The Hindu Business Line : Asia Pacific Partnership: The business of clean energy

The US has identified wind, biomass and hydro-power as particularly profitable areas with considerable potential for transferring technical expertise. — A. Shaikmohideen

Ananth Krishnan

Talk about perfect timing. Barely a few days after the Nuclear Suppliers Group waiver paved the way for American companies to enter India’s lucrative civilian nuclear energy market, 11 of the United States’ leading players in the clean energy sector find themselves on a week-long trade mission to New Delhi, Mumbai and Hyderabad, promoting foreign investment and pushing for more trade-friendly policies.

This will be the third American ‘clean energy mission’ in the last two years. The US has been making serious efforts to tap India’s nascent clean energy market — long before the words ‘NSG waiver’ were on everyone’s lips. The trade mission is an offshoot of the Asia-Pacific Partnership on Clean Development and Climate (APP) initiative that the US set up in 2005 to promote private investment in clean energy.

The APP is a coalition of seven countries — the US, China, India, Japan, South Korea, Australia and Canada. These countries account for more than half of the world’s carbon emissions and that have also been some of Kyoto’s most prominent rebels. With the Kyoto Protocol expiring in 2012, the George W. Bush government set up the APP as the first step towards arriving at an alternative framework.

Dissenters on board

The idea is to bring to the climate change discussion countries such as India and China that have been explicitly against setting fixed targets for emission reductions. Unlike Kyoto, the APP does not seek to impose mandatory emission cuts in these countries. Instead, it allows each country to set its own targets, and encourages them — through private investment — to increase the contribution of renewable energy to the country’s needs and balance the demands of sustaining growth and reducing emissions.

The APP’s reluctance to speak the language of mandatory emission cuts has led its critics — and there are many — to denounce the venture as a lame compromise by a US government that has long been shirking its responsibilities in reducing emissions.

David Bohigian, the US Assistant Secretary of Commerce who is leading the trade mission to India, however, strongly defended the APP model in an interview with Business Line. He argues that it is crucial to bring together India, China and the US — the world’s biggest polluters — in any initiative, and that private investment might perhaps be the best way to reconcile differences between countries that hold fundamentally opposing views on the notion of differentiated responsibilities — an opposition that has certainly limited and stalled the working of Kyoto.

Workable framework

“It is fair to say there are right now two sets of countries — those that did not sign Kyoto, and those that are missing their targets,” Mr Bohigian said. “The fact is we need a more workable framework that includes India, China andthe United States, to make sure that as we move into a lower carbon economy, we continue to build the prosperity we all want for our people.”

Two themes Mr Bohigian will stress in discussions with the government this week are introducing greater incentives for energy efficiency and allowing market-based pricing for clean energy.

For American companies, there is certainly a lot of money to be made in India. A US Department of Commerce report forecasts that clean energy will account for a quarter of India’s additional energy demands in the next decade, adding 15,000 MW and requiring an investment of $21 billion (clean energy technologies refer not only to renewable energies like solar, wind and hydro-power, but also to energy-efficient technologies that reduce emissions in conventional power generation and transportation).

The US has identified wind, biomass, hydro-power and, needless to say, nuclear energy, as particularly profitable areas where a lack of technical expertise means a lot of potential remains unfulfilled.

Wind energy is top of the list: India’s installed capacity in 2008 was only 8,757 MW, while the potential is estimated to be somewhere in the range of 45,000 MW a year.

Companies such as Synergics, which is into green power such as wind and hydro, and which is already present in India stress that more incentives, particularly a shift from investment-based incentives to production-based ones, and a freer market are crucial for the sector’s development.

“There is a concern that our projects are burdened with unnecessary costs,” Wayne L. Rogers, the chairman of Synergics, said in an interview. The company has hydro projects in Uttar Pradesh and Uttarakhand, and is also looking at potential sites in Sikkim and Maharashtra. “In hydro, for instance, 12 per cent of the power goes to the government for free, so the remaining 88 per cent costs more than it should. For the renewable energy sector in India to grow, it should be allowed to become competitive.”

Crucial component

The US also sees nuclear energy as a “crucial” component of reduced greenhouse gas energy deployment, Mr Bohigian said. With India targeting a boost in the contribution of the sector to 6 per cent of the country’s energy needs by 2030, the requirement for reactors and technology is expected to open up a market valued at more than $30 billion.

American companies such as Westinghouse and General Electric, which are part of the current trade mission, will be awaiting the US Congress verdict on the deal with great interest. The big question that remains unanswered is whether the APP model can indeed provide solutions that lead to a post-Kyoto framework which reconciles the differences that have bogged down the Protocol. In three years, it surely has not achieved enough to suggest this is the case.

Private enterprise can only go so far: as long as the US government, the world’s biggest polluter, refuses to ratify Kyoto and refutes the notion of differentiated responsibility for developing countries, India and China will likely remain equally reluctant to agree to fixed reductions in emissions.

Environmentalists have criticised India for joining the APP and signing a “dirty deal” with US industry. But this criticism also ignores a basic reality that the country has to confront: whether or not the US decides to shoulder more responsibility in tackling climate change, India has far more to lose, and is certainly more vulnerable to its long-term impact. And in a $100-a-barrel world, any move to develop the country’s still embryonic clean energy sector must be certainly welcome.

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