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CLEAN ENERGY
- A regulator must determine tariffs for power, coal and gas

The United States of America wants India to reduce carbon dioxide emissions. Developed countries are and will remain the world’s major polluters. The US accounts for 24 per cent of global carbon emissions, China 24 per cent, Russia 6 per cent, Japan 5 per cent, while India is only 5 per cent. India and China must use less coal to produce energy. If economic growth is not to suffer, they must find other ways to cut carbon emissions. Our self-interest requires it to improve the health of our population. Beijing’s polluted black skies are a warning to us. But our low per capita energy consumption levels (in 2003, 512.4 kg per person in India, 1138.3 in China, 1674.4 for the world as a whole, versus 7794.8 in the US), means energy consumption will rise sharply in India and in China as their economies grow. Further, energy must be available and affordable for the poor.

Both demand and supply must be managed. Setting standards for all energy-using equipment, monitoring them and penalizing those who cross maximum levels can improve energy efficiencies. Thailand has an energy to gross domestic product growth ratio of 1.2:1, and aims by 2011 to reduce it to 0.85:1. India’s primary energy to GDP ratio in 1991-2000 was 0.907, for electricity it was 1.213. It must improve.

An efficient operation of generation and distribution by modernizing old and small plants is a quick and low-cost method. The average plant load factor for Indian plants in 2003-04 was 68.4 per cent but in Bihar it was 37.6, Jharkhand 23.1 and the North-east 14.0. China is shutting down all thermal plants below 100 MW capacity to improve overall plant efficiency. The National Thermal Power Corporation has demonstrated its ability in improving efficiencies in old plants and this expertise must be exploited. There are technical as well as commercial losses (theft) of electricity. Reducing technical losses to international levels from the present 10 per cent will free more energy for consumption with no additional emissions.

India is not using 75 per cent of its hydroelectric potential. This can add over 60,000 MW of generating capacity. Similarly, nuclear power accounts for hardly 3 per cent of our present total electricity-generating capacity of around 120,000 MW. But even if the world gives us better technology and uranium fuel, nuclear power will not exceed 5 per cent of demand in 20 years. There remain problems of disposal of nuclear waste and the possibility that terrorists could get hold of enriched uranium and blackmail society. But we must pursue all avenues of reducing coal usage.

There is potential for generating non-polluting power through windmills, solar panels and solar cells, harnessing geothermal energy, using biomass and agricultural products. Wind speeds vary; hence wind power generation varies, and must be supported by more certain base load power from coal or gas or nuclear. (Base load power demand is power that is constantly needed). Solar panels and cells are still high-cost and useful for remote areas or households. Geothermal energy is a technology still under experimentation. Biomass can help in small-scale generation and is useful for village-level generation and distribution without using the grid. Cost reduction, and institutions to manage it commercially, must be developed. Agricultural products like ethanol could, in a land-short country like India, adversely affect availability of sugar, food and other commercial crops. Further, all these sources are likely to produce more expensive power less than our needs. This bunch of technologies has limited value for us.

Only coal, of which we have large reserves, and gas, which is being found in increasing quantities in India, can meet the explosion in our energy demand, even if all other sources are exploited fully. But Indian coal has a high ash content (though low in sulphur that causes acid rain in parts of China). Carbon emissions cause global warming and climate change. New technologies are required to get more energy out of the same quantity of coal and also reduce carbon emissions.

Some ways to use less energy without lessening comforts: improve efficiency of lighting appliances, tax inefficient appliances, make rules for buildings and factories to make them more energy efficient, set standards for energy using equipment such as our inefficient agricultural pump sets.

Available technologies or those under development for reducing carbon emissions in generation are gasifying coal, pulverizing coal before use, washing coal, sequestering carbon emissions in underground caves or under the oceans, and using efficient combustion to get more electricity from the same coal.

Pulverizing coal before use is perhaps the quickest method, with technology already in use on which further cost reduction is possible. Coal washing is also a known technology, but at present adds to the cost. Research to reduce costs is essential. Sequestering carbon emissions is a new technology still being tried in some developed countries. It may not offer much benefit,but we need to develop expertise in it.

Advanced coal combustion technologies, with the use of supercritical steam cycle technologies and integrated gasification combined cycle plants, reduce carbon emissions for the same amount of energy. Ultra mega power projects are to use supercritical technology. There is little Indian research and development on these technologies and to reduce their costs. Investment is especially important because our coal is of a different quality from that in most of Europe and the US. It is thought that IGCC is a good possibility though, even in developed countries, the technology is 20 years away from actuality. Another problem with these technologies is their high capital costs.

India, China, Japan and South Korea together have high foreign exchange reserves and are energy-short, importing an increasing proportion of global oil and gas. Using our combined clout to create a buyer cartel for oil, gas, uranium, and so on, collaborating in manufacturing equipment for our countries, and negotiating to get international prices down, must be priorities. Asian countries could optimize on power usage through a regional grid. We could set common standards for generation and energy using equipment and share our experiences in renovation and modernization to get more out of old plants. Most important, we could set up collaborative research and development in a network of laboratories over the region.

Fiscal measures can redirect demand to energy-efficient equipment. Increased taxes can shift consumers from polluting to non-polluting fuels, for example, from diesel or petrol to CNG. Banks could lend on long tenures for energy-efficient technologies so that repayment can be spread over more years. A shorter tenure puts a greater burden on the immediate tariff that the consumer has to pay.

An alternative to coal is gas used for generating power. The cost of imported gas, whether by sea or by land from Iran, Burma or Bangladesh, will be far higher in cost than coal and result in non-affordable power tariffs. However, the substantial gas discoveries in recent years enable us to greatly increase the use of gas for generating power. Gas does not have the pollution and emission problems associated with coal. But it must be priced at levels that the Indian power consumer can afford. The government should take its royalties from gas fields in kind and use them for the central power and fertilizer plants.

For private generators, independent tariff regulation of gas must be introduced. This must allow the gas producer adequate margins to cover his exploration and production risks, but not the windfall profits that arise because of the wildly rising international gas prices because of war and cartels. Domestic gas must be reserved for power (and possibly fertilizer). It must also be priced at levels affordable for the power user. This will be helped if we had a common independent energy regulator to determine tariffs for power, coal and gas.

The author is former director- general, National Council for Applied Economic Research
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