Business Environment of Alternate Energy AFTER

LPG

Manu SrinathIpsit AacharyaSatish PadhiAnurag TripathyAbhinav Kumar

@ B.B.A.LL.B. (Hons.), National Law University Orissa

Why Renewable Energy(R.E.) …. Industrial & Economic growth creating an ever increasing demand for

energy along with burgeoning population worldwide.

Heavy dependence on conventional energy sources like oil, coal coupled with ever increasing demand created international markets and market linked pricing structures leading to accelerated exploitation of conventional energy sources.

High Volatility in the primary energy markets create untenable pricing and balance of payment crisis for many governments.

Abnormal increase in Oil prices in the 1970s was the first wake up call for many governments.

Depleting natural sources unable to meet demand growth in both developed as well as developing economies creating demand supply shortages.

Increasingly evident impact of fossil fuel usage on climatic conditions around the globe.

Hypothesis

Alternative Energy Sources are not an option, but a necessity in the future.

Renewable Energy In India…. A Historical review

Subsequent to the two oil shocks in the 1970s, Energy ‘self-sufficiency’ was identified as the major driver for new and renewable energy in the country. Various initiatives on this front led to the establishment of Commission for Additional Sources of Energy (CASE) in

1981. Department of Non-Conventional Energy Sources

(DNES) in 1982. Ministry of Non-Conventional Energy Sources (MNES) in

1992. Ministry of Non-Conventional Energy Sources (MNES)

renamed as Ministry of New and Renewable Energy (MNRE) in 2006.

Electricity Act, 2003

Approaches for Promoting of RE … a worldwide experience

Price Setting and Quantity forcing Policies

Cost Reduction Policies

Public Investment or Market Facilitation Policies

Power Grid Access Policies

Solar power is still not cost effective with photovoltaics (PV) costing in the neighborhood of 30 cents per kilowatt and 20-22 cents per kilowatt for solar thermal plants.There is hope in private companies, who have developed technology that cuts the cost of solar thermal to 8 cents per kilowatt. Initial cost for wind turbines is greater than that of conventional fossil fuel generators.The cost of energy from larger electrical output wind turbines used in wind farm applications has dropped from more than $1.00 per kilowatt-hour (kWh) in 1978 to under $0.05 per kWh in 1998.It is projected to plummet to $0.025 per kWh when new large wind plants come on line in 2009 and 2010. The hardware costs of these wind turbines have dropped below $800 per installed kilowatt in the past five years, under pricing the capital costs of almost every other type of power plant.

ECONOMICAL ANALYSIS

IMPACT ON DEVELOPING COUNTRIES

If developed countries cut carbon emission slowly, less carbon space will be left for the developing countries

If carbon space is limited, developing countries will– Incur higher cost per unit of energy to lower emissions– Have to limit energy consumption

Comparative FiguresCountries Per Capita at ($)

Per Capita Consumption (k ) Per Capital

Consumption (KWh )

Per Capita Emissions(kgoe) KWhr) (CO2Tons)

India 2,600 528 542 1.3 China 5,085 1,484 2,332 4.3 Germany 33,183 4,026 7,184

9.5 US 43,031 7,766 13,651 20.0

TECHNOLOGICAL ENVIRONMENT

SOLARThis form of energy relies on the nuclear fusion power from the core of the Sun which can be collected and converted in different ways. Mirrors, boilers and photovoltaic cells are used for the conversion.

Disadvantages•Initial cost of the equipment used to harness the sun’s energy is very high. •A solar energy installation requires a large area for the system to be efficient in providing a source of electricity. •Pollution can be a disadvantage to solar panels, as pollution can degrade the efficiency of photovoltaic cells. •During the night, expensive solar equipments will be useless.•The location of solar panels can affect performance, due to possible obstructions from the surrounding buildings or landscape.

WIND POWERWind is caused due to the differences of temperature at the Earth's surface when lit by sunlight. Wind energy can be used to pump water or generate electricity, but requires extensive areal coverage to produce significant amounts of energy.

DisadvantagesWind itself is not dependable. Set up cost is very high.-The compounds used to make the parts of the wind mills are very high in cost, and non usage of this causes damages like rusting.Wind Farms are Unsightly and Wind Turbines are Noisy Wind Turbines Interfere with Television Reception. Wind Turbines Kill Birds

HYDROELECTRIC POWERThis form uses the gravitational potential of elevated water. It is not strictly speaking renewable since all reservoirs eventually fill up and require very expensive excavation to become useful again.

Disadvantages1. Hydropower dams disrupt the natural flow of rivers. 2. Impedes the natural flow of sediments. 3. Scour holes. 4. Obstacles to fish migration. 5. Catastrophic Failure. If dam breaks it would be a disaster and would kill many people. One classic example in American history is the Johnstown Flood of 1889.

BIOMASSBiomass is the term for energy from organic things like plants. Modern forms of biomass energy are methane generation and production of alcohol for automobile fuel and electric power plants. This releases a lot of Carbon dioxide into the atmosphere.

Disadvantages1. Biomass produces greenhouse emissions. 2. It takes more energy to plant, cultivate and harvest the crops and trees than it is worth to get a net energy gain. 3.Biomass collection is a difficult task.

HYDROGEN AND FUEL CELLSVery abundant in availability and are very low in pollution when utilized. Solar power is used to produce the hydrogen gas. Due to the need for energy to produce the initial gas, the pollution is relocated from the cities to the power plants.

DisadvantagesIt is very big and cumbersome. The fuel cell has to be insulated to keep it safe and protected.Safety issues- Liquid hydrogen has the ability to freeze air. Sometimes valves get plugged up when there is too much pressure in the cellThe hydrogen may sometimes evaporates.

GEOTHERMAL ENERGYIn certain areas the geothermal gradient (increase in temperature with depth) is high enough to exploit to generate electricity. This form of energy can lessen the need for other power to maintain comfortable temperatures in buildings, but cannot be used to produce electricity.

DisadvantagesThe area for a geothermal energy power plant should consist of those suitable hot rocks at just the right depth for drilling. If the holes were drilled improperly, then potentially harmful minerals and gas could escape from underground.Pollution may occur due to improper drilling at geothermal stations. It is also possible for a specific geothermal area to run dry or lose steam.

WAVE AND TIDAL ENERGYIn this, concentrations of wave power generate a low-frequency energy that can be converted to a 60-Hertz frequency. The technology involves building a dam, or barrage, across an estuary to block the incoming tide, the outgoing tide, or both. The water is channelled through a turbine in the dam in order to get to the other side, which produces electricity by turning an electric generator.

DisadvantagesMarine population is greatly affected.The exchange of water volume between a basin and the sea is reduced, this leads to the potential for increased pollution, because pollution is left accumulating in the basin. Power stations only generate power when the tide is flowing in or out of the basin, which only happens during certain times of the day.Economical. Startup costs to build a tidal energy plant is high

NUCLEAR FUSIONNuclear fusion is the process in which two or more atomic nuclei join together, or "fuse", to form a single heavier nucleus. This is usually accompanied by the release or absorption of large quantities of energy. Fusion is attractive as an energy source because of the virtually inexhaustible supply of fuel and the promise of minimal adverse environmental impact.

DisadvantagesScientists have not yet been able to contain a fusion reaction long enough for there to be a net energy gain. Many countries are phasing out fusion research because of the failure to reach a breakthrough

Ocean Thermal Energy Conversion(OTEC) - Is a promising source of renewable, non-polluting energy for the future. The oceans comprise over two-thirds of the earth's surface, meaning they collect and store an enormous amount of solar energy.

The final result of all forms of Alternate Energy is that each suffer from one or another significant drawback and cannot be relied upon fully at this time to solve the upcoming energy crunch.

THE TECHNOLOGIES BEING RESEARCHED FOR FUTURE USE

Salinization of waters at river estuaries as an energy source Nuclear fission

Artificial photosynthesis

SOCIAL ENVIRONMENT

Employment- it will increase the living standard

Rural/Urban- it will generate electricity which will help farmers, and in cities it is the alternative available to reduce the pollution and carbon emission

Development- this will generate sustainable growth.

Empowerment of Socially Disadvantage-

Marginalized class

Health- environment friendly and good for health.

Population-It has the capacity to fulfill the increasing energy demand and it will provide sustainable development.

Education- Education is an essential tool for achieving sustainability.

Public awareness, education, and training are key to mobilising society towards sustainability.

Switching to "clean energy" sources will not solve the environmental problems associated with energy use.

Alternative sources of energy may also affect the environment in negative way.

Hydroelectric power does have environmental drawbacks.

Water Resources by William Whipple published by ASCE Publications in 1998 states that “Although hydroelectric plants have great inherent advantages, they have major environmental disadvantages as regards fish”.

Environmental Impacts of Alternative Energy

Environmental Impacts of Alternative Energy

Nuclear power produces little or no greenhouse gas, but does have other environmental concerns.

“Energy Revolution” published by Greenpeace and the European Renewable Energy Council in October 2008, states in relation to nuclear power, “There are multiple threats to people and the environment from its operations.

These include the risks and environmental damage from uranium mining, processing, and transport the risk of nuclear weapons proliferation; the unsolved problem of nuclear waste; and the potential hazard of a serious accident.

In chapter 5 of “20% Wind Energy by 2030”, published by the U.S. Department of Energy in July 2008, it states “Wind energy production can also, however, negatively affect wildlife habitat and individual species, and measures to mitigate prospective impacts may be required”.

Environmental Impacts of Alternative Energy

Biofuels offer the potential to lower the dependence on gasoline which is a major contributor to global greenhouse gas emissions, but their production does have environmental consequences.

“Impacts of Biofuels: A Framework for Analysis”, by Kemmen, Farrell et al. and published by The International Transport Forum in December 2007 says that “Crop based biofuels and a growing demand to feed a larger and more affluent global population increases pressure on forest and soil resources”.

SUSTAINABLE DEVELOPMENT

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (World Commission on Environment and Development, 1987, p 43).

Sustainable development is generally thought to have three components: environment, society, and economy.

By the use of alternate energy, the exploitation of resources is minimum.

ACCEPTANCE IN INDIA

Lack of government policy support. This includes the lack of policies and regulations supporting development of renewable energy technologies and the presence of policies and regulations hindering renewable energy development and supporting conventional energy development. Examples include fossil-fuel subsidies, insufficient consumer-based renewable energy incentives, government underwriting for nuclear plant accidents, and difficult zoning and permitting processes for renewable energy.

Lack of information dissemination and consumer awareness. And Poor perception by public of renewable energy system aesthetics.

Lack of stakeholder/community participation in energy choices and renewable energy projects.

High capital cost of renewable energy technologies compared with conventional energy.

Inadequate workforce skills and training. This includes lack in the workforce of adequate scientific, technical, and manufacturing skills required for renewable energy development; lack of reliable installation, maintenance, and inspection services; and failure of the educational system to provide adequate training in new technologies.

ACCEPTANCE IN INDIA

THE EXPERT SPEAKS…….JIM ROGERS

(Investor and Financial Commentator)

He believes that there’s a lot scope in Alternate Energy especially in Wind and Solar Energy.

If we don’t replace our pre-historic energy sources with alternate energy , we may end up with the price hike of all the basic necessities.

TNERCA CASE STUDY

Public-Private Partnership

1. Acquisition of Land By the Government.2. Identification of Arable land and non- Arable land.3. Re-Distribution of Arable land to (big-time)farmers @ par

and non-Arable land to other private parties @ discounted rates.

4. But with a condition that for a minimum of 5 years, the land cannot be transferred again. And in the mean time , wind mills are to be installed for which TNERC will bear the costs.

5. The electricity produced will be State’s property.6. Instead State will pay Rs.2.90 per Unit.

Challenges1. Lack of big Parties investing in Wind power Project2. Competition from Gujarat, Karnataka and Kerala

where Unit cost is @ above Rs.3.3. Drastic Climate Change4. Destruction of Ecosystem5. Destruction of Radio Communication

POLITICAL ENVIRONMENT

TECHNOLOGY TRANSFER

TECHNOLOGY TRANSFER

The process of sharing of skills, knowledge, technologies, samples of manufacturing among governments and other institutions to ensure that scientific and technological developments are accessible.

It can be broadly termed as knowledge transfer.

Displacement of existing economic activities and process by the new technology

Cost benefit analysis

Environment-friendly technology

Presently there is comparatively less investment in this field for R & D in India

The Indo-German Partnership for betterment in the field of Alternate Energy

India is looking towards Germany for technological assistance and knowledge transfer in the field of renewable energy, especially for rural electrification and grid integration.

German companies are offering battery-supported photovoltaic island systems to provide uninterruptible power supply for countries with unstable, overloaded power grids like India.

THE CENTRIC IDEOLOGYDevelopment process by the ideology of “a socialistic pattern of society in accordance with satisfying the present needs of all.”

The centrists have abandoned their original sociological view and chose to adopt a more liberal approach to adopt technological transfer policy.

Open to changes as they are secular and democratic in nature and believe in the participation of masses.

Development and skill comes into the society when common man agenda is in the manifesto of political party and centric parties follow this welfare politics.

SOCIALISM & DEVELOPMENT Alternative Energy makes a

section of people “self-sufficient” May create widespread

unemployment Won’t like the idea of alternative

technology, if the sector is owned by private parties

Private ownership of alternative energy may create more energy crisis, because the rich may be served and the poor will be kept in darkness.

So alternative energy should be reserved for the State.

“THE LEFT EFFECT “

In politics, right-wing refers usually to conservatism.

Rightists are generally traditionalists, conservatives, reactionaries, monarchists, aristocrats, and theocrats.

They support free market capitalism, and also some forms of nationalism, including fascism.

The rightists support a decentralized economy based on economic freedom, and advocate policies such as property rights, free markets and free trade.

The right wing believe in free economy and agree upon easy technology transfer.

WHETHER “RIGHT” IS RIGHT ??

THE RIGHTIST VIEW…

The rightists favour policies that remove barriers to private sector investment in technology.

There has to be focused subsidies in those cases in which a nation has the capability of producing a world-class industry.

India needs to do more technology transfer because of the big potential of renewable energies. This also relates to India’s energy security.

LEGAL ENVIRONMENT

Why R.E Law for India ?Beyond Electricity Act, 2003

1. Sections 61 (h) and 86 (1) (e) are the only real, clear developmental provisions relating to renewable energy in the Electricity Act (EA), 2003.

2.  Secondly, EA, 2003, speaks only of generation, transmission and distribution of electricity.

POWER SECTOR REFORMSPower sector reforms will improve market opportunities

for renewable energy equipment suppliers and developers.

RENEWABLE ENERGY LAW IN INDIA

The World Institute of Sustainable Energy (WISE) has drafted a model Act.

WISE sought the help of the National Law School of India University in Bangalore, particularly of CEERA, the law school’s Centre for Environmental Law, Education, Research and Advocacy, to prepare the Draft Renewable Energy Law for India.

The draft law proposes to increase the target for electricity generation from renewables to 10% by 2010 and 20% by 2020, of the total electricity generated in the country.

BioFuels-Time-bound programmes for biodiesel engine production, introduction of hybrid vehicles, fuel cell bus demonstration, increasing railroad efficiency and development of ultra-efficient aircraft technology have been proposed. Most importantly, modern concepts of Renewable Transport Fuel Obligations have been proposed.

Hydrozen Road Map- Hydrogen has extremely varied applications, from electricity storage, as transportation fuel, to fuel cells which can power all imaginable devices, as well as huge multi-storeyed buildings.

Decentralized Renewable Microsystem- To address the energy problems faced by the rural areas and to facilitate faster growth of grid-independent distribution and small-scale (micro) generation, numerous provisions have been included in the draft law.

Special provisions for meeting dispersed pumping energy needs of the agricultural sector using modern technologies have been included.

Three separate time-bound Technology Missions have been proposed to achieve the objectives of energy independence. Such technology missions are to be established in the areas of: Solar Energy, Biofuels and Hydrogen.

Growth without Subsidy- All the growth and development is proposed to be achieved through introduction of innovative market based policies and instruments.

Establishment of Renewable Energy Development Funds in all states (on the pattern of Maharashtra) has also been proposed.

NATIONAL RENEWABLE ENERGY COUNCIL- To guide and advice comprehensive achievement of the objectives of the Act, a national level apex body called the Renewable Energy Council with the Central Minister for New and Renewable Energy as its Chairman has been proposed.

PENALTIES-

Penal Clause of the Electricity Act 2003 will be applicable. Section 135 deals with theft of energy, with provision of imprisonment up to 3 years, fine or both. o Section 136 deals with theft of electric lines and materials.o Section 150 deals with connivance in theft.o Section 152 deals with Compounding of offences

Provision for hearing prior to penalty Appeal to Appellate Tribunal Civil Court not to have jurisdiction

People’s Republic of China: Renewable Energy Law, 2006-o The stated objective of the law is, “to

promote the development and utilization of renewable energy, improve the energy structure, diversify energy supplies, safeguard energy security, protect the environment, and realize the sustainable development of the economy and society”.

o According to the law, renewable energy includes hydroelectricity, wind power, solar energy, geothermal energy and marine energy, all of which need to be taken consideration in state and local development plans.

o It establishes cost-sharing mechanisms so the incremental cost will be shared among utility consumers.

o creates new financing mechanisms and supports rural uses of renewable energy.

o provides for a long-term development plan, R&D, geographic resource surveys, technology standards, and building codes for integrating solar hot water into new construction.

Major acts covering use of renewables.

United Kingdom-Sustainable Energy Act 2003Energy Act 2004 Renewables obligation relating to electricity [Under Section 32 (9) of the Electricity Act 1989] Climate Change and Sustainable Energy Act 2006

Czech Republic: Act on the promotion of Use of Renewable Sources, 2005

Austria: Green Electricity Act, 2003 (amended 2006)

Australia: Renewable Energy (Electricity) Act 2000

Philippines: Biofuels Act 2006

PORTER’S FIVE FORCES

What more is necessary or desirable…..(RECOMMENDATIONS)

Specific targets for RE sources which are not commercial Efficient mechanism for purchase of RE Enabling mechanism for inter-state sales National Mechanism for purchase of RE Sufficient training and Awareness is a must for successful

implementation Clarity on wheeling/ banking facilities Preferential Treatment needs to be considered for

promotion of Renewable in terms of quantum of charges considering the nature, quantum of generation so that the project viability may be enhanced

Stronger enforcement and penalty mechanism Choice between a Penalty driven policy or a Incentive

based mechanism