It is obvious that there’s a huge thrust on renewables-based power in India, the National Solar Mission being the most high-profile example.
But it’s a bit funny, and I’ll tell you why.
Most power in India is produced by coal and hydroelectric power – both of which are available in plenty within India (yes, we import over 15% of our coal requirements, but we actually have reserves that will last us about 100 years at current levels of consumption). On the other hand, we have much less oil and import about 70% of our requirements (though it is nice to know that there have been some significant oil finds in the recent past by Cairn Energy and more recently by Reliance).
India uses about 3.2 million barrels per day of oil, and about 2 million barrels per day are imported. At $75 a barrel, that’s $150 million per day, or $4.5 billion per year, or over $50 billion per year. Our FDI every year is about $30 billion., which means our import bill on oil easily wipes out all the gains we made on FDI.
If our dependence on foreign countries is much higher for oil than for electricity, one would expect an equally high thrust to be provided by the government for the progress of biofuels as it is provided for renewable electricity. But I do not find an equal thrust.
That’s why I said it was funny.
True, there are blending mandates (5% for both gasoline and diesel) and slightly increased buy-in rates for both ethanol and biodiesel (Rs 27 and 34 per liter respectively), but nothing of the sort that is being provided to solar PV and thermal where the government plans to provide incentives that is almost 80% the total cost of production.
India is a diesel country (unlike the US which is a gasoline country), so let me focus on biodiesel. India consumes over 50% of all its oil consumption in the form of diesel.
While estimates vary, I doubt it is economically feasible to make decent profits at a buy-in price of Rs 34 for biodiesel. The jatropha biodiesel industry has been in the doldrums owing to the poor performance of the crop. While no one really knows for sure how much jatropha-based biodiesel costs, some estimates we made at EAI using costs of jatropha seeds and other processing costs indicate that it will cost not less than Rs 30, and likely more than Rs 34, to produce one liter of biodiesel based out of Jatropha.
Sure, this cost likely to go down with scale, and it could well be much lower than Rs 30 a few years down the line, but only if more companies are investing in Jatropha research and in setting up large scale biodiesel refineries. In the current circumstances, companies producing biodiesel have a large part of their capacity idle as it is not economical to produce biodiesel at the prices mandated by the government. Oh well, it is the chicken-and-egg story we have heard so many times – low production prices require large-scale operations, and investing in large-scale operations require a large market demand that can come about only through higher investment in R&D (especially in Jatropha R&D), higher yeidls, low production costs & hence prices. But, the c-and-e story is not exactly unique, it’s there for solar energy as well. Which was precisely why the government came up with the National Solar Mission. Admitted, the government had come up with a National Biodiesel Mission as well, but it has been a disappointing story of start-and-stop-and-start-and-forget.
Solar energy costs four times as much as coal based energy, and the objective behind the national solar mission is to eventually bring the cost down to grid-parity. Jatropha yields today are only 30-40% of what they have been projected to be. Why can’t there be a National Jatropha Mission that assists in R&D of Jatropha to increase the yields of the crop to the theoretical potential of 5 T of seeds per yer per hectare?
Such a National Jatropha Mission will have a beneficial effect on the farmers, who can play an important role as oil producers of the country and financially benefit from it. Isn’t it a lot better to depend on our farmers for our diesel instead of on sheiks from countries a thousand miles away?
I am aware that the biofuels domain is going through a troubled phase. But so is solar, and there are problems in practically every domain of renewable energy.
What are your thoughts? I’d love to hear them