Learning from telecom
Rural India has witnessed tremendous growth in the use of mobile phones in the last five years. Expanding connectivity and dropping handset prices apart, a key reason for this has been the presence of local supply chains. A prepaid coupon or handset is available in nearby shops. This is not a uniquely Indian story. Countries like Papua New Guinea, Rwanda, and Timor-Leste (earlier East Timor) have seen more than a ten-fold increase in teledensity since 2006.
According to International Finance Corporation, the private sector lending arm of the World Bank, the number of African mobile users was expected to overtake the number of households connected to the electrical grid in 2011. Back in India, you can also easily locate a shop selling irrigation pump-sets and its accessories in rural India but not solar panels and its components. The message is clear, local needs and accessibility are crucial for driving the demand.
Despite impressive cost reductions in the average cost of solar power due to advancements in technology and market-building policies, the current cost of solar power is prohibitive to many. It calls for further technology innovations and faster deployment. The bulk of research & development (R&D) work in India is taking place only in public sector organisations. Even there, the budget for R&D is low.
R&D spending as a percentage of the GDP in all sectors collectively in India is only 0.8% compared to China's 1.23%. Developed countries have R&D expenditures of up to 3% of their GDP. It is, therefore, important to encourage public-private partnerships for mobilising larger funds for R&D.
Catalysing finance and technology innovation is crucial for harnessing renewable energy. Assessment of policies and incentives in tune with industry concerns is also crucial. However, without creating demand and setting up a supply chain, these may not deliver the desired results. India is proudly at the fifth place in terms of renewable energy capacity (17 GW) and tenth in investment ($2.3 billion), but the absence of coordinated efforts in creating demand and supporting service delivery model could see that rankings slip downwards.
Externalities in terms of health and environmental hazards associated with extraction, transportation, processing and combustion of coal are huge, and costs billions (or trillions) of dollars annually to the public across the world. However, this is not counted while selecting energy options. If externalities are accounted for, renewable energy is a clear winner, even after excluding incentives given to make them competitive or at parity with other conventional resources. If a portion of the cost of externalities is invested in developing new and more efficient technologies, it could change the landscape for renewable energy in times to come.