Dr. Arvind Subramanian
Chief Economic Advisor, Ministry of Finance
Govt. of India, New Delhi
Dated, 23rd August 2017
Dear Dr. Subramanian,
Festival season’s greetings from Mysore.
My apologies for this unsolicited communication, but I feel compelled to bring to your attention few critical issues in the country’s electricity sector. This has particular reference to your lecture delivered on the occasion of the Sixteenth Darbari Seth Memorial Lecture on 17 August 2017 at TERI on the topic ‘Renewables versus Fossil Fuels: An Indian reassessment of electricity generation’.
Your lecture has also been covered in the media such as the one below. You were reported as saying “Rapid changes in technology are promising to help realize the promise of renewables, which is an eminently desirable development. At the same time, these changes need to be seen in the context of India’s current economic situation and its enormous endowments of coal, which is still a very cheap way of providing energy to hundreds of millions who are still energy-deprived,” .. and ” ….for India today, the social cost of renewables is higher than that of thermal power, and it is highly unlikely for the converse to be true, at least for some time”.
I must say that the gist of this lecture, which can be construed as an indication of your conviction about the electricity sector’s future in this country, was disturbing to me at a time when many concerned sections of our society are trying hard to persuade the NITI Aayog to think truly rationally (from the perspective of the overall welfare of our society) while formulating the National Energy Policy (NEP).
Since your views have the potential to influence the policy making circles of the Union govt. there seems to be an urgent need to draw your attention to the serious issues to our society of coal based energy policy, and also to request the much needed course corrections in your view of the coal power sector in the country so as to positively influence NEP.
Though there are a number of issues of concern in your speech to many concerned people like me, I would like to focus on few major points in your lecture as below:
- The social cost of renewables will continue to be considerably higher than that of coal for some time to come.
- The abundant and cheap national asset (the so called huge reserve of coal) should be used first before we go on to use the free natural assets (solar and wind).
- Coal mining and consumption should be ramped up in the short and medium term, while the renewables should be slowed down in the short term and increased when its true price gets parity w.r.t coal.
- Coal has to be the mainstay of our energy policy for many years to come in order to provide energy for the poor.
- The nation must be aware of the energy imperialism by the global powers, who have occupied the carbon space much before India could do.
- Everyone in India should be connected to the national grid and supplied basically that way.
Looking at these issues from the true welfare perspective of our society, it appears to me that you did not have the benefit of someone briefing you adequately on a holistic perspective of coal based electricity policy for the country. Lot many issues seem to have escaped your attention. Can you please go through the comments below on the above mentioned statements?
- The social cost of renewables was never higher than that of coal, if a rational analysis of all the direct and indirect costs of coal were taken into account. In 2017, when Climate Change has become an existential issue for the humanity, it is difficult to put an upper limit to the true cost of coal. In the past such costs of coal were viewed wrongly as acceptable to the society basically because all the associated costs to the society of coal mining, transportation, storage, burning, and ash disposal were not taken into objective account. The true costs to our society in the form of health costs and the depletion of natural resources (forests, fertile land, water and clean air along with the impact on food crops) due to the ever increasing consumption of coal are enormously high. While there are a number of reports/articles focusing on the social, environmental and economic impacts of coal power, only a few of them are listed below for your ready reference.
- G20 governments paid out 444 billion USD in subsidies to fossil fuel companies in 2014, but the use of fossil fuels resulted in estimated health costs of at least six times this amount: 2.76 trillion USD .
Scholarly study report “Hidden Price Tags” prepared by Health and Environment Alliance (HEAL), Europe
- Fossil fuel subsidies are a staggering $5 tn per year at the global level.
A ScienecDirect article “ How Large Are Global Fossil Fuel Subsidies?” (https://www.theguardian.com/environment/climate-consensus-97-per-cent/2017/aug/07/fossil-fuel-subsidies-are-a-staggering-5-tn-per-year)
- In the European Union, it has been estimated that coal plants produce up to 43 billion EUR in health costs annually (HEAL, 2013).
“Global Health Professionals Call for Transition Away from Coal”;
- The World Health Organisation has estimated that seven million people on the planet are dying from pollution – that is more or less the same number of people dying from cancer. Coal pollution is the major contributor.
“Pollution kills as many people as cancer does, UN’s new environment chief warns”
- As per another credible report the estimated annual health impacts and health costs due to PM pollution from coal-fired power plants in India for the year 2011-12 was about 100,000 premature mortality and about Rs. 19,000 Crore of heath costs.
“Coal Kills”; (http://www.greenpeace.org/india/Global/india/report/Coal_Kills.pdf)
- River Network, US has indicated that as per U.S. Geological Survey 53% of all of the fresh, surface water withdrawn from the environment for human use in 2005 went to operating thermoelectric energy plants.
“Burning Our Rivers: The Water Footprint of Electricity”
When we consider all these direct and indirect costs to our society, what could be the social cost to our society from the coal energy? Certainly it cannot be as low as Rs. 0.75 per kWH as you seem to have mentioned. What value do we assign to the human life, which may be in excess of one hundred thousand deaths each year? What is the economic loss to the nation in the lost human days because of the health issues associated with coal energy?
There are many other costs to the society because of a coal dependent scenario. In order to ramp up the coal production our country has to loose thousands of acres of thick tropical forests in the central and eastern India, below which we have the rich coal bearing lands. As against the national forest policy of 33% of land cover by forest and trees, we have that figure less than 22% as of now, and is decreasing every year due to the competing demands from various “developmental projects”. How much life supporting forests are we ready to sacrifice for the sake of dirty energy sources, when we have much benign alternatives? Assuming that our authorities will not be satisfied until they add about 500,000 MW of coal power capacity, before the nature hits back severely, we will lose more than 375,000 acres of land (at the rate of about 0.75 acre per MW as per the ministry guidelines) to build these coal power plants and the associated infrastructure in addition to the land required for transmission lines. As highlighted in item (I) (f) above, horrendous amounts of fresh water will be required, and the same will be denied to the poor in a water stressed country. It is worthwhile for us to seriously consider the issues rose in the report by U.S. Department of Energy “The Water-Energy Nexus: Challenges and Opportunities” of June 2014. International Energy Agency (IEA) also has brought out a separate report “Water Energy Nexus – Excerpt from the World Energy Outlook 2016”. (https://www.iea.org/publications/freepublications/publication/WorldEnergyOutlook2016ExcerptWaterEnergyNexus.pdf)
Whereas these are some of the serious concerns in respect of coal, the total cost to the society of renewable energy sources (REs) can be said to be miniscule as compared to that of coal energy technologies. Other than the initial capital costs the O&M costs are negligible, and the social and environmental costs can be made almost nil, if careful planning is done. There need be no diversion of forest and agricultural lands in cases of rooftop solar PV systems, and the same can be minimised even in the case of wind or bio-energy units, if the sizes are kept small and located very close to the existing transmission & distribution (T&D) networks. REs, if deployed in micro/mini grid mode, will also be able to provide the energy justice, which is much needed, to the rural population. The financial costs of REs have plunged since 2010 and are credibly projected to continue to drop further for next few years. The solar power has registered the lowest levelised prices in India. At the global level the additional generating capacity through REs was more than that through all other sources in 2015-16. As per IEA, the green energy accounted for more than half of net electricity generation capacity added around the world in 2015-16. This trend of explosive growth of REs has been going on since last few years, which should clearly indicate the reality around the world. At the global level the total subsidies given to coal industry is reported to be many times more than that given to REs. In 2013, IEA had estimated that consumer subsidies for fossil fuels amounted to US$548 billion, while subsidies for renewable energy amounted to US$121 billion.
Keeping all these factors in mind, your view that the social cost of REs is more than that of coal needs a radical change.
(II). You also mentioned: “…. in the context of India’s current economic situation and its enormous endowments of coal, which is still a very cheap way of providing energy to hundreds of millions, who are still energy-deprived,”. Please consider from the economic standpoint whether the natural endowments of energy available to India in the form of sunlight, wind and bio-mass, which are inexhaustible, free and environmentally friendly, can ever be compared to the coal, which is described variously as “dirtiest among the fossil fuels”, “killer coal”, “very costly” etc.
The gross inefficiency and the consequent societal costs of coal dominant scenario prevailing in the power sector of our country seem to have been completely ignored in your consideration. The fact that the electricity produced from coal is associated with the lowest energy conversion efficiency seems to have not been informed to you. When we objectively consider various processes involved in electricity production from coal, the fact emerges that the electrical energy which reaches the end user can only be about 10% of the associated coal energy, because of the inefficiency in the coal/steam boiler, the local energy consumption, and losses in transmission and distribution etc. As compared to this scenario, a solar PV panel installed on the rooftop of a consumer can convert the solar energy to electricity at efficiency of about 18-20% and without any of the losses/costs/concerns associated with the coal power.
The existing archaic electricity grid in the country, which is characterised by large size power plants, centralised control, and complicated T&D network, is also globally famous for its gross overall inefficiency and energy injustice between urban and rural areas. The aggregate technical and commercial losses (AT&C losses) of more than 33% at the national level (with some states reporting as high as 60%) should be a disgrace to a country, which dreams of a place in the high table of global comity of nations. Whereas such inefficiencies and the absence of professionalism & accountability has been known for decades, it will be a dis-service to our communities to continue to cheat ourselves that large scale additional of coal power plants will be needed to provide energy to hundreds of millions, who are still energy-deprived. Whereas the coal power capacity, as well as the total capacity, has increased by more than 300 times since independence, and whereas the per capita electricity consumption at the national level and for the urban areas has increased by similar proportion, it should be a slur on our governance that about 25% of the population are still out of the reach of the national grid due to the simple official reason that it is not cost effective to extend the grid to remote and small energy demand villages. For even that rural population who are connected to the grid, the supply of electricity is at best scarce. In times of deficit, which is quite common in most of the states, the rural population are the first to experience the load shedding and the last ones to get back their power supply. In the context of such an inefficient power infrastructure and unjust scenario massive additions to coal power capacity will only lead to further wastage of our scarce resources. In this cruel reality, you may also like to review the other statement of yours that everyone in India should be connected to the national grid and supplied basically that way. For smaller and remote consumers, the isolated supply through REs is the best option, at least as on today.
(III). There was a mention of “carbon imperialism” of advanced countries having the risk of biasing our judgments about energy. In this context it should be stated that in the case of environmental protection and Climate Change, what we must do in the future is critically important than finding fault with what happened in the past; for the nature will not wait for such disputes to be settled before it hits back. What is critical from the perspective of the existential threat to the mankind is to minimise the GHGs at the global scale on a priority base. The limit of 2o C rise in global temperature, as agreed to in Paris agreement, will not be achieved by such blame games and any token effort to reduce GHG. India, with its vast population base, cannot hope to see that limit achieved while it increases its own GHG emissions on a massive scale in its eagerness to match the per capita energy/electricity consumption of the advanced countries. Also, India is projected to be one of the most vulnerable countries to the impacts of Climate Change, which has to be our critical concern.
The Stern Review – ‘Economics of Climate Change’ AND IPCC 5th Assessment Report have both referred to 42% of CO2 from fossil fuel burning in power stations, and have estimated that India may suffer economic costs of about 20% of its future GDP from Climate Change impacts if appropriate actions are not taken urgently, and that mitigation is feasible now at a cost of about 1% of present GDP. The more delay in addressing the Climate Change phenomenon there will be vastly higher cost of mitigation in future.
A World Bank report of June 5, 2013, “Diagnostic Assessment of Select Environmental Challenges, Economic Growth and Environmental Sustainability: What Are the Trade-offs?”, has highlighted how the environment has suffered in India consequent to the past decade of rapid economic growth. It says that although the previous decade of rapid economic growth has brought many benefits to India, the environment has suffered, exposing the population to serious air and water pollution. The report finds that environmental degradation costs India $80 billion per year or 5.7% of its economy. Green growth strategies are needed to promote sustainable growth and to break the pattern of environmental degradation and natural resource depletion. Emission reductions can be achieved with minimal cost to GDP and that in the medium to long term such emission reductions can even add to GDP through positive feedback impacts.
It should also be emphasised that those economic activities which cause Climate Change are also directly responsible for the accelerated environmental degradation and natural resource depletion. Can we afford to continue with such wanton destruction having known the implications for our communities?
Keeping all these in proper perspective, India should do all that is possible within its borders to minimise its GHG emissions and prevent environmental degradation and natural resource depletion.
(IV). You have also stated that rapid, organic growth in energy demand and technological progress in cleaning coal—for which there must be a collective international effort— will help minimize the tensions between coal and renewables.
The real impact of rapid growth in energy demand for a large population base, as we have in India, has been and will be the accelerated environmental degradation and natural resource depletion. There can be no doubt about it. Hence, it is not only important that the country should strive for ensuring the life line energy for everyone through environmentally friendly and sustainable means, but it is also critical that the total energy demand should not be allowed to go beyond the nature’s limit. The distributed kind of REs has the potential to achieve these goals, but not the fossil fuels, such as coal.
The concept of clean coal has come to be known as a misnomer, as there cannot be clean coal. When coal is used to produce energy there will be GHG emissions along with other pollutants. Super-critical or ultra-supercritical coal-fired power plants instead of subcritical power plants can reduce air pollutant emissions and health impacts by about 10-15%, but cannot eliminate the GHG emissions and pollutants completely. However, even with these state-of-the-art emission controls, coal-fired plants remain far dirtier than gas plants with similar emission regulation, and obviously dirtier than renewable energy options. Even super-critical or ultra-supercritical coal-fired power plants in large number will result in much higher GHG emissions and pollutants at the national level, which should be the primary concern for the national levels policies.
At the global level the clamour with Carbon Capture and Sequestration (CCS), as a technology, has not been found to be economically viable, and the technology has not been able to convince its own advocates as to how to keep the captured GHGs and pollutants away from the atmosphere. The following website provides a lot more additional information in this regard.
(V). You stated: “ …the social cost of renewables should include the costs of stranding thermal and coal assets.”
In a modern economy there have been and will be stranded assets/costs. Have we not routinely written them off in the past, and will we not continue to do so in other sectors of our economy? The question should be: how to manage them such that they don’t unnecessarily burden our financial system. It is against all canons of economic wisdom to aim at keeping the banking system solvent by encouraging the grossly inefficient coal plants to continue to operate at enormous direct/indirect costs to the larger society. It amounts to throwing good money after bad, which will deny finance for good projects. Knowing very well that coal cannot be a sustainable option even in the medium term (as per the experiences from US where many coal power plants have been shut due to economic reasons alone), shall we continue to build more coal power plants, which are likely to become stranded assets for various reasons within 25 years of economic life time?
While the proponents of business as usual scenario may raise the bogey of intermittency of REs, a diligent study of the electricity demand/supply in the Indian scenario will reveal that a RE based power sector is eminently suitable and critical to our communities. There are a large number of credible reports, from both within India and outside, establishing the techno-economic credibility of REs to the electricity sector. Some of them are as listed below:
- Special Report Renewable Energy Sources (SRREN), IPCC, 2011
- Renewable Electricity Futures Study, National Renewable Energy Laboratory (NREL), US
- “German Energy Transition: Arguments for a renewable energy future”, Nov. 2012
- Review of solutions to global warming, air pollution, and energy security; Mark Z. Jacobson; Department of Civil and Environmental Engineering, Stanford University, Stanford, California,
- Road maps for 139 Countries to Transition to 100% Clean, Renewable Wind, Water, and Solar (WWS) Power by 2050 and 80% by 2030
- Energy White Paper 2012, Commonwealth of Australia
- WWF (2013), “Busting the Myths: Debunking myths about renewable energy”
- Report: China Could Generate 80 Percent of Its Energy From Renewables By 2050 For Less Than Cost of Coal
- “UKERC Dispels Myths Surrounding Intermittent Renewable Energy”
- “Solar Irrigation Pumps: The Rajasthan Experience” by Nidhi Prabha Tewari
- “RE+: Renewables beyond electricity”, WWF-India & CEEW, 2013)
- “The Energy Report – Kerala: 100% Renewable Energy by 2050”
- “Action Plan for Comprehensive Renewable Energy Development in Tamil Nadu”; World Institute of Sustainable Energy (WISE), Pune
- Renewables Beyond Electricity, WWF-India & CEEW 2013
- “Climate Change: implications for the energy sector”
- “Rooftop solar could provide nearly half of US electricity demand”.
There are very many issues of similar nature confronting the Indian power sector, which if not addressed holistically, will pose massive problems to our society in the medium to long term. A keen observer of the developments occurring all over the world in energy/electricity sector can list many other issues/technologies not taken into objective account in your discussions. Some of them are: (i) how to make the renewables affordable to our people; (ii) change in grid topology – from hierarchical to a federation of smaller grids and microgrids; (iii) advances in energy storage technology; (iv) entrepreneurial opportunities which are available from the next generation renewable energy technologies; (v) vulnerabilities of the traditional grid such as grid collapses and the hacking of the IT used in the system etc.
The lecture gives me the impression that your views would have been altogether different, if you were to have a better knowledge of Indian power sector. For your credit, you mentioned that you were not an energy expert, nor a climate change expert. While some power sector observers who also listened to your lecture wondered as to why you should venture into making some sweeping statements on a sector on which you do not have much knowledge, I will not make such harsh judgements. There is an imperative for you, being a CEA, to have a decent understanding of many different sectors on our economy in order to provide rational advice to the Union govt. Getting a much better knowledge of the country’s power sector and its close linkage to the phenomenon of Climate Change is essential for the Chief Economic Advisor, because of the influence he may carry with the policy makers. I urge you to take an opportunity to visit some of the coal fields operating for years, such as Jharia coal mines of Jharkhand, and some of the older thermal power stations to get a an overview of the issues confronting our society.
If you think I can help you to get a better understanding of the Indian power sector, I shall be happy to consider the same. I am an electrical engineer and a power sector professional with about 37 years of field experience in the areas of electricity generation, transmission and distribution in India, New Zealand and Australia. For more than 10 years I have been studying the implications on our society of policies and practices in the electricity sector. You and your team, which helped you preparing the material for your speech, may be interested in the PDF versions of two books on India’s power sector, as below. These books have discussed most of the major issues confronting our power sector and also the credible ways of meeting our legitimate electricity demand in a people centric, environmentally sustainable and economically viable means.
- “Power Sector Road Map for Tamil Nadu – 2050”; April 2016
- “Integrated Power Policy”, Sept. 2012
In summary, I would like to draw your kind attention to the harsh reality of the power sector that on an objective consideration of all the associated social, environmental, economic and intergenerational issues, it should become abundantly clear that coal and any of the other conventional technology electricity sources (from fossil fuels, large dams and nuclear) are not environmentally sustainable and people friendly. Keeping all these issues in proper perspective, please consider advising the Union govt. to prepare the National Energy Policy so as to move away from each of the conventional technology electricity sources as early as possible, and move over to RE based energy system well supported by mini/micro/smart grids, which will enable the local communities to manage their affairs much better than what it has been all these years since independence.
Thanks for your patience in going through this lengthy communication, which was necessitated due to the criticality of the electricity /energy sector to our society, and your important role in advising the Union government on economic issues.
With best wishes and kind regards
Power Policy Analyst
1026, 5th Main Road, E&F Block
Ramakrishna Nagara, Mysore, India – 570022
Phone: ++ 91 821 2462 333 / 94482 72503