Tale of Two Energy Dictates

Two news items caught my attention, both related to “mandating” renewable sources of energy.

Like most who populate the libertarian society we live in, I am no lover of “dictates”; but I guess dictates aren’t exactly bad in circumstances that, well, deserve dictates.

The first mandate was about the West Bengal pollution board asking all telecom towers in the state to use 30% biodiesel in their generator sets – http://bit.ly/9hzXhH .

The second one was about how solar water heaters have been made obligatory in government buildings. The Conservation Building Code (ECBC) apparently mandates solar water heaters in residential facilities, hotels and hospitals, but this is a voluntary code. Recently, this has recently been made obligatory for new governmental buildings.

Now, we all know how well mandates have worked so far in India – we have seen the spotty way in which mandatory blending of ethanol and biodiesel had been implemented (not implemented) in the past. So I am not exactly going to go to town about these mandates  (this newsletter is as far as I will go!).

However, to me it appears that there is a good chance that the mandate could be followed in one of the two, while in another, I honestly do not expect anyone to walk the talk.

Let’s consider the idea of biodiesel for telecom towers. It is fairly well known that telecom towers have a serious problem when it comes to backup power, mainly owing to the remoteness of the towers. Many of them use diesel gensets for their backup power. Now, the government is asking them to use biodiesel instead. How much will they succeed in this effort? Not much, in my opinion.

The real questions are where these telecom towers are going to get biodiesel from and for how much. India has an installed capacity of over 200,000 T of biodiesel production, and less than 75,000 T is actually being produced. Why?

One, feedstock availability is a problem, with Jatropha hardly delivering even 30% of what it is supposed to deliver in its yield. If you have been reading newspapers last few years, it would not have escaped your attention that jatropha has so far been a non-starter. I personally feel jatropha has a good future, but well, that’s in the future. The present for jatropha is, well, tense.

Two, the government’s pricing policy puts the price of biodiesel at Rs 34 per liter (this is the price at which the oil companies are mandated to buy the product from the biodiesel producers).

Well, there are some who’d think 34 rupees per liter is a good amount of money . I am not so sure. By some calculations we have made, it will cost a minimum of about Rs 30 per liter just to procure the oil (say, jatropha oil). You need to trans-esterify the oil and refine it to make it into biodiesel, and my guess is, biodiesel producers will have little or no margins at a selling price of Rs 34. Well, the largest cost component that determines the final biodiesel cost is the cost of the feedstock – jatropha oil, for instance – and unless significant improvements are made in the cultivation and yields of jatropha plant, I do not see biodiesel producers being able to produce large quantities of biodiesel profitably at Rs 34 per liter. If you leave out jatropha, there’s hardly any other vegetable oil which can enable biodiesel producers to make biodiesel at those kinds of prices – castor oil, for instance, costs about Rs 50 per liter, and prices of groundnut oil, palm oil etc., are around 35-40 per liter.

In short, don’t expect much to happen on the biodiesel directive to telecom towers.

I’m far more sanguine on the “mandate” related to use of solar water heaters in governmental buildings. I have been a great fan of solar thermal based heating and drying applications, and rather than explaining the reasons, I’d request you to have a look at a blog post I had put in earlier – http://eai.in/blog/2009/12/india-solar-water-heaters-domestic-and.html. Solar thermal based heating and drying is a low-hanging fruit that provides clear benefits to the users, even without any significant external incentives. If I were a gambler, I would gladly bet that this directive has a good chance of success.

Time will tell how right (or wrong) I have been.