate on the necessary mechanism."
Ajit Gupta suggests amendments to the Electricity Supply Act to allow private sector generating companies to distribute power through existing grids or to expand the network on their own, and to allow electricity sales to 3rd parties or local communities. "The purchase of non-conventional technology-based electricity by our utilities should be made mandatory," adds Gupta.
By linking renewable technologies with demand-side management, the MNES has tried to find a niche for these within the existing scenario. While conventional power can be used to meet average loads, only decentralised renewable energy systems can supplement the peak load requirements.
All this requires continued R&D support within the country. "But MNES has a dismal record of supporting R&D. There is a great hurry to go abroad in search of answers," says N K Bansal, professor at the Centre for Energy Studies at the Indian Institute of Technology, Delhi.
Bansal represents the recalcitrant segment of the Indian energy establishment which is sceptical about increased American influence in the renewable energy sector. Others like him allege that the Americans "have no perception of integrating their technology with what is existing in the country".
Adds Bansal, "None of the developed countries can claim singular expertise in any field of renewable energy development that does not already exist in India now. But in terms of real development of technology, the country has to do it on its own." Bansal deprecates aping the West, insisting that the first priority is to increase the efficiency in utilisation available conventional sources. Next comes indigenous R&D.
G V Ramakrishna, member-energy in the Planning Commission, echoes Bansal's views on giving "top priority to promoting R&D in nonconventional energy sources within the country". Nevertheless, Indian perceptions of renewable energy are discernibly undergoing radical transformation. Says Krishna Kumar, "We are heading towards a radical scenario where renewables move to centrestage."
With promises of soft loans from international agencies, the scale of technologies has also been increasing. B C Jain, director, Ankur Energy Technologies, Vadodara, says, "We are moving towards large systems and large players."
Insiders in the MNES concede that the promise of Western technology and investments has clearly lent credibility to the ministry's ambitious revision of nonconventional energy targets mooted 2 years ago, and there is intense pressure to raise them even higher.
But high voltage ambitions cannot give way to rash plugging into new projects. The US experience suggests that new technologies which successfully go through R&D may not necessarily succeed in the marketplace. Says Gary L Nakarado, technical director for utility programmes at the National Renewable Energy Laboratory, Golden, Colorado, USA, "The American utilities' access to cheap conventional power sources have ensured that even the cheapest and most efficient renewable energy technologies often lose out in grid applications."
Bansal says, "What we need are viable, low-cost solutions for rural applications that would survive in the long run." He also speaks of R&D plans matching investments to back up MNES' commercialisation policy. "Without it, the ministry will realise its folly 5 years later, when the systems we are installing now will have to be maintained, serviced and repaired with our own capability."
Ramakrishna sounds a word of caution, "We will have to make many corrections before the technologies are appropriate to local conditions. Lessons from our own experience have not been fully learnt or utilised."
Whether the MNES will learn its lessons then or now is a billion dollar question.
We are a voice to you; you have been a support to us. Together we build journalism that is independent, credible and fearless. You can further help us by making a donation. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together.
Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.