Use Goldilocks Principle to synergise energy sources

The ‘Goldilocks Principle’ or solution is named by analogy to the famous children’s story, The Three Bears, in which a little girl named Goldilocks tastes three different bowls of porridge and finally decides to have that bowl which is neither too cold nor too hot, but just the right temperature. This concept has been extended to various fields; for instance, in the field of communication, it is spoken of in terms of ‘right amount’ of communication that is effective.

In Economics, this principle has been discussed even more. For example, it is talked about in case of ‘right combination’ of growth and inflation. This is a very old debate regarding how much growth can be sacrificed in order to have price stability or how much of price stability can be sacrificed in order to have the right percentage of growth.

In case of debate whether renewable energy sources should completely replace coal for power generation or whether coal should continue as the predominant fuel for power generation, we can apply the Goldilocks Principle. For quite sometime now, there has been a raging debate on this issue. The proponents of clean energy strongly advocate that renewable energy should totally replace coal as a source of power generation in order to achieve the goal of sustainable development and also because of the fact fossil fuels are depleting fast.

It is also argued that due to shortages of coal we may have to be dependent on imported coal. This would mean huge import bills, adding to current account deficit problem. When the Ultra Mega Power Project at Mundra, owned by Tata Power, faced problems because Indonesia hiked the price of coal, on which it was dependent, it further brought the problem to light.

Therefore, the supporters of renewable energy are becoming more vocal to the extent of recommending that coal be totally replaced as a source of power generation by renewable energy sources. Can this really happen in India, given the fact that about 65 per cent of our power is generated by coal?

The Central government has an ambitious plan of achieving 175 GW of renewable energy capacity by 2022. India is the on course to becoming the solar hub of the world. It ranks third among 40 countries in EY’s Renewable Energy Country Attractiveness Index. The Central government has envisioned generating 40 GW through rooftop grid interactive solar power alone as part of the 100GW target of solar power.

India has added a total of 2,311.88 MW of grid-connected power generation capacity from renewable energy sources like solar and wind during this fiscal. The government has launched many initiatives like solar street lighting, solar cities, etc. India has taken an initiative to launch International Solar Alliance (ISA) of around 120 countries to promote investment and free flow of technology to developing countries and to provide loans for development of solar energy.

Renewable Purchase Obligations (RPOs) is another initiative which has been there in India for some years. RPOs are minimum renewable energy targets which are specified in percentage terms in proportion to total electricity consumption. It is mandatory on part of State Electricity Regulatory Commissions (SERCs) to specify year-wise RPOs as per the provisions of Electricity Act 2003. All these developments are a pointer to the fact that we are very serious to promote renewable energy.

There is no denying the fact that nations world over need to worry about the dangers of climate change due to indiscriminate use of fossil fuels such as coal. India cannot be an exception to this growing concern. However, the question arises whether in our country we can totally replace coal with renewable even in the long term? One of the earliest reports which underscored the inevitability of India’s dependence on coal was the ‘Integrated Energy Policy Committee’ report 2006.

The committee looked at 11 scenarios with various combinations of fuels such as, coal, gas, nuclear and renewable and came to a conclusion that coal would continue to be the main fuel for power generation. At a recent lecture given by Arvind Subramanian, the Chief Economic Advisor, at The Energy and Resources Institute (TERI), he very succinctly explains why coal cannot be totally replaced.

Solar and wind are not available all the time, greater solar capacity has to be installed to generate a unit of power equivalent to conventional sources, land acquisition costs would be higher, and so would be the costs of building and upgrading grid to equip them for renewables. Another important point he raises is about the stranded assets resulting from complete displacement of coal, which would make the power generation companies generating power from coal unviable.

These companies have taken loans from public sector banks. This would mean aggravation of their NPAs, leading to aggravation of by now famous ‘twin balance sheet’ problem. There is also the problem of those who are dependent on coal for their livelihood, if coal is to be totally replaced. Even renewable energy will have to face the most significant sectoral challenge of poor financial health of Electricity Distribution Companies (DISCOMs). Hence the total replacement of coal would result in considerable social costs.

Therefore, any policy related to coal and renewable must realise that both the sources are ‘Siamese Twins,’ the imperatives of climate change by increasing use of fossil fuels and the problems of totally replacing them need to be properly blended. Yes, the ‘Goldilocks Principle’ should be followed. (Gangakhedkar is Head, Centre for Energy Economics, Institute of Public Enterprise, Hyderabad; Rohit is a PGDM student, IPE)

By Dr Rajesh Gangakhedkar & S Sai Rohit