A Week Dense With Energy Developments – Issue #88
This week, visions of a thirsty future from both the hemispheres.
Climate news of the week
This week, visions of a thirsty future from both the hemispheres.
Mexico City is struggling with acute water shortages. The city’s travails are especially ironic because it stands on the site of Tenochtitlan, the legendary city built on an island in a lake.
Closer home, Karnataka is staring at a drought as well. No less than 223 of its 236 talukas have seen low rainfall. Of these, as Deccan Herald reported, 196 are severely affected. In tandem, the number of farmer suicides in the state has risen. In Bangalore, another city of erstwhile lakes, water tanker rates are already spiking.
The state government’s response, so far, is to double down on groundwater extraction. “Deputy Chief Minister DK Shivakumar said the government is exploring the possibility of digging more borewells to solve the issue,” reported NDTV. "We have allotted ₹8 crore to solve the water issue. Some MLAs said borewells have been dug up to 1,500 feet. We are exploring the possibility of digging 500 metres deeper besides installing more borewells," he said.
Maybe there is nothing more to be done in the short term. But longer term, the city has to focus on making better use of its rainfall. Which means it has to revive its lake system. Which means it has to rein in real estate.
If not, Mexico City’s future will be Bangalore’s as well.
News of the week
News from the energy sector dominated headlines this week.
EVs made headlines repeatedly. First came the news that EV growth is slowing globally. A global clutch of carmakers like Mercedes Benz revised their targets of going all-electric by 2030, saying internal combustion engines will be around well into the next decade. Speaking to Reuters, the chief economist of a wealth management firm said: “High-interest rates, moderate oil prices, and range anxiety have all conspired against EV demand. The enthusiasm of early adopters of EVs wasn’t representative of the longer term… demand for these vehicles.”
It’s a hard statement to accept uncritically. On one hand, as countries try to sell as much oil as they can, oil prices might indeed stay low. At the same time, R&D into EV batteries continues to take giant strides. And so, even as Reuters was writing its bearish report on EVs, CATL announced it will slash battery prices by half by mid-2024. Both CATL and BYD are vying to push car prices down.
As mentioned in the last newsletter, TOI reported that, after the recent price cuts for Tata’s EV models, buyers will recover the additional cost of an EV within one year of driving. It raises a question. Is the world seeing a crisis in EVs? Or is it seeing a crisis in ICE car makers who are struggling to keep pace with new rivals?
Continuing with EVs, JSW seems unwilling to back out of the sector. After its talks with BYD fell through, JSW has now begun talks with Volkswagen and SAIC for its EV project in Odisha. It has already, reported Mint, inked a share-purchase agreement with SAIC, which owns MG Motor India. The news will come as a relief for Volkswagen, which sells Skoda cars in India, as well. Its previous negotiations with M&M and Tata Motors had gone nowhere.
Talking of EVs, news came too that Adani is entering the sector.
It’s not, however, getting into EV manufacturing. Uber, as the Economic Times reported, wants to replace its existing fleet with EVs. And so, Adani wants to buy cars, brand them, and add them to Uber’s fleet. In addition, it is amongst a clutch of firms talking with the government to set up charging stations along national highways.
Adani TotalEnergies, Jio BP, Shell Mobility, and the Aditya Birla Group, reported Mint, will be offered locations along national highways by the end of March to build charging infrastructure. The model to be followed is called — wait for it — AHEM. Annuity hybrid e-mobility. Here, “annuity payments (will be made) to contractors for the initial investment made by them in fixed amounts for 12 months. Thereafter, a variable annuity will be paid in the remaining period for expansion so that the entire capital investment is recovered.” This has to be understood.
Continuing with Adani, the group is now in talks with sovereign funds based in West Asia to raise up to $2.6 billion for its airport expansion and green hydrogen projects. That means Bahrain, Iraq, Jordan, Kuwait, Lebanon, Oman, the State of Palestine (observer), Qatar, Saudi Arabia, the Syrian Arab Republic, the United Arab Emirates, and Yemen. This possibility, that the group would pivot fund-raising away from Western financial institutions to domestic lenders and sovereign funds elsewhere in the world, has been remarked upon earlier.
The reasons for this switch to West Asia have to be understood. Does the group still face some difficulty in accessing capital markets in the West?
In other news, as AdaniWatch reported, a key hearing at India’s Supreme Court in a case relating to the Directorate of Revenue Intelligence investigation into alleged over-invoicing of coal imports by the Adani Group was quietly postponed by six months on 6 February 2024, with no apparent explanation. And GQG Partners, which invested in Adani at the height of Hindenburg, has seen its $1.9 billion investment soar to $10 billion.
Three other developments last week are notable.
One, L&T will start selling its electrolyzers from September this year. “Come September, the company plans to commercially roll out 150,200 megawatts of this capacity,” said Derek Shah, senior vice president at L&T and head of green manufacturing and development. Speaking to Business Standard, the company said it is closer to Chinese costs than Europe. “Our electrolyzers would be almost 50 percent (of) the price offered by European suppliers,” a company spokesperson told the business daily.
Two, Hindalco is likely to reach its target of having 30% renewable power in its overall energy mix ahead of its original schedule of 2030. It’s doing this by adding a pumped hydro project to its portfolio. “In 2022, the Aditya Birla Group company signed a pact with Greenko Group to set up a green energy project with a capacity of 375-400 megawatt (MW) in Odisha,” reported Mint. “The company plans to enhance the 100 MW pumped hydro project in Odisha to 350 MW, as the project will lay the foundation for the production of low-carbon, green aluminum,” it added. “The company is also planning to deploy a similar solar project with pumped hydrogen for its Madhya Pradesh smelter through Aditya Birla Renewables.”
In all these developments, one sees the new political economy of decarbonization take shape. Some states are pulling in investments. Some companies are taking the lead. Barring a handful of electric two-wheeler players, most of the action is being led by the conglomerates.
Third, as CarbonCopy had written earlier, India is inviting private sector participation in the nuclear sector. “The government is in talks with at least five private firms including Reliance Industries, Tata Power, Adani Power, and Vedanta Ltd to invest around 440 billion rupees each,” The Hindu was told.
Under the funding plan, the private companies will make investments in the nuclear plants, acquire land, and water, and undertake construction in areas outside the reactor complex of the plants. But the rights to build and run the stations and their fuel management will rest with NPCIL, as allowed under the law, they said.
The private companies are expected to earn revenue from the power plant's electricity sales and NPCIL would operate the projects for a fee. This, too, has to be understood.
In other news, Qatar is doubling down on LNG exports. This is not good news for costlier American shale — or the environment. India is telling railways to operate 500-600 trains this summer to move coal. That is not good news either. JSW is in talks to buy a 20 percent stake in a coal mine owned by Australian firm Whitehaven Coal. This is for metallurgical coal. Houthi attacks on oil tankers might push up the cost of imported gas.
And, finally, the results from NTPC’s auctions for gas-based power are interesting. It invited bids for 4,000 MW. Bids were received only for 1,307 MW. The cheapest bid clocked in at ₹5.63 (Torrent Power), with Lanco winning second place with its bid of ₹7.02.
Smaller plants in Uttarakhand offered to supply 182 MW at over ₹7 per kWh each.
The old question again. Invest in gas to address intermittency? Or invest in more renewables and smarter grids to address intermittency?
Finally, the SC came in with a good ruling on forests, telling states and Union Territories to act as per the definition of 'forest' laid down by the top court in its 1996 judgment.
PS: Lots of energy reportage this week, in all. But, as the first part of this newsletter says, it will take more than decarbonization to fight climate change. See long-reads below for some non-energy developments.
Russia’s war on Ukraine: “A fossil fuel war”
Do read this interview with Ukrainian climate scientist Svitlana Krakovska.
Long-reads of the week
How green is the green credit programme? (Frontline)
Uttarakhand: Project Blocking Tiger Corridor Cleared After Modi Cabinet Backs it (Newsclick)
Coal chronicles (Frontline)
Uttar Pradesh's Economy: Down the Rabbit Hole and Beyond (The Wire)
Analysis: The Great Indian Water Act Of 2024 (Free Press Journal)
A farmer makes ₹10K a month in India; earnings as low as ₹4.8K in some States (Hindu Businessline)
Countries draw battle lines for talks on new climate finance goal (Climate Home)
Scientists under arrest: the researchers taking action over climate change (Nature)
Biden’s EV Dreams Are a Nightmare for Tesla and the US Car Industry (Bloomberg)
How real is our farmers' angst? (New Indian Express)
Book of the week
And so, we ended up reading one John Vaillant book right after another.
Last week, this newsletter flagged Fire Weather, on how global warming is not just making wildfires more frequent, but also changing their behavior. Our book this week is Vaillant’s The Tiger: A True Story of Vengeance and Survival. The book is about an Amur Tiger, in the great forests of Primorye in eastern Russia, who becomes a man-eater. Hardwired into its story is a larger tale of how Perestroika and Putinism have pushed ordinary Russians into living off their local environment. And how old relations of tolerant co-existence between homo sapiens and tigers are changing in our lifetime. Stunning book. He speaks about the book here.