India Must Invest in Solar Power R&D Now

Forget anthropic global warming. Sure there is climate change. But when did the climate ever not change? Even before hominins walked upright, climate has been changing. Indeed, without climate change, we would not be here. Climate change from a reducing to an oxidizing atmosphere allowed complex lifeforms on earth to develop. Life has always changed the climate — and will continue to do so. What matters is not climate but what mankind’s major sources of energy is.

Energy is what fuels human civilization. Like food for an individual, without some source of energy for its growing needs, civilization stumbles. The current developed countries were lucky to have developed when newly discovered oil was aplenty and the demand for it was comparatively low — China and India were not in the game of development then. Now that oil has most likely passed its peak, and another 3 odd billion people are getting hungry for oil, it would not be too long before oil prices rise through a combination of diminishing supply and rising demand. Oil has played a very critical role around the industrial revolution but in the long drawn drama of human civilization lasting thousands of years, its role of about 150 years is too short for it to be a major player.

Alternative sources of energy have to be found. Solar is it. Solar energy contributes very tiny amounts to the energy mix today. Given the state of the technology, it is three or four times more costly compared to say coal or oil. Even the most optimistic projections of solar utilization put its contribution to the energy mix in 10 years in the low single digit percentages. At first glance, solar just does not make sense.

But solar does not make sense if you take the static point of view. Solar can be made to make sense. Investments into R&D is needed to make solar make sense. Large amounts of investment. I have argued before that India needs to make that investment. Why? Because India has a large domestic market. Way back in Nov 2003, over six years ago, I wrote —

The “learning by doing for a large domestic market” is a very important point. India is a very large market since India accounts for around one-sixth of the world’s population. Practically every need of developing countries is represented in India itself, whether they be transportation, agriculture, or telecommunications. So we have a very large canvass to try out our ingenuity on and learn from doing that. Having developed solutions, we are well on our way to developing comparative advantage in those areas.

Is there any specific area that India should develop a comparative advantage in? There is. And that is in the area of alternative energy. More specifically, solar technology.

The case for India to invest in R&D for solar technology is so plain that I find it incredible that everyone and his brother is not shouting about it. Consider the following facts. First, India is conventional fuel poor. We do not have oil and have to import a good portion of our current needs. We cannot afford to rely on the whims of foreign oil producers. There is one 800-lb gorilla in the oil market and it has cornered significant sources of the global oil market. So for strategic reasons, India must reduce its dependence on foreign oil to meet its energy needs.

Second, rich nations have the resources to pay (one way or another) for the oil they consume, India cannot. For instance, the US pays for oil by directly paying the producers and indirectly by maintaining a huge military and using force strategically.

India is blessed (?) with a lot of solar energy delivered free. The sun shines too hard most of the time and very few people are making hay.

Finally, any desired technology can be developed if you throw sufficient money at it. That is a basic fact of the modern world. Everything that is theoretically possible can be developed given sufficient commitment in terms of time, effort and resources.

It is my considered opinion that energy is the most fundamental of all resources. If one can get free energy (or even cheap energy), there is no problem that cannot be solved. Energy is a substitute for land and labor. Don’t have enough land to grow food? No problem — use hydroponics and grow you food in factories. Don’t have water to do that? De-salinate sea water using energy. Don’t have enough labor? Use machines. Where do you get machines? Make them using energy.

I made this recommendation over six years ago:

My policy recommendation is simple. Set up a national goal to make India the Solar Power SuperPower (SPSP) in the next 10 years. (Pres Kalam, are you there?) To achieve that goal, spend Rs 500 billion (approximately $11 billion) to get an R&D started at space travel speed using the best brains that exist anywhere in the world. Hire the best scientists and pay them so much that they would not consider working on anything else. Create programs in all the top Indian research institutes and reward people with sacks of gold or whatever floats their boats to get them to devote all their talents to that one aim of making solar energy technology in India so good that we don’t have to import a single drop of oil and can tell our Arab “friends” to take a hike. Indeed, once the demand for oil falls, they will have to take a hike because they would not be able to afford cars.

Can it be done? You bet. All it needs is national will. Do we have leaders enlightened enough to create the needed national will? I am afraid not.

I have been pushing for solar for a while. Three years ago, in Dec 2007, I again argued for public investment in solar power:

India cannot continue to ignore reality: its continued economic growth and development is predicated on it developing the technology to exploit solar energy, and base its industrial, transportation, commercial, and household energy needs to be met through the derived electrical energy. Every bit of modern technology India uses has been developed elsewhere. It would be a welcome change if it developed the technology that would be its lifeblood. Developing technology is a matter of will, vision, and sometimes dire necessity. The Manhattan project and manned missions to the moon are examples of what can be achieved within a short time if the will exists.

India cannot afford not to develop solar energy technology for these reasons. First, eventually someone will, and then once again India will have to perhaps grovel for access to it. Second, and conversely, if India develops the technology, not only will it have it for its own use, it would be able to sell that technology to other nations. Third, India does not have a very large legacy infrastructure system built on oil. It therefore has the opportunity to build its infrastructure that is electricity oriented. For instance, India’s transportation needs can be met more rationally primarily by a rail network backbone instead of roads, cars, airports, and airplanes.

Developing solar technology is not going to be cheap. But the alternative is going to be immeasurably more expensive. Here’s the scenario using ball-park figures. India somehow acquires the vision and the will to invest US$100 billion and within the next five years develops efficient solar energy technology. That investment reduces its dependence on foreign energy imports on average by US$100 billion every year for the foreseeable future. The returns on investment will be immense. Furthermore, if India were to be the leader of solar energy technology, it could earn from licensing that technology to other economies.

The question naturally arises: why aren’t others doing it if it is such a great idea. First, the private sector cannot match the funding ability of a large government. Second, other large governments do not face the immediate necessity that India faces and besides they are invested in their legacy systems. Another question relates to why the market cannot be depended upon to create the solution. It is well known that markets fail when there are very high fixed costs. Only a government has the ability to fund the high fixed costs and thus correct for the market failure. Later the fixed costs can be recovered through taxing the inevitable increase in the national income.

With the will to invest US$100 billion, India can acquire the best brains in the world to work on the problem. That spending will have important forward and backward linkages that will have multiplier effects throughout the economy. Research and development capacity will be built in the private sector and in educational institutions. Millions of productive jobs will be created by the need to develop the infrastructure required for the new industries that result from such a massive project.

Will India do it? Nope. Indian leadership is of the blue-turbaned variety: they take orders from white bosses.

Anyway, smart people are concluding that investment in solar energy is important and critical. In yesterday’s Wall Street Journal, Bjorn Lomborg concludes his piece “Time for a Rethink on Global Warming:Mandated carbon cuts won’t work” thus —

If we really want to solve global warming, we need to get serious about developing alternatives to coal and oil. Last year, the Copenhagen Consensus Center commissioned research from more than two dozen of the world’s top climate economists on different ways to respond to global warming.

An expert panel including three Nobel Laureate economists concluded that devoting just 0.2% of global GDP—roughly $100 billion a year—to green-energy R&D could produce the kind of breakthroughs needed to fuel a carbon-free future. Not only would this be a much less expensive fix than trying to cut carbon emissions, it would also reduce global warming far more quickly. [emphasis added.]

India must invest in solar power R&D now.

Related Post:

The Future of Energy. Sept 2005. Very very highly recommended. My friend CJ makes his interesting points on energy.

Author: Atanu Dey

Economist. View all posts by Atanu Dey