India’s chief economic advisor is clueless about energy. And that’s worrying.

A recent lecture by Dr. Arvind Subramanian, the Indian government’s chief economic advisor, offers clues on its thinking on coal vis-a-vis renewable energy, crucial for meeting its stated climate goals. In this stinging rejoinder to the lecture, energy expert Prof. Mahesh Bhave shows conclusively why mainstream economists like Dr. Subramnian simply do not ‘get’ energy.

Mahesh Bhave, Renewable Energy World 

Dr. Arvind Subramanian, chief economic advisor to the Government of India, delivered the Sixteenth Darbari Seth Memorial Lecture on August 17, 2017 (watch video above). In his lecture titled, “Renewables may be the Future but are they the Present? Coal, Energy, and Development in India,”  Subramanian “examined the social costs of thermal and renewable sources of energy and evaluated that India needs coal in the short-medium term,” according to one report, which quotes him as saying, “Renewables are part of the energy answer but they also come with hidden costs which must not be overlooked in the “headlong embrace of renewables”.

The report further states:

Furthermore, [Subramanian] emphasised that discussions around renewables and coal must take account of India’s regional, development realities. “Coal is located predominantly in the poor, eastern hinterland of India, while the potential of renewables is, with the exception of Rajasthan, in the richer, peninsular parts of India. Coal is both the source of livelihoods for millions and the locus of many communities as well as an important source of fiscal revenues for many states. The rise of renewables poses both a threat to those livelihoods and communities but it may also afford an opportunity to escape from the attendant pathologies,” he said.

Cautioning against the “carbon imperialism” of advanced countries which risks biasing India’s judgments about energy, he enunciated that India should not allow this narrative to come in the way of rational, realistic planning for the future.

Two weeks after the lecture, noted energy expert Prof. Mahesh P. Bhave published a stinging critique of the lecture, illustrating how it reveals “the limits of classic, zero-sum, conventional, neoclassical economic thinking”. “In [Subramanian’s] analyses, what is notable are not the variables considered but those omitted, not necessarily intentionally, but because he is unaware of them. The lecture is full of “unknown unknowns” to him,” wrote Prof. Bhave, adding that “When there are real-world consequences of amateur thinking, especially when delivered from the pulpit of the 16th Darbari Seth Memorial lecture at TERI from New Delhi, it is difficult to forgive the resulting irresponsibility.”

Bhave quotes from the lecture:

[Subramanian] proposes a global organization for cleaning coal, “to clean and green coal —the world collectively needs to embark on a program akin to the Manhattan project that produced the first nuclear bomb. This would require investment from both public and private sectors, in advanced and developing nations, as well as a range of policy instruments.” 

… and proceeds to explain why mainstream economists like Dr. Subramanian just do not “get it” when it comes to energy:

Cleaning coal might have been a good idea decades ago, but not in the age of renewables. Equally implausible is post burning carbon sequestration and storage. Vaclav Smil said, and I paraphrase: If you believe in carbon sequestration and storage, you may as well believe in immaculate conception!

He then takes Subramanian to task for claiming that “India cannot allow the narrative of “carbon imperialism” to come in the way of rational, realistic planning for the future.”:

Carbon imperialism?! The world has the opportunity to be rid of smoke, soot, smog, pollution, and pre-mature death of especially women and children, through getting rid of fire-based coal electricity and wood, kerosene, and coal burning based cooking. Coal-burning power plants account for ~40 percent of all warming emissions and fuel burning transport accounts for another ~40 percent. When faced with existential threats to livelihoods on the planet through a Hot War of us vs. us, who thinks “imperialism?” I would rather Dr. Subramanian advocate “solar imperialism” for India rather than fight phantoms.

Bhave shows how Dr. Subramanian’s narrative shows zero awareness of new phenomena like distributed generation, or “the several colliding industries that constitute the emerging complex new industry — we don’t even know what to call it — incorporating Electricity, Transport and ICT, information and communications technologies.”

He goes on to make a comprehensive list of things the lecture does not contain, which is he says is highly revealing:

• There is no talk of industry fracturing and splintering because economies of scale do not matter.
• There is no talk that barriers to entry in the new electricity business have disappeared; we are all in the electricity business.
• There is no talk of “application” being more important than “kWh” or traditional measures of consumption or generation.
• There is no mention of microgrids and their role in the infrastructure of the future.
• There is no discussion of the strategic implications of storage, for electricity, transport, and new applications, such as cooking, or for diesel substitution, for instance.
• There is no discussion of the implications of the change in grid topology — from hierarchical to a federation of smaller grids and microgrids.
• There is no discussion of the vulnerabilities of the traditional grid — security breaches and blackouts from hacking, for instance.

Bhave concludes his rejoinder thus:

“Traditional economists likely do not have the frameworks and tools necessary for creative analyses, synthesis, and policy recommendations in the complex emerging energy industry. That makes economists with the pretense of knowledge a dangerous breed, the more so for being affable and well-intentioned.”

Mahesh P. Bhave, formerly visiting professor, strategy, IIM Kozhikode, India, and the founder of Bhave Power Systems, a company working on alternatives to diesel and LPG. He is an engineer from IIT Delhi with a Ph.D. from Syracuse University’s Maxwell School. He may be reached at mahesh@iimk.ac.in. He is author of The Microgrid Revolution: Business Strategies for Next Generation Electricity, 2016, Praeger. 

READ: Full text of Mahesh Bhave’s article: The Perils of Being an Economist in the Energy Industry

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