Coal Will Remain the Major Source of Electricity Generation in India

September 7, 2011

Editor’s Note: In an interview with OneWorld South Asia, Charles Ebinger discusses the need for regional cooperation, price reform and better governance to ensure energy security in South Asia.

ONEWORLD SOUTH ASIA: In your latest book you reveal how all the touted regional energy cooperation plans repeatedly fall through due to the intense mistrust that clouds relations between South Asian countries. Do you feel that this stumbling block will eventually be overcome?

CHARLES EBINGER: I believe this mistrust can only lessen over time and will largely center on India’s willingness to go the extra mile in all negotiations with its neighbors and treat them with a less jingoistic attitude, especially at the official level.

To be sure, this is not just the fault of politicians in New Delhi. Leads of all countries across the region have singularly failed to embrace energy cooperation, and their citizens suffer as a result.

Certainly, overcoming this deep-rooted mistrust will not happen overnight—I do not want to minimize the history behind many of these disputes. Another factor that will impact how quickly the regional mistrust can be overcome is political courage: it will require some tremendous political courage to cooperate with neighbors because of the vested interests that oppose any such cooperation. And, unfortunately, political courage seems to be in short supply around the world today (the United States included). However, I do think that, in the long-term, this can be overcome.

We are already starting to see some glimmers of cooperation between India and Bangladesh. While the meetings didn’t go off flawlessly, they did go off, and relations appear to be easing back to a more positive dialogue. The important question is not if, but how quickly, will politicians realise the value in embracing regional cooperation.

OW: You argue strenuously for energy price reform. How essential do you believe these reforms are for energy security in South Asia and how confident are you that the necessary political consensus will emerge? 

EBINGER: Pricing reform is the most important issue. The right market signals encourage energy end use efficiency and conservation and also provide incentives for investment in domestic exploration and production and infrastructure development (all of which are sorely needed in the region). When you factor in the fiscal deficit facing India, it certainly is a concern as to how sustainable subsidies for oil, gas, and electricity are. Indeed, India is also fighting inflation that is threatening the foundation of the Indian economy, therefore pricing reforms must be done carefully so as not to exacerbate the situation. However, it must be addressed otherwise India is facing a tumultuous energy future.

While I think pricing reform is the most critical reform, there are many smaller moves India can make in the near term, for instance, there must also be more stringent enforcement of electricity theft, which is rampant. Crimes like bribes for meter readers, etc. should have a stringent and enforceable penalty. As for if and how these policies come out, I think it again comes down to political courage: voters tend not to like pricing increases.

Ultimately, however, I believe reforms will be piecemeal and will not occur on a timely basis given entrenched political and financial interests. But we have seen, with the discussion of LPG subsidy alleviation, that the government is interested in building on the gasoline pricing reforms of last summer.

OW: In the book you mention that climate change driven migration will affect India. How large do you believe the influx of climate refugees will be and with what consequences?

EBINGER: This really is one of the most harrowing prospects for the region and could potentially be a source of major conflict. Maplecroft, a UK-based risk consultancy recently released its Climate Change Vulnerability Index, where Bangladesh, India and Nepal were in the top four, and Pakistan in the top 20.

Bangladesh in particular is a frightening prospect. With Dhaka being so vulnerable to flooding and with the city’s population continuing to grow at dizzying rates, I really fear for that part of South Asia. In reality climate refugees from the Maldives and Bangladesh are already beginning to come and are even looking to buy land for the future. The number of migrants could be in the tens of millions by 2060 onwards and will be very destabilising.

If nothing else, the governments should make a more concerted effort on climate change adaptation measures and cooperate on how to respond to this challenge.

OW: India’s position on climate change and emissions is to hide behind the fact that its per capita emissions are low. Does the extreme disparity between energy consumption and associated emissions of high and low income groups render this argument weak?

EBINGER: The argument is weak for the reason you suggest but also because although the industrialized world is responsible for the current level of high emissions, the emerging market nations will soon overtake them. Moreover it does no good to use this argument to support inaction since we are all in this together. India cannot put its head in the sand.

Now, to the government’s credit, India was an asset to the climate discussions in Cancun at the end of 2010 proposing new accountability standards for both industrialized and developing countries. It will be interesting to see if India progresses down this strategy in Durban this winter.

OW: In light of climate change and the drive to move to cleaner sources of energy, is it realistically possible for renewables and/or nuclear energy to replace polluting fossil fuels?

EBINGER: Renewables and nuclear are extremely important but will not replace fossil fuels during the remainder of this century. On the renewables side, we must be pragmatic; until there is a solution to the issue of large-scale, commercially-viable and economically-competitive energy storage, renewables will remain on the fringe of the electricity generation discussion.

The progress India has made in renewable energy production is laudable, but we have to remember the scale of the issue we are tackling. I think in the near-term, renewables will have the most use when deployed in rural areas as distributed generation, or generation that occurs below the distribution grid (isolated solar-powered water pumping stations, for instance). In this sphere India has made great progress, but can make even more progress if it continues and expands these efforts. And the work that groups like TERI are doing on these and related issues is nothing short of remarkable.

On the nuclear side there is more promise for near-term gains, but there are problems here as well. Land access, as it is for many other issues, is a problem for nuclear power plants in India, as we see in Jaitapur.

Also, there are issues with public perception. I believe that nuclear power is safe (when regulated and administered properly) and an integral way of generating clean electricity. However, there are a number of opposition groups in India that are not in favor of nuclear energy. While it is OK to still continue with nuclear power plans, the government and industry must adequately inform and address the opposition movements, rather than ignoring their claims.

But for both nuclear and renewables as well as for the other fossil fuels, the government needs to realise the value of investments in electricity efficiency. If they first invested in a wholesale upgrade of what is a terribly inefficient transmission and distribution grid, they wouldn’t need to invest as much in new generation capacity. They will still need nuclear, renewable, hydropower, and gas and coal, but not as much as they are projecting.

In the end, however, nuclear and renewables will not solve the problem for the foreseeable future. Coal will remain the major source of electricity generation and natural gas will increase its share of the electricity mix. Therefore, for climate change concerns, we must find ways to sequester carbon dioxide emitted by all fossil fuels and engage in strenuous end use efficiency research.