That we need ‘green’ technologies—wind, solar or biomass gasification—for future energy security is no longer a matter of debate. The critical question, now, is: under what conditions can these emerging technologies be introduced into the market? The answer is not so simple. Most innovation and manufacture in these new sectors lie with private players. At the same time, the creation of ‘favourable’ conditions for application is at the door of government and public policy. The question becomes even more complex when you consider both technology and application belong to uncharted territory. As with any new technology, there will be a learning curve in its application, which must lead to innovation, both in technology development and in its practice. Here lies the catch. If we don’t get the public-private partnership right, if we don’t allow for research, regulation and scrutiny, we will end up nowhere. The technology will be a sham applied for short-term profit, not change.
Take wind energy. For some years now, rightly, the Centre and state governments have given generous fiscal incentives to promote the sector. As a result, India has over 8,700 mw of installed capacity. The 11 th five-year plan wishes to add another 10,000 mw. But does it work?
I ask this question because, recently crunching government data on wind energy, my colleagues and I got stumped. By March 31, 2008, wind energy certainly comprised 6 per cent of installed power capacity in the country; yet, we found, it contributed a paltry 1.6 per cent to the actual power generated. On an average, the plant load factor (plf, the efficiency at which a wind farm runs based on installed capacity) of wind power installations has marginally increased from 13.5 per cent in 2003-04 to 15 per cent in 2007-08. Then there are states like Gujarat and Andhra Pradesh, where wind energy plf is less than 10 per cent. Maharashtra has more than tripled its wind capacity in recent years, but the state government’s own data shows wind farms produce less power today. In this energy-starved state, wind energy functions at a plf of 11.7 per cent. This is pathetically low, even compared to apparently better-off states like Tamil Nadu and Karnataka. It is certainly shocking, compared to global plf averages of 25-30 per cent.
There is no question incentives are needed for this technology to penetrate the energy market. The problem is fiscal benefits come without regulatory support. The sop-soaked package of giving 80 per cent depreciation (it was 200 per cent some years ago) in the first year is a tax bonanza. It should not surprise us hotel companies, spinning mills and even film stars have invested in wind energy. It pushes investment. But there is no interest in power generation.
The fact is we promoted this technology in the business-as-usual mode. We did not demand a new working relationship between public and private. In fact, we allowed this sector to grow with the worst characteristics of the market and we continued to pour public largesse. Currently, the wind energy business is closed, monopolistic and unregulated. It works simply: the turbine-maker (very few in the market) arranges with investor companies to set up wind farms. The same turbine maker then supplies equipment and is further paid to operate and maintain equipment. In this completely integrated business, nobody knows the cost of manufacturing a wind-mill. Nobody knows why it should cost what it does to manage a wind farm that does not generate much power. Nobody is interested in reducing costs and increasing efficiency of power generation. As a result, unlike other parts of the world, in India, the capital and running costs of wind power generation have increased, even though market dictates the cost decrease with economies of scale.
In this ‘closed’ economy, there is little public scrutiny, or research. The only people who know are in its circle of influence—consultants who get business, or business itself. Not a single wind company responded to issues we raised. Not a single ‘expert’ was willing to go on record. Nobody could explain why the plf of wind energy projects is so low, or what it should be. Is this because of lack of data on the actual performance of wind energy projects? Is it because wind energy data, though available, does not reflect the variability of wind regimes? Have we sited the plants wrong, so that the technology used cannot optimise the potential of the region? Questions never asked. Answers, not given.
This is deadly, when you consider all new technologies have a ‘learning curve’. The application must cause public programmes to be modified and so evolve. In the case of wind, policy must promote incentives for generation—increase tariffs and reduce subsidy for capital. Also, if we don’t fix the public-private relationship at the beginning, vested interests will creep in and make it difficult to go for change. Last month, after much delay, government did bite the bullet and agree to a generation-based incentive scheme for wind energy. For every unit, or kilowatt-hour, of power a turbine generates, the Centre will give Rs 0.50, over and above tariffs fixed by state electricity boards. But it has not modified the existing scheme, which gives incentives for capital. So this add-on scheme, meant for those who ‘choose not to take advantage of capital subsidy and tax depreciation’ will clearly lead to little change. We need a new model in all these cases. It has to be 4Ps—public-private-public-partnership. The public regulator has to drive the purpose of technology introduction; private industry must be accountable since public funds fuel its business, and, at all stages, public research and public scrutiny must be welcomed. Let us be clear, green technologies need green politics as well.