PLI Scheme, costs of importing energy and more — Issue #23
News of the Week
Last week was eventful – unlike the one which preceded it.
India rolled out a second PLI scheme for Solar PV manufacturing. At Rs 19,500 crore, this one is almost four times as big as the first one. The government has also decided to create a fresh PLI for local manufacture of shipping containers.
Old questions about the scheme, however, persist. Take shipping containers. The grade of steel needed for containers is costlier in India. And so, how much disability cost (subsidy) will India give? For how long?
Given containers are procured by shipping lines – and India doesn’t have large shippers – can India garner the scale needed to be globally competitive?
Such questions deserve more attention than they have received. And so, it has been heartening to see more critical commentary on PLI – like this oped in Hindu Businessline where Rajiv Kumar, the former vice chairman of Niti Aayog, warned about protectionism.
Elsewhere, even without a PLI scheme, India is making large strides in electrolyser manufacturing. The world is on track to add 26 GW of electrolyser manufacturing capacity by 2026. Of this, 8GW are coming up in India alone. As RechargeNews reported, “The 8GW figure is made up by a total of nine companies across seven factory projects — three joint ventures and three solo investments — the biggest of which are 2GW factories built by Belgium’s John Cockerill in partnership with India’s Greenko, and Nevada-based Ohmium.... There are also four 1GW factories in the making by 2025, from Indian conglomerate Reliance, which has partnered with Danish engineering firm Stiesdal, India’s Larsen and Toubro in partnership with Norwegian electrolyser manufacturer Hydrogen Pro, and Indian fuel-cell manufacturer H2e Power, which plans to make solid-oxide electrolysers at its gigafactory. H2e also plans a 200MW factory to make anion exchange membrane (AEM) electrolysers.”
Adani too, says the report, has committed financing for a 1 GW line.
More news on renewables. Chinese EV Giant BYD had announced plans to enter India. Now, Fisker of USA has announced its India plans as well.
From renewables to dams, where grimly predictable news surfaced. For the longest time, folks in Assam have been worried about the downstream impacts of NHPC’s Subansiri Lower Hydroelectric project. The project, however, has been kept alive by the state and central governments. Last week, following incessant rains over the last few days, a guard wall – meant to protect the dam from overflowing water – collapsed. A video emerged shortly.
It isn’t just the guard wall that buckled. A diversion tunnel of the dam has collapsed as well. A line in the news report is especially noteworthy (and begs further detail): “Notably, the intake tunnel of the project has been closed following fears of collapse as overflowing water has been gushing out of the tunnel owing to heavy downpours and landslides.”
The news from Sikkim is not much better. Sunil Saraogi, Officer on Special Duty (OSD) to Chief Minister Prem Singh Golay, put out a tweet asking business groups like Tata and Adani to invest in the state’s hydel sector. Locals are up in arms, said EastMojo. Meanwhile, Adani and Ambani have signed a no-poaching agreement, in anticipation of direct competition as they expand their energy and decarbonisation investments.
India has returned to previous statements and said it wants to build more coal plants. The decision is unsurprising. The costs of relying on imported energy are coming home to roost. India, which wanted Gas to account for 15% of its energy mix, has bought several LNG cargoes at over double the price it paid around last year. The surge in prices effectively demonstrates the imprudence of chasing this target for India.
It might take time. Policy-makers, moving incrementally, are now planning to set up a strategic gas reserve.
As things stand, the country’s push for coal is a part of a global trend. Putin’s invasion of Ukraine has left countries scrambling for alternatives to Gas – and brought coal back into favour. Prices have spiked. The Asian benchmark in Newcastle has surged to an all-time high of nearly $450 per tonne, up from less than $150 per tonne earlier this year. As Reuters reported, “Buyers in Europe and beyond are now vying to pay top dollar for coal from often remote mines in places such as Tanzania, Botswana and even potentially Madagascar.
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Yet other news. India is trying to accelerate environmental clearances further. In tandem, the prime minister has told environment ministers they should be promoters -- not regulators – of the environment.
As phrases go, “Green growth” has lost all meaning. The country also wants to allow water trading. The many implications of such an idea will be discussed in more detail in the next edition of this newsletter.
Climate Long Reads
1. “At a time when the global economy is being battered by the war in Ukraine and the global energy, food and climate crises, Indonesia has emerged as an unlikely outlier, boasting both a booming economy and period of political stability.... The world’s largest producer of nickel, a critical component in electric vehicle batteries, Indonesia is putting in place plans to benefit from the upcoming boom in EVs.” (Financial Times).
2. Brazil, however, is struggling. “Political coverage in the build up to next week’s presidential election has been dominated by the controversies around the two leading candidates — whether incumbent Jair Bolsonaro will respect the result if he loses and the potential return to power of former leader Luiz Inácio Lula da Silva who spent time in jail on corruption charges. But as Brazilians prepare to vote on October 2, it is the widespread decline in quality of life that is at the forefront of their minds.” (Financial Times).
3. From Bloomberg, the world is hurtling towards $1 trillion in climate-disaster damages this year. Also see, from CarbonBrief, this primer on loss and damage. Also, with COP nearing yet again, talk about historic responsibility has sharpened.
4. In the US, e-bikes are outselling EVs. (Outside)
5. An outstanding read from Der Spiegel on the country’s over-reliance on Russian Gas. “How did Germany get here? DER SPIEGEL spent months poring over files and speaking with business and political leaders. The result: Mistakes were made and some illusions proved to be misguided. But it is also the case that the inadvisability of some decisions only became clear once Putin invaded.”
6. The world is in the grip of multiple crises – debt, energy, climate – all at once. Historian Adam Tooze looks at the “polycrisis” in South Asia.
7. Putin is ratcheting up the rhetoric. What it means, by Anne Applebaum.
8. While on PLI, also see this oped (from July) by academics Gagan Deep Sharma and Surendar Singh. “Four issues deserve prominent attention in the context of the discourse of PLI — import protectionism, greater focus to capital-intensive industries, heterogeneity of firms within and across sector (s), and incompatibility with GVC led trade.”
Climate Podcast
“As the world moves towards renewables and away from fossil fuels as an energy source, we can’t forget that the technology and minerals behind this green transition need to come from somewhere — and that somewhere is primarily countries in the Global South.... In part one of this two-part series on the green transition, we’re going to explore what happens when we simply paint capitalism green without addressing its fundamental global operating principles and processes. What is the dark side of the energy transition — particularly for the Global South and Indigenous communities?”
Book of the Week
This week, a book about the USSR, Russia and the use of media to retain power.
In The Invention Of Russia: The Rise of Putin and the Age of Fake News, Arkady Ostrovsky shows how despotic power, first in the USSR and now in Russia, derived its legitimacy through the media. That chapter could have ended with the demise of the USSR but, as is the case, vacuums of power are usually filled by opportunists. Oligarchs took over the media and instrumentalised it for their own gain – eventually supporting the elevation of Putin. Who returned the favour by wresting control over the media – and other organs of the state – away from the oligarchs.
A real cautionary tale for our times. Here is a review.
PS: The Red Web, mentioned in the review, is also a stunning book.