Renewable Energy: Banking on Sun

 

ISA is in its infancy. Yet talks of a Solar Bank have already begun at full pace. The economics of the solar industry or “Solaromics”, as I call it, is without doubt the biggest variable after solar geopolitics, that would explain the success of ISA. ISA has a goal of raising a trillion US dollars for a terawatt of solar energy deployment. And that’s just the initial goal. As mentioned elsewhere, this goal would see expansions as the execution progresses.

The Solar Bank, formed by leveraging the equity capital, just as in the case of most other banks, would be critical to the swift scaling of solar projects of ISA. The ‘times’ of leverage would raise the corpus of the bank geometrically and would be determined by the specifics of the solar power projects – scale, ease of the RFQ and RFP processes, project risks, international conditions amongst others.

The structure and functioning of the Solar Bank within the ambit of the ISA is likely to take a life of its own. The various competing and conflicting choices between autonomy and control, authority, its delegation and responsibility, informality and protocols would have to be carefully deliberated for a robust Solar Bank to emerge. Its dependence on inhouse subject matter experts or a more collegial model based on independent external consultants would also say a lot about how the Solar Bank would go about doing its business and disburse finance.

 

Hydrogen Mission   In the Independence Day speech in August 2021, The Prime Minister announced the launch of National Hydrogen Mission and stated the goal to make India a global hub for Green Hydrogen production and export. The draft National Green Hydrogen Mission document is under inter-ministerial consultations. The Mission proposes a framework for inter alia creating demand for Green Hydrogen in sectors such as petroleum refining and fertiliser production; support for indigenous manufacturing of critical technologies; Research & Development activities; and an enabling policy and regulatory framework. The proposed steps will lead to the development of additional renewable energy capacity for Green Hydrogen production.

 

It's absolutely imperative that the ground rules are debated intensely and threadbare before the action begins. It must be understood that the Solar Bank itself is a big ship, let alone the ‘mothership’ ISA and they’d have a huge torque. Once the stern of these ships is swirled in any direction, it must be backed by a granular understanding of the current and expected trends across functions such as technology and finance. Or else, a wrong direction would take a long time to correct the long arcs that they’d have already charted – costing precious time, resources and above all reputation.

Technology would be the key driver of the long-term structure of the financing required. How the various sovereign funders, multilateral funding institutions, private investors respond to Solar Bank, what the risks involved might be, how that might reflect in the cost of funds are questions that would be critical to the deployment of solar projects.

ISA would also need to grapple with the question of deployment of funds towards plain-vanilla, pure projects as commodities based on known commercial technologies to be rolled out across geographies on the one hand and investments in research and development on the other. As explained earlier, leadership in solar technology would continue to define the progress of the solar industry and that of ISA within it. Many of the questions posited above and the unknown unknowns would be decided by this bifurcation in its funding mix.

The SuperGrid (“One Sun, One World, One Grid” as Narendra Modi called it in the 1st General Assembly of the ISA in 2018) has begun to shake the geopolitical tectonic plates, gently. India and France have partnered in the idea and have currently initiated a scientific study in the technical feasibility of the SuperGrid. Once evidence of the technical and financial feasibility has been established, simultaneous to presenting a proof-of-concept demonstration, the long-term roadmap, institutional mechanisms would need to be developed to accommodate and replicate on mammoth scales.

Ideas such as a global water grid and global natural gas-grids could be the next ‘moonshots’ of global energy cooperation. We could be moving to a global internet of things and the SuperGrid could possibly play the role of the harbinger of that Global Internet of Things, a truly interconnected world. Those things might be interconnected national grids of natural resources that can be made to travel vast distances. We can call it the SuperGrid-of-SuperThings.

ISA, no matter howsoever India and France hardsell it as a theater of global energy unification, shall always be looked at as a geo-strategic weapon in their arsenal. Its success shall be looked upon as an exemplar of the rise of India as a geostrategic superpower. Comparisons with China’s One Belt One Road would be inevitable

As mentioned earlier, we already have the internet, i.e. the world wide web, that has connected nations and communities. Yet, that interconnected world is not a guarantor of a game of pure cooperation. Internet has become as much a symbol of knowledge that sets the world free as it is a tool of domination and control by colonial corporations and nation states. The same could also be true of the SuperGrid.

How exactly the dice might land would be defined not just by how the dice is thrown but how the players respond to it. A rule-based, transparent, open system with built in resolution mechanisms would be required to establish a SuperGrid system of solar power generation, transmission, distribution and propagation based on trust and mutual cooperation.

It might be hypothesised that the system should ideally be designed to tilt towards the developing nations who are at a distinct historic disadvantage when it comes to ownership of technology, raising and deployment of finance, skills and know-how. This historic disadvantage is owed in good measure to the colonial hegemony of the developed powers. Trillions of dollars’ worth of resources has been siphoned off by the latter in the last few centuries. The SuperGrid might just address that anomaly through a unified grid that no one owns but everyone benefits from. In any case, the Sun shines brightest in geographies that have also been at the receiving end of colonial exploitation. Thus, the SuperGrid already presents a potential for natural justice. Or, the hegemonic powers might be able to prove the hypothesis wrong and the system might be only nominally just and equitable, untethered to the colonial past of the hegemony over resources.

 

Challenges ahead Gearing up the banking sector for arranging finances for larger deployment goals, exploring low-interest rate, long-term international funding, and developing a suitable mechanism for risk mitigation or sharing by addressing both technical and financial bottlenecks are major challenges. Need for mobilization of funds on attractive terms has further increased with launch of PM-KUSUM, which provides farmers an opportunity to become entrepreneurs and participate in India’s growth story. The ongoing efforts for mitigating investment risks, and easing approval processes would also need to be strengthened. Land acquisition: Land acquisition is one of the major challenges in renewable power development. Identification of land with RE potential, its conversion (if needed), clearance from land ceiling Act, decision on land lease rent, clearance from revenue department, and other such clearances take time. State governments have to play a major role in acquisition of land for RE projects. Creating an innovation and manufacturing eco-system in the country; Integrating larger share of renewables with the grid; Enabling supply of firm and dispatchable power from renewables; Enabling penetration of renewables in the so called hard to decarbonise sectors.

 

One of the earliest contentions of the co-founders of ISA had been the inner working of the ISA. The subject of the administrative structure of the ISA itself had been debated hotly. It has been said that France was for a nimbler structure and that India wanted a more formal structure. The latter had its way. France was worried that ISA might become a bureaucratic behemoth.

Another worry was the basic legal structure of the multilateral organisation that was sought to be created. It wasn’t understood why ISA would be a voluntary organisation, sans any obligations and yet be founded as an UN-treaty based intergovernmental organisation. No parallels existed or still exist. ISA cannot issue orders to a member state or bind any nation state with an obligation or enforce a sanction. Nations can join and leave at will, do as much as they can or may, each according to its own willingness and ability. These features make the ISA unique.

ISA itself has been found on the basis of many assumptions, the most central assumption being the perpetual feasibility and competitiveness of solar energy amongst all known renewable energy technologies. Conceded that at the given moment solar energy is the winning argument amongst all the workable and demonstrated theses presented in the realm of commercially viable renewable energy technologies. However, in the world where concepts like Hydrogen Storage, Portable Nuclear Fusion Power, Artificial Intelligence, Blockchain, Hashgraph, Self-driving cars were relatively unheard-of concepts till just a few years ago, and so were companies like Tesla and Emrod were equally unheard of, it’s not just hard to judge how the technology landscape would taper a decade hence.

It’s a given that technologies that are entirely unheard of yet are mere concepts on the drawing board might take center stage and threaten to upend the premise on which ISA has been formed. In short, at some point in the future, solar energy might not be the most reliable, cheapest renewable energy technology in the world.

Let’s say, the idea of portable fusion reactors that looks like a distant dream in a parallel world actually become a reality, in a couple of decades. What would be ISA’s response and how would it survive as a viable institution?

ISA, no matter howsoever India and France hardsell it as a theater of global energy unification, shall always be looked at as a geo-strategic weapon in their arsenal. Its success shall be looked upon as an exemplar of the rise of India as a geostrategic superpower. Comparisons with China’s One Belt One Road would be inevitable. Vacuums of balance of power seldom exist in international geopolitics and if they do they are quickly filled by the dominance of one power or the other. If there is a resource, a jewel to be had, nations vie for it and try to grab it. This has been the history of international relations. ISA won’t be untouched by the vagaries of international geostrategy. Nations would race for the pole position in the ISA ‘circuit’.

 

Bio-Fuelling Self-Reliance The advanced bio-refinery technology demonstrates integrated production capability of 1 million litre per annum of ethanol from variety of biomas  “Our country is paving its way toward greater energy self-reliance”, said Shri Nitin Gadkari, Union Minister of Road Transport and Highways while inaugurating Praj Industries’ second generation integrated bio-refinery demonstration plant for renewable fuels and chemicals, near Pune. Shri Gadkari said: “It is heartening to see indigenous innovation emerging from Praj Industries yet again. Today I witnessed India’s first 2nd generation bio-refinery demonstration plant and my belief in India’s capability in technology development as compared to the Western countries, has strengthened manifold. Biofuel is not only cost-effective, but also a pollution-free import substitute of Rs 7 lakh crore. Our Government has initiated dialogues between my ministry, Petroleum Ministry and Renewable Energy ministry to present a comprehensive blueprint and is now with the Prime Minister for consideration. There are multiple benefits that can accrue to the government, farmers, industries and consumers.”  Shri Gadkari further added, “Agricultural diversification is the need of the hour, wherein agri waste will generate additional revenues to the farming community. Waste to wealth is the new mantra that emerges from Praj’s innovative world-class 2nd generation ethanol technology.” Praj’s second generation bio-refinery demonstration plant will produce 1 MLPA ethanol by processing a variety of agri-residue like rice and wheat straw, cotton stalk, bagasse, cane trash, corn cobs & stover, etc with superior product yields. With continual research and development, further pipeline of other renewable fuels and chemicals is underway to be produced from this technology platform. In India, an eco-system for the second generation ethanol is in the making to achieve the aspired 20 per cent blend ratio. As a part of this drive, 10 to 12 Second generation ethanol projects are expected to be finalized, with average capex of around Rs 600 crore each. Each of these plants will have the capacity to produce 100,000 litres of ethanol per day. Praj is at the forefront of this development and has already signed MoUs with IOCL and BPCL as their technology partner for certain project sites. Meanwhile, experts from Oil Marketing Companies (OMCs) and their engineering consultants have already visited demo plant and endorsed the success of Praj’s technology.  Praj is a global process solutions company driven by innovation and integration capabilities, offers solutions to add significant value to Bio-ethanol facilities, Brewery plants, Water & Wastewater treatment systems, Critical Process Equipment & Systems, Hipurity solutions and Bio-products. Over the past three decades, Praj has focused on Environment, Energy and Agri process led applications. Praj has been a trusted partner for process engineering, plant & critical equipment and systems with over 750 references across five continents. Solutions offered by Praj are backed by its state of the art R&D Center called Praj Matrix. Led by an accomplished and caring leadership, Praj is a socially responsible corporate citizen. Praj is listed on the Bombay and National Stock Exchanges of India.

 

If there is a Sun, there is gravity, that keeps the Earth at a safe distance from the Sun, but close enough for the Sun to warm us but not incinerate us. The gravity is in the ‘goldilocks zone’ – neither too far, nor too close. But that’s not enough to survive. There yet are solar storms, waves of solar thermal energy and radiation, strong enough to fry us, that envelop the Earth. But then, again, and thankfully, there is the Earth’s gravitational field – a magnetic invisible envelop that protects the Earth from the solar storms.

There couldn’t have been a better natural metaphor from which to learn. This natural phenomenon itself should be a guiding light for the mitigation of risks and threats at ISA. The design of ISA needs to be robust, modular and flexible enough such that the proclivity of nations to control and dominate, the psychology of civilizational clash is used against itself to mould the entire game such that the outcome is nothing but one that enhances cooperation.

In some ways, the open architecture of the ISA is a cushion against games of conflict. Any competition amongst one another should be welcome so long as it benefits all the world. However, the open architecture won’t be enough. ISA can become irrelevant with the passage of time simply because of technological irrelevance vis a vis other competing technology, such as, say portable nuclear fusion energy or Hydrogen storage.

ISA would need to essentially be at the cutting edge of science itself, specific to the development of solar energy technologies and associated technologies such as smart grids, storage and yet others such as developments in material sciences for development of more efficient PVs. Additionally, when ISA seeks to integrate grids at continental scales via the SuperGrid, virtual grids, automation of information driven processes would become imperative. Consequentially, tradable solar energy markets would have to be developed that would require trust. The impact of digital technologies such as blockchain and artificial intelligence would become inevitable.

As matters stand now, investment in technology would be the best insurance ISA can possibly buy against obsolescence, redundancy and impairment. Relevance of solar technology is by far the biggest assumption in the reason of existence of ISA. The Sun is a given. It is a shining orb of unimaginable energy and shall be there for billions of years to light the darkness that would otherwise swallow us in the wilderness of the infinite cosmos, guide us and inspire civilisations and who knows one day power interstellar and intergalactic spaceships.