NITI Aayog, here's a challenge for you

The ongoing transition to green energy worldwide poses a significant risk of creating a series of energy price shocks similar to that in the 1970s, said Jayanth Varma, Monetary Policy Committee (MPC) member, who voted to tighten the stance of monetary policy. ‘This means that the upside risks to long-term inflation and to inflation expectations are now more aggravated,’ he said, according to the minutes of the recent MPC meeting. Varma is right to worry about energy price shocks during the low-carbon transition, but wrong to assume that best way to tackle such inflation is to squeeze demand hard. It should be possible to minimise the price shocks arising from undersupply of fossil fuels during the transition. Investment in fossil fuels must see a calibrated rise.

Worldwide, investment in fossil fuels has been scaled back since 2014. While investment in renewables has been on the rise and the share of renewable sources in the total energy mix has surpassed that of gas and is well over a quarter, that is still not large enough to supplant dirtier fuels. So, till renewable energy production is large enough and the means of storing renewable power – through pumped storage, production of green hydrogen, storage batteries or more esoteric means such as heating large chunks of salt that, when gradually dipped into water, release steam in sufficient quantities to rotate a turbine – sufficiently advanced, investment in coal and gas is unavoidable. Technologies to minimise emissions from power plants that burn such fuels are available and must be deployed. Both the tech and the funds needed for this should come, ideally, from the rich nations and their promise of funding the green transition in the global south. But if the rich fail to live up to their promise, a country like India should stump up its own funds to curtail emissions.

The main challenge is to estimate how much to invest in fossil fuels, in relation to the stepped-up investment in renewables and storage. To model different scenarios to figure that out is your job, NITI Aayog.


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