Lights On briefing: Licence to pollute, power struggles and more
What you need to know to start the week
Happy Monday and welcome to Lights On, a newsletter that brings you the key stories on energy and climate change in South Asia.
Here’s a selection of news to watch this week, plus a pinch of my confidential intel to help you anticipate what may come next. In case you missed it, here’s last week’s story on urban mining and why it matters to India.
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A tea stall in Delhi - Image credit: Adam Cohn/Flickr
Licence to pollute
More than 300 power plants with a total capacity of 100GW could be allowed to defer anti-pollution improvements for another two years, if India’s environment ministry accepts the power ministry’s proposal. A total of 448 power plants were slated to be retrofitted with flue-gas desulfurization (FGD) systems, which remove toxic sulfur dioxide (SO2) from exhaust gases. The environment ministry will have the last word on a potential two-year extension of the 2022 deadline for 322 units.
The problem has been long in the making. Last year, a Reuters investigation revealed that the Association of Power Producers (AAP) had warned the government that banks were withholding funding for the installation of the new technology due to lack of confidence in the power sector. A 2019 Greenpeace study found that India is the world largest emitter of SO2, with 15 percent of the global count.
Solar industries in Andhra Pradesh have escalated the ongoing dispute with the state government that in July 2019 tried to retroactively demand a discount on energy tariffs. The administration decided singlehandedly to renegotiate the cost of wind and solar energy, saying it would not honour the deals signed by the previous government. The state of Punjab attempted a similar move earlier this year, and the outcome of the Andhra Pradesh case could set a precedent that may encourage or discourage other states to do the same.
Easing the crisis
The government approved a relaxation for the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) tasked with managing the financial crisis of the country’s power distribution. The two government owned institutions have been instructed to extend the loans keeping distribution companies afloat, removing a cap of 25 percent of the companies’ working capital from the previous year’s revenues. The working capital is calculated by a company’s assets, such as cash reserves, minus its liabilities, such as payments due.
Power generation and transmission companies were also asked to cap the late payment fees for distribution companies to a maximum of 12 percent.
Earlier this year the finance minister had promised $12 billion (900 billion rupees) to India’s distribution companies struggling after lockdown. But experts say that cash injections cannot save the sector plagued by chronic inefficiencies.
Green contracts at stake
Despite all the emergency measures, a new quandary involving India’s distribution companies could throw both the country’s green economy and investors’ confidence in disarray. According to a Mint exclusive, the companies are reluctant to sign contracts for 16.8GW of solar and wind capacity that had been previously awarded through reverse auction, for a value of $8 billion (600 billion rupees).
Intermediaries such as the Solar Energy Corporation of India run the auctions, finalise deals with solar developers and then approach the distribution companies to sell the new projects. The companies can decide whether to take part and purchase energy depending on the tariffs offered. But because tariffs have recently reached new lows, distribution companies are now hesitant to accept prices that are above the expected 2.4 to 2.6 rupees per kWh.
The Prime Minister’s special adviser on climate change admitted to the Islamabad High Court that development projects in Pakistan often ignore environmental impacts. Responding to a local petition, Adviser Malik Amin Aslam conceded that “environment impact assessment (EIA) report is supposed to be prepared before commencing of project [sic] but it is sought after completion [...].” The judge used this small case as an example of all that’s wrong with the government’s environmental record, and recommended that the climate change ministry “make Pak-EPA [Pakistan’s environmental protection agency] independent and empowered to take action against influential people without any discrimination.” He added that due to this negligence Pakistan’s protected ecosystems have already deteriorated.
Myanmar will boost its power capacity by a fifth thanks to an agreement with three Japanese trading companies, which will build a 1250MW liquefied natural gas power plant. The plant will be worth $2 billion, according to Nikkei. The next steps include designing the plant and negotiating on power pricing with a local utility and are expected to take 18 months to two years. The construction itself would take another two and a half years, so the plant would be up and running in 2025.
A project to improve climate resilience of people and ecosystems in the Gandaki River Basin in Nepal will receive $27.4 million from the UN climate finance institution, the Green Climate Fund (GCF). The 26th board meeting of the South Korea based body awarded $878.8 million after a competitive evaluation process. The 15 successful projects include rural electrification in Afghanistan, forest protection in Indonesia, and $38 million for ecosystem-based adaptation in the Indian Ocean.
The capital Dhaka, which generates some 6,000 tons of garbage every day, rests its hopes on the country’s first waste to energy power plant. According to the minister for Local Government, Rural Development (LGRD) and Cooperatives Tazul Islam, the proposed plant will churn 3000 tons of waste every day. “If a power plant collects so much garbage, there’ll be no more waste everywhere in the city,” he said.
Although the project’s timeline is still unclear, the minister said that a deal with a foreign company will be signed very soon, and the plant should be up and running in 18 months after that - though the firm may seek some more time.
It remains to be seen whether the technology employed in Bangladesh will address the environmental concerns that waste to energy continues to face in India.
Research and other readings
- New ultra-mega projects, old problems - A detailed read from IndiaSpend casts a critical eye on the benefits of mega solar parks, which receive a range of incentives from the government but are often built at the expense of local environment and communities.
- The reality of reforestation - A new study in Nature Climate Change offers a reality check for all the ambitious tree-planting climate plans we hear so much about. The researchers looked at 121 million hectares of degraded land in Southeast Asia to assess their mitigation potential through reforestation. However, after taking into account a series of land use, financial and operational constraints, they found that only a fraction of that mitigation potential is achievable in real life. Food for thought.
- A wetter India - After a mild July, the monsoon rains gained pace in northwest and central India earlier this month, making up for the rain deficit accumulated so far. Two reports, from Carbon Copy and Scroll India, dig deeper into what more erratic weather driven by climate change means for people and the economy in major Indian cities and in the desert state of Rajasthan respectively.
That’s all for today! If you are a subscriber, watch out for the story of the week on Thursday. If not, you can sign up below. As usual, you can get in touch with comments and confidential tips by replying to this email.