Monday, October 27, 2008

India's energy print

The crunch of energy has led Indian strategists to believe that the only solution to India's power problems is Nuclear Power as a result we signed the Nuclear Deal to import fuel and technology. Power problems are faced by all developing nations and United States of America too went through such a crisis in the 70's. As a result of it, presidents Gerald Ford and Jimmy Carter promoted the use of renewable sources of energy like solar power and also increased the mileage standards for the automobiles from 13.5 miles per gallon to 27.5 miles per gallon. This helped to create a global oil glut during mid 1980's. But as things eased off, the focus was shifted. When Ronald Regan became the president, he let the tax incentives lapse for the Solar Energy Research Institute and stripped of the solar panels in the white house installed there at the time of Jimmy Carter. He also reduced the mileage standards to 26 miles per gallon.

Looking at India's energy model, we are adopting a model, quite similar to US model. Looking at successful energy models, Denmark's model is the most inspiring. Denmark also faced an energy crunch in the 80's and as its power demands grew, it had to look for alternative sources of energy. At that time, 99% of Denmark's energy requirements were met by the middle east oil. To change that scenario, the government decided to go against nuclear, and went ahead with the scheme of levying high taxes. Japan too adopted such an approach.In Japan there is higher tax on bigger vehicles and the taxes on oil per gallon are also very high.In Denmark, to reduce electricity consumption, a CO2 tax was introduced. When the consumers saw a CO2 tax in their bills, they automatically resorted to an energy conservation approach. You might think that Denmark's economy would have slowed down. No, it has risen by about 70% since 1981 and there is only about 2% of unemployment there.

The model of nuclear powered energy model has also been successful and countries like France get 78% of their electricity requirements from nuclear energy. But the atomic path has had its fare share of negative effects. The two major accidents that have happened in the nuclear era has been that of Chernobyl in Russia in 1986 and the partial meltdown of core at three mile island in 1979. So it is a very risky proposition. But since now to power our economy froward have decided to follow a high energy print, we could be in for tough times ahead, in terms of our oil consumption.Being an agricultural nation we could have come up with a more ingenious solution, similar to that followed by Brazil, when it started a national program to produce ethanol from sugarcane. Today, between the domestic oil production and the ethanol industry it does not need to import oil. India today is highly depended on oil. Now that global oil prices have gone down, the government is thinking to reduce the price of petrol and diesel, rather than helping out the oil companies to recover their losses incurred during the last few years. Right now there seems to be a gloomy prognosis for our economic recovery, which is heavily dependent on energy and power.