If not solar energy, what should India use (Part 1)

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Sanjeev Sabhlok


In a previous article, I had examined solar energy as a potential source of day-to-day electricity and showed that it is not fit for purpose. In fact, things with solar energy are worse than I had thought.

BBC recently reported that the UK Financial Services Ombudsman has received 2,000 complaints from consumers who took loans for rooftop solar panels and are not getting the promised returns.

Read: If not solar energy, what should India use (Part 2)

In rural India, things have been particularly bad. The Scientific American reported in 2015 that Dharnai, a community of about 3,200 people in Bihar, was provided with a solar-powered microgrid in July 2014. But by the time the CM of Bihar visited to inaugurate it, villagers lined up to protest, chanting, “We want real electricity, not fake electricity”.

Solar creates huge problems for electricity grids as its overall share increases, creating the infamous “California duck” demand curve profile which leads to profitable segments during the day being skimmed off by heavily subsidised solar suppliers while baseload energy plants are left to supply the lower night demand. This forces such electricity producers out of business, causing the grid to further unravel.

Solar connectivity to the grid is also a huge issue. Just the other day, the Australian Energy Market Operator slashed the allowable output from five solar farms in Australia by half to minimise voltage fluctuations and ensure system security.

Before solar harms India’s grid, strong regulation is needed to ensure consistency of supply, not just the Pigovian taxes I had alluded. The Terry McCrann formula proposed in The Australian on 17 August 2019 seems a good option, that “If you wish to sell power into the grid you will have to guarantee a minimum level of supply 24/7. And that minimum can be no lower than 80 per cent of the maximum you will be permitted to sell into the grid”. This would force solar and wind energy producers to internalise the huge negative externality they impose on society.

But if solar and wind are unsuitable, what should India use for electricity? Our party does not believe that picking winners is the job of the government. We should let the market decide. All that is needed is that the government get out of the way and create a level playing field.

Unfortunately, the Indian government controls most electricity assets today and manipulates energy prices, including through direct and indirect subsidies. The result is a colossal failure. I have bitter memories of spending around 35 years in India of my 59-year life with either no electricity or with wildly fluctuating bulbs. India’s communist monolith must be replaced with agile market forces.

We need to almost fully privatise the generation, transmission and distribution of electricity. Anyone should be able to produce and sell electricity, subject to complying with relevant regulations. The private sector will deliver high quality electricity because it can only succeed in a competitive environment by supplying a reliable product. All price controls must, of course, be dismantled. And social goals must be sharply isolated from energy pricing and regulatory considerations.

The government may need to continue to own and manage a few large-scale hydro-electricity assets and legacy nuclear plants. To address the perverse incentives created by such ownership, the energy regulator would need to enforce competitive neutrality. The full costs, including opportunity costs of any government land that is used, any losses capitalised through the budget process and all investments by taxpayers must be reflected in the price charged for government-generated electricity.

The main role of the government in the electricity market, however, be in the regulatory space. It would need to establish a rules-based environment that motivates productive efficiency, with market-design economics principles applied to industry segments based on their special characteristics. In addition to regulation for consistency of supply, stringent safety regulations (subject to a cost-benefit test) will be needed. Energy producers should be required to insure for harms they may cause, such as from nuclear contamination, and pay appropriate Pigovian taxes to address environmental harm.

With such a policy framework, India should be able to produce vast amounts of cheap, high-quality electricity that reaches each and every home.

So what kinds of energy sources would the market use? We can revisit the root equation for energy in the universe, E=mc2. This tells us that if the mass contained in 1 gram of water is converted into energy, it would generate an explosion equivalent to 20,000 tons of TNT. Such comprehensive conversion of mass into energy is only possible in supernovae and black holes, but Einstein’s equation reminds us that an infinite spectrum of energy sources is available to mankind, subject only to technological and economic feasibility.
Two forms of atomic energy are reasonably practical today: fusion (creating new elements) and fission (breaking atoms). Fusion holds the key to mankind’s future. It also generates very little radio-active waste and once it becomes commercially viable, it can be expected to unleash an era of low-cost energy in perpetuity.

Around one hundred Indian scientists are helping to build the International Thermonuclear Experimental Reactor (ITER) in France in which India has invested Rs. 17,500 crores, approximately 10 per cent of the project’s cost. The reactor is expected to start operations by 2025 with a full-scale electricity generating unit by 2040.
Our party opposes government funding of research. A government must govern, not conduct research or pick winners. In this case, government investment was clearly unnecessary since many agile private companies have independently invested hundreds of millions of dollars in the race to create the first fusion reactor. Providing tax exemptions for research and protecting the intellectual property of these companies for a few years would have created sufficient incentives for private R&D. And it is almost certain that one or more of these agile companies will beat the bureaucratic Leviathan, the ITER, to the goalpost.

Assuming that the ITER does succeed, the Indian government should throw open the technology, enabling private companies to innovate and generate fusion energy. These efforts would have to stand on their own in a competitive marketplace and under no circumstance should the Indian government build or subsidise any fusion reactor.
In the second part of this article I will discuss nuclear and the traditional sources of energy.

DISCLAIMER : Views expressed above are the author’s own.

via TOI Blog

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