Generals are, on occasion, accused of preparing for the last war. The mandarins responsible for energy in the next government should not make this mistake. India is in the midst of a significant energy transition. The decision makers would be wise to create a new strategic framework for energy policy and its implementation.
Our energy policy is dual pronged. One prong is focused on fossil fuels. The priority here is to manage and mitigate the increasing import dependency on petroleum. The specifics of this prong are diversification of the sources of imports, strategic reserves, domestic exploration, demand conservation and efficiency and environmental protection.
The second prong is focused on accelerating the transition to clean renewable fuels. Here the specifics flow from the longer term commitment to achieve net zero carbon emissions by 2070 to the shorter/medium term objectives of reducing carbon intensity of GDP and creating 500 GW of electricity generation capacity from non fossil fuels by 2030.
These two prongs are developed and implemented by functional, vertically structured ministries. The Ministry of Petroleum is responsible for the first prong. And as coal accounts for the largest share in our energy consumption basket, the Ministry of Coal is also crucially significant. The second prong has a more cluttered parentage. The Ministries of Renewables and Power predominate, but the Ministries of Heavy Industry, Mines and Minerals, IT and Information and Environment are also involved. This is because many of components required to build a green energy ecosystem fall in their jurisdiction.
Each of these government ministries is headed by a cabinet minister. They all have a phalanx of bureaucrats who operate within well defined, narrow and impermeable siloes. There is no formal executive forum for an integrated discussion on energy policy.
I have often commented on the sub optimality of such a compartmentalised decision making structure. But I do so because I believe the targets for decarbonisation and sustainability that India has publicly announced will be difficult to achieve unless decision makers view the energy value chain through one integrated lens. This is because of the international forces that bear on the green transition.
The world is once again confronted by great power competition. The US and its allies are pitted against China and Russia in a new version of the Cold War. Taiwan is the “Berlin” of this contest and technological superiority the surrogate for nuclear arms race. This Cold War has ramifications for the green agenda along three axes — supply chain resilience, domestic investment and national security.
China has a near monopoly concentration on global supplies of materials essential for green energy. It also produces the least cost solar wafers, cells, panels and wind turbines. And it has stolen a march over others on low cost green technology. Domestic manufacturers of solar, wind and EVs have been the beneficiaries. But there are national security concerns. What is supplied can also be withheld.
To mitigate this exposure, the Indian government has imposed duties on Chinese imports and introduced the PLI scheme to incentivise domestic manufacturers. It has not, however, created a strategic frame a la the Chips and Science Act legislated by the US.
The next government should consider developing such a frame. The purpose should be to weave the different strands of policy related to fossil fuels and green energy into one seamless whole and converge the current two-track energy policy onto one track. The government should, as a first step, prepare a document captioned “Energy strategy: Towards convergence, security and sustainability”. Such a document should address the following issues.
One, the relationship between the hydrocarbon PSEs and other energy companies. Several of the former are now operating in the domain of the latter. The intent should be to prevent duplicity of effort and resources.
Two, IEA has forewarned that the market for copper, lithium, nickel and cobalt will be volatile and there will be supply shortages in the absence of additional investment in mining. India must, therefore, lay out a clear strategy for meeting its future requirements.
Three, in the face of the “China factor”, the competitiveness of clean energy vis a vis fossil fuels and the ease of access to low cost green technology. The US and EU have imposed anti-dumping duties on Chinese EVs. The reasons are understandable. National security should take priority over economics. But there will be an impact on investors and on the pace of the green transition. These ramifications should be studied.
Four, board rooms are currently cautious about green investment. But, private capital is crucial for the transition. The government must address this risk aversion. One approach could be to identify specific sectors or activities for special incentives. Another, to step up public investment and “crowd in” private capital. The strategy document should detail the options and lay out a road map.
The next government’s challenge is to accelerate the latter against the backdrop of a polarised international geopolitical context and exponential technological innovation.
The writer is chairman and distinguished fellow, CSEP
