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Arvind Subramanian is wrong

According to reports, “Coal will remain and should remain,” says Arvind Subramanian, the Chief Economic Advisor to the Government of India. In his speech at energy NGO TERI on August 18, Subramanian was only dilating on what his Economic Survey, released a week earlier, had said — that if costed properly, i.e., taking into account the “social costs”, renewable energy costs thrice as much as coal and, therefore, coal production and use should be encouraged. In the Survey’s estimate, the true cost of renewable energy is ₹11 a kWhr — as compared with the lows of ₹2.44 and ₹3.46 that solar and wind, respectively, have reached in recent auctions.

The Survey is not oblivious to the fact that coal’s carbon dioxide emissions causes global warming with all its deleterious consequences. It has even come up with a cost of carbon — $2.9 (₹186), a tonne, in India. It also recognises that coal causes respiratory deaths and quotes Scientific American’s figures — 115,000 deaths and monetary loss of $ 4.6 billion, globally.

Though the Survey does not give India numbers, there are other estimates. For example, according to a very recent study of Lancet Respiratory Medicine journal, there were 800,000 deaths in India due to ‘chronic obstructive pulmonary disease’, and 100,000 more due to asthma — a good guess is that a large percentage of these deaths are caused due to pollution due to coal firing. (The 115,000 deaths quoted in the Survey are directly linked to coal.)

As is widely known today, while thousands die due to the polluting effect of coal burning, millions more are put into distress due to climate change, the chief culprit of which is coal.

Yet — regardless of all these deaths — Subramanian says coal “should remain”. His reasoning is based on narrow economics. The Survey attributes a third of the “social costs” of renewable energy to the stranding of coal assets. In simpler terms, it says, you use more of wind and solar, coal power plants will go out of operation, so you must take into account job losses and loans to the coal plants turning bad in the books of banks. Hence the Survey prescribes: go slow on renewables.

In other words, this is akin to saying, ‘go slow on eradication of polio, keeping in mind the loss of livelihood of those who make artificial limbs.’

Those who point out that thousands of people in coal sector face the prospect of losing jobs due to the rise of renewables, should also remember that millions of farmers are put into misery because of carbon dioxide emissions from coal plants.

NPAs here, loan waivers there. If you take into account one, you must take into account the other — you can’t be a one-eyed accountant.

Also, going by Subramanian’s astonishing logic, there can never be any disruptive innovation, for the “social costs” of such disruption will price the innovation out of the market.

The Survey is similarly unacceptable in several other assumptions. For example, it notes that land per MW of coal is 2,023 sq metre, whereas for solar it is ten times as much.

It does not seem to recognise that solar is mostly put on barren, otherwise unusable lands. Indeed, it speaks of “diversion of land to renewable energy generation”.

It wants to take into account the “opportunity cost of land” used by solar, but is silent on opportunity cost of land used by coal power plants. It is plainly wrong to factor in opportunity costs, because such costs are anyway already impounded in the cost of the land, which in turn is reflected in electricity tariff. Thus, if a solar power company agrees to sell power at ₹2.44 a kWhr, the cost of land is already taken into account.

The Survey obviously tries to make a case against renewable energy by invoking ‘opportunity costs’ of land. Does the government factor in ‘opportunity cost of land’ when it fixes prices of agricultural commodities it buys from farmers?

Worst of all, the Survey seems to believe that wind and solar are subsidised. It does note that the subsidy for solar has come down from ₹450 crore in 2015-16 to ₹15 crore in 2017-18. However, the Budget for 2017-18 allocated ₹420 crore for wind and solar. Since solar takes only ₹15 crore, the other ₹405 crore must be going to wind.

The truth is, there is no subsidy to wind too, today. The ₹405 crore for wind is for ‘generation-based incentives’, that were committed to those wind projects that came up when the incentive was in vogue. The scheme has since been scrapped. From April 1 this year, no wind project gets a rupee of subsidy. The wind tariffs that are being discovered through auctions today do not have a subsidy element in them.

Renewable energy has long discarded the crutches. That they are cheaper than conventional energy is well-recognised all over the world. Thus, when (say) the International Energy Agency says renewable energy is cheaper than coal, it is a statement of fact, and not “carbon imperialism” as Subramanian terms it.

Above all, in its desperation to fight climate change, the entire world is trying to clutch every straw it can. It is getting clear that even if all the countries keep up their promise made at the Paris conference of December 2015, the world will get hotter than scientists believe is bearable.

And it is also clear that India is one of the more vulnerable countries, given the peninsula’s dependence on monsoons and the Indo-Gangetic plain’s exposure to the Himalayan glacial systems. India, more than any country, should be asking for roll back of coal.

Incidentally, in the run-up to the Paris conference, Subramanian made a bizarre call that India should not ask the developed countries for funds for its efforts to cope with the effects of climate change. And now, he wants more coal burnt in Indian boilers.

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