Guest: Abhinav Jindal, Senior Researcher and Energy Economist
Hosts: Shreya Jai and Sandeep Pai
Producer: Tejas Dayananda Sagar
[Podcast intro]
Welcome to Season 3 of The India Energy Hour podcast! The India Energy Hour podcast explores the most pressing hurdles and promising opportunities of India's energy transition through an in-depth discussion on policies, financial markets, social movements and science. The podcast is hosted by energy transition researcher and author Dr. Sandeep Pai and senior energy and climate journalist Shreya Jai. The show is produced by multimedia journalist Tejas Dayananda Sagar and is presented by 101Reporters, a pan-India network of grassroots reporters that produces original stories from Rural India.
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[Guest intro]
In India, the coal based electricity dominates the power sector. But the country has set ambitious renewable power targets. This will bring about many techno-economic and socio-political changes. For example, Indian state owned enterprises in the power sector may have to redefine themselves, and there will be a need for new financial mechanisms and policy design for providing renewable energy a boost.
To understand the state of play in the power sector, we interviewed Abhinav Jindal, senior researcher and energy economist, who has over two decades of experience working in the power sector. Abhinav is one of the most balanced voices on the subject of energy security and electricity transition.
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[Podcast interview]
Sandeep Pai: Abhinav, it's really a pleasure to have you on the podcast. I've been following your work for a bit. You're one of those people who is a practitioner, but also somebody who thinks in a more scientific and academic sense. So really delighted to have you and I hope we can have a wide ranging conversation about power sectors, role of state-owned enterprises, repurposing assets, et cetera. So welcome to the show.
Abhinav Jindal: Thank you, Sandeep.
It's been an honor and it's indeed a very joyful experience interacting with such an elite cohort. So I'm all excited and delighted, looking forward to it.
Sandeep Pai: Okay. So, you know, we have a tradition in this podcast that we start with, you know, we spend about 10 minutes depending on the episode on the guest itself, their journey, like where they were born, what did they study, like what is their story, right? Like, why did they get interested?
Why is Abhinav interested in power sector? You know, he could have been interested in food or, tell us like what's your story, personal and professional?
Abhinav Jindal: So I am essentially an engineer by training. So, and I, my training in engineering focused on steam turbine, gas turbine, power plant engineering, and I was excited about all that engineering stuff right from my college days. And I then got into one of the premier maharatna companies in India, NTPC, and at a very young age and I was fortunate to work at one of their corporate center functions, which is a very regulatory, disciplined kind of a function, commercial, where I got into the nuances of tariff setting and dealing with regulators, state, central, as well as a number of independent private players.
At that time, 2004, when the market was opening up, Electricity Act was passed in 2003, and there was a deluge of private players getting into India. You must have seen how Reliance and Lanco and so many other companies were in fact poaching people from NTPC and it was a time for us to hold on and to improve upon our learning capabilities. Meanwhile, I was kind of upgrading and upskilling myself in a number of other parallel domains.
I also happened to work in a corporate planning function where we are doing policy advocacy directly with the Ministry of Power. So a number of things happening alongside and then meanwhile, I happened to do some master's course in economics, not a regular one, but which gave me a number of intricacies about the economics in general and that for the power sector in particular. And as a result of which I developed a sound grounding in economics related to the financing of the power sector.
Also I was fortunate to learn a Harvard online management mentor program, which was a one year program where I was exposed to a number of management concepts along with economic concepts. And then finally, I also happened to get an opportunity to do a full fledged PhD from one of the premier institutes in India, which is IIM Indore and my supervisor there was somebody who had a mix of energy, environment, finance, operations, research and not economics alone. So I was fortunate to do my dissertation in this domain where I could focus on energy as well as utilize tools in economics to come up with something which is of special interest to the community.
And you will be surprised to know that I was the only PhD student at IIM Indore who could publish an A star paper within his PhD period, which is energy economics. And I was rewarded in the institute specially for that. And the journey has ever since been a roller coaster and I've now had tons of publications.
And as I usually say, it's not the impact factor of a journal that matters, it's the impact of the work that finally matters.
And I'm happy that the work has made some bit of an impact in India and elsewhere.
Shreya Jai: That's a great point that you made. It would be good if you can just tell some of these impacts that your work has had.
Abhinav Jindal: So my training in mechanical engineering and subsequently my detailed learning of a number of economics concepts, some of which while working with the utility and some of which during the course of my PhD work has made me understand how interdisciplinary work has to be carried out with a policy perspective. And interestingly, I started working using quantitative modeling techniques, drawing from operations research, which are very commonly known as data and development analysis, where we try to rank decision making units in many cases, goal plans, hospitals, ports, banks and assess their performance amongst each other.
And very often I found that many of these works have been taken wholeheartedly by the industry, but to make a larger impact and to reach to a wider audience, which may not be researchers alone, I realized probably it is about time to not focus on quantitative work alone, but also to focus on qualitative analysis. And that is when I also got in touch with a number of researchers abroad besides my doctoral dissertation committee. So some of which I think are in the public domain. I work with eminent researchers like Girish. They have done qualitative analysis, policy analysis and gone beyond quantitative stuff.
So we did work on a number of counts. Recently, we've done a work on understanding what should be the policy design for an Atma Nirbhar energy independent Bharat. That paper is the first of its kind, so to say, to analyze what should be the policy design for making India Atma Nirbhar Bharat in green energy technologies. So some of which has been possible because we have now focused on the policy aspects of it.
The other domains we've tried analyzing are the ones which really matter. You've done a paper on understanding what should be the policy design for battery storage in India. We tried understanding their enablers. We then talked about something called mandatory battery standards. And you'll be happy to learn that ever since we talked about mandatory battery standards, the same are now in vogue. The regulator probably took a cue and has now enforced these battery standards across the country.
We've developed a paper on understanding the policy design for green hydrogen. In that paper also, we have talked about mandating green hydrogen standards for industries, the hard-to-abate ones. And we will not be surprised that if these mandates also see the light of the day in the coming future.
So the objective is to take the current technology, go at its frontier, try to understand policies elsewhere, try to draw lessons for India, make a recommendation, being aware of what is happening in the Indian context, and then to create a long lasting impact.
Shreya Jai: And you forgot to mention that you have a presence across the supply chain. Each and every aspect.
Abhinav Jindal: Yes, that's the advantage of working with researchers across continents. And I should have kind of mentioned it. It started with US Stanford, Girish. Ever since he moved to Oxford. So we have a team of researchers we are working with Oxford. And I think Sandeep and others must be aware of.
I just got a call recently from Sugandha Srivastav. She is at Oxford. She's writing a paper for Nature Energy. She wants me to write a case study for India where we want to explore the rigidity of fixed contracts, which lock in a number of investments in Indian context. And I'll be leading that case study from India.
And so it is serendipity so many times, almost with every new author that I've been exposed to. So I would in a nutshell say I've been very lucky.
Sandeep Pai: That's great. And we are lucky to have you so we can pick your brain on the power sector and the state of the power sector.
So why don't we start with the topic with a highly big picture question about, tell us what is the state of the power sector? I mean, we have a lot of international audiences as well who are interested in energy sector but have doesn't know the nuances.
So who runs the power plants in India? Who is financing the power sector?
And what is the status and how does renewables come into the picture in the current state of play?
Abhinav Jindal: So that's a good question. India, I mean, besides being the most populous country in the world and majority termed as the third largest emitter in actual terms, although in per capita terms way behind others. It also has a burgeoning energy demand. And if we want to put it in numbers, as much as roughly 410 gigawatt is the entire kind of installed capacity in India as of now, out of which more than 50% is dependent on coal alone. And that is the general idea, right?
We are trying to maximize the utilization of this fundamental resource, which is coal in terms of utilizing the peak demand. So out of this 210 megawatt, we try to meet the maximum demand from coal. And there are a number of reasons for it. We could delve about it in some more time. But the idea is because coal happens to be the fundamental resource and because it is able to meet the base load as well as the peak load requirements in India, it happens to be the most important resource in meeting the energy demand.
Having said that, India has set a hugely ambitious target going forward in terms of utilization of capacity from renewables. So much so that I think roughly 175 gigawatt of renewable capacity is now from solar, from wind, from hydro and from waste to energy plants. The only drawback is the utilization factor. Unlike coal, the utilization is relatively lesser. Although there are studies which are trying to improve on that also.
Having said that, India is also one of the only countries in the world which is trying to have its own sustainable energy transition. You are aware that after the Ukraine war and the Covid shocks, a number of countries have gone back and revamped coal. But India has stayed afoot in its very clear, identified goal of energy transition amidst all the setbacks elsewhere.
So the idea here is India's energy transition model is sustainable and it is here for the long haul and they want to rope in more and more renewables going forward. At the same time, they want the fundamental demand to be met from coal. So this is the larger perspective of what is happening in Indian context.
However, we also need to understand that whenever we are scaling renewables, renewables alone will not be able to meet the entire power demand because of their intermittency.
We require battery storage. Battery storage again has to be in a number of forms. It could be lithium ion battery, it could be gravity storage, it could be a number of other forms.
India is working on those counts but there are technological and cost limitations. By the time we are able to meet those limitations, we need to be dependent on other sources. And India I am sure is not going to be shy on that count as well.
And lastly and also very importantly, India is looking to decarbonize its industrial economy. It is moving towards green hydrogen and seeing if it is possible to leverage the use of green hydrogen in hard to wait industries such as fertilizer, cement, refineries. And although there are cost considerations, it is still a nascent technology. There are a number of other challenges. But if you see the policy imperative, if you see the urgency, it is very evident that India doesn't want to miss the bus.
Such is the case with electric vehicles also. We have set hugely ambitious targets. 70% commercial vehicles by 2030. I mean 80% two wheelers by 2030, which means like 8 out of 10 vehicles will be electric vehicles when it comes to two wheelers. So these are the kind of targets. And I must assure you that many of these targets are ahead of their schedule in terms of implementation in terms of policy support.
It is such a time that government has not shied away from enforcing any of the subsidy measures. It came up with Fame 1 and now it is being followed up with Fame 2. The manufacturers find it difficult to implement the kind of subsidies that are being doled out. There have been instances where manufacturers are trying to misutilized the subsidies and the government is ready to offer them.
I just wanted to highlight the kind of policy ecosystem which is in place to enable this impending energy transition, which is not something which is going to happen, but it is something which has happened and which is happening as we speak. So this is the entire kind of things how things are poised.
And in fact, we will be happy to know that we started working on a study where we are trying to see if this transition happens in the automobile sector, particularly the EV Then what is its impact on a number of firms which are dependent on coals, for instance, Coal India, NTPC and Indian Railways. And in economics, it's known as second-order impact. We're not talking about the direct impact, which is due to underutilization of coal.
We are talking about the second-order impact in terms of if we have more EVs, then we will be requiring more renewables. That is why. And if we will be requiring more renewables, then it implies that probably the coal dependent companies balance sheet will be under some kind of a shock. So not only they are exposed to the first level impact that is due to utilization of less coal, they are also exposed to the second-order impact due to utilization of renewables, which is required for electric vehicle charging. And we are trying to develop a methodology from the world best practices and see what is the kind of impact.
I just wanted to highlight the entire power system in the Indian context is geared to the challenge. It is up and running and we are looking for a bright, green and sustainable future ahead.
Shreya Jai: Thanks Abhinav.
You gave a good summary of all the targets that this country has. Ambitious, as you said, aggressive is what I will say. The only target right now which is missing from the country is an expiry date to coal, which I agree is something that the global north is pushing us to do.
But if you give an expiry date to coal or you do not, it puts into perspective a lot of these other targets as well. 500 gigawatt renewable by 2030 or, you know, 100 percent electric mobility or 70, 75 percent. This whole ecosystem changes the moment you add or subtract coal into this whole equation.
How would you juxtaposition all these targets that you mentioned, all the green targets with the current reality? And what happens when you take out coal from the equation?
Abhinav Jindal: So I mean, for a country which relies on coal to meet the fundamental needs of its people at large, I don't think it is possible to wish away coal for not just a decade, but a number of decades going forward. So what is possible is definitely number one, more sustainable use of coal.
Number two, to see how we can make the use of coal more friendly, in terms of environment and to gradually allow renewables to take the place of coal in a larger context. And I will put it in perspective with the help of three arguments.
First, the way coal is important for India, gas is important for a number of European and American countries. Have they shied away from the use of gas? No. Can they? Probably not. So India is not an outlier. Definitely not when it comes to its developmental objectives and definitely not when it comes to its growth imperative.
So coal is going to be central to the argument of India's growth story. This is, I think that is something that is something which has to be central to India's energy transition.
Having said that, there is also something very important called the age of coal fleet. If you compare the age of Indian coal fleet vis-a-vis other countries in the West, you will find Indian coal fleet is much, much younger. In fact, the average age of Indian coal fleet is around 12 to 14 years, while the average age of coal fleet in a number of European and Latin American as well as American countries is more than 20 years, which makes them amenable to retirement. And you would understand for a coal plant whose debt has not been paid out, I mean, yet usually you pay out within 15 years. Forget the equity. How are you going to pay out? And that is the number of the problem.
We are not able to garner enough finance to undertake massive retirements. And we are talking about retiring some 210 gigawatt plants. We can't have finance. We can't mobilize finance on that count. We've done a number of studies. You would see a plant, I mean, whom you're trying to retire some 20 years ahead of schedule will require massive financing. It will require huge financing to retire one gigawatt. And we are talking about retirement of 210 plants, 210 gigawatt plants ahead of their economic life. So this will throw the finances in a tizzy, not just of a country like India, but I would say any developmental institution, either it is the World Bank or IMF or even any group of institutions. We have seen how JetP has been kind of trying to undertake transition in countries like South Africa, Indonesia, Vietnam, Mexico, Philippines. But you see, these are relatively smaller countries.
They have much, much smaller coal fleet. They have coal fleet and also the population load is relatively lesser. And do you think that we will be able to accumulate finances of the magnitude that is required for India? Probably not.
So what is required is for a fleet which has gone past its age, which is turned unremunerative, which is environmentally disastrous. Probably we could find ways and means to see if it can be resurrected. Otherwise, we will see how it can be retired, but retired in a fashion that it becomes just to the entire community, which is dependent on it. Not just the utility, but all key stakeholders.
So on that count, I would say and add the analogy I usually give while explaining this is that of an electric vehicle, which is quite straightforward to understand.
If India is talking about a net zero for 2050, I know it is 2070, but imagine if it is 2050. And if we imagine the life of any vehicle to be 15 years, it implies that after 2035, India cannot have an internal combustion driven vehicle. So the last internal combustion engine driven vehicle has to be 2035. If India talks about energy net zero by 2050.
However, India talks about net zero by 2070, which means India can still manage to utilize internal combustion engines till 2050 or 2055.
On the same count, if India is talking about net zero by 2070, India can still manage to work on coal plants, if not more, but at least by 2050, which is good to two and a half decades ahead.
So in that context, talking about coal plant retirement will be a bit premature. Although we can talk about improving efficiency, we can talk about more sustainable use of coal. While working on these coal plants, but to talk about retirement of coal plants en masse will throw the entire power system into a tizzy.
And then I don't think we have the kind of renewables that are required to balance this burgeoning requirements, so to say. And we need to have financial mechanisms to gradually retire the unremunerative plants.
Shreya Jai: I'm just curious, should it be imperative on us to shut down coal? Is it not possible to, you know, given our net zero target year is 2070, it is highly possible plan to run coal and also, you know, have mitigation plans alongside.
We had former Secretary Anil Jain as our guest in one of the episodes. And, and he said something very amusing is that 2070 is our target. So I can shut all my coal power plants tomorrow or in 2069 and still achieve my net zero target.
Also, I can keep running my coal power plants and side by side, I mitigate it. So overall, the carbon emissions are at a level that we have targeted it to be. This is something that the Coal India highlighted in an interview today. What are your thoughts on this? I want to understand.
And also this whole repurposing of coal and, you know, shutting down environmentally costly plants and keep running the better efficient ones. Who is going to give money to these coal plants that we have?
Abhinav Jindal: I don't quite buy the argument that a coal plant turning unremunerative has to be shut down just because of environmental constraints. I believe that the fundamental attribute of a coal plant is to generate power. We have market mechanisms in place where a plant which is economically unviable does not get the schedule and is not allowed to generate. That is something called merit order in terms of getting the capacity allocated from a coal plant. So if it is unremunerative, it will not get the allocated capacity and it will be shut down in any case. So that is happening to some of the coal plants already in Indian context and we call it stranded assets. So utilizing stranded assets is another issue altogether. Some of the considerations are already in place to see how these stranded assets are put to good use.
Now coming back to this question of repurposing. Repurposing is a concept that is prevalent in a number of countries and that has yielded dividends when utilized according to the underlying asset. For instance, if the underlying asset has a good insulation potential, we could repurpose it for solar PV. If the underlying asset has a good wind potential, we could repurpose it for wind turbines. If the underlying asset has an urban location, we could develop data centers around it. If the underlying asset has good agriculture potential, then we could see if some of that can be utilized.
But it requires an extensive analysis of what the final objective is. Repurposing plants ahead of schedule is akin to kind of closing these plants ahead of schedule. And for a country which has huge power demand, we probably need to have a rethink as to repurposing being the only solution in that case.
So although I have worked on repurposing, I have suggested a methodological framework of repurposing. The idea is application of repurposing has to be done on a case to case basis where the benefits far outweigh the costs that are involved in repurposing. And that is what we highlight in our paper called cost benefit analysis.
The idea is we need to undertake a detailed analysis of the underlying costs, the benefits that are accrued, and only in the cases where benefits far, far outweigh the costs, we need to kind of go ahead with repurposing. And as you would know now, with just transition happening in a number of countries, the costs of repurposing have to also include the costs of communities which are dependent on those plans and not to the utility alone.
That is where I would say that although I didn't get time to it, but probably it is also required that we need to upgrade and redevelop the entire cost benefit analysis framework for repurposing to involve the overarching concept of just transition and repurposing also. So we need to see whether the benefits are accruing to utility alone or they are accruing to the system alone. I'm talking about the power system, or we are also considering the communities and the livelihood of dependent communities on those plans.
Once we figure out, yes, the benefits are there and they are greater than the cost, then probably repurposing can be the way forward. But I don't see any study doing that in the Indian context. We don't have any results doing that in the Indian context. So probably I think it is about time that some such studies can be undertaken which talks about repurposing the framework from a just transition perspective also.
So my previous work talked about repurposing framework from an engineering standpoint. We talked about the cost, direct indirect cost, direct to the utility, indirect to the system. We also talked about some of the societal costs, but then there were the environmental costs.
We never talked about the costs that are accrued because of displacement of people. Probably we need to worry about that also.
So I just wanted to make this point that probably we would need a few more studies to talk about repurposing from not just the utility standpoint, but from the entire community standpoint so that we are able to bring home the concept of just transition along with repurposing going forward.
Sandeep Pai: Yeah, and we should collaborate on that. So that's something I'm actively working on.
But I want to take a few steps back before we really dive into repurposing. I'm very interested in understanding and you mentioned a little bit of this in terms of the power plant age, average age is 12, 14 years and they haven't even paid it yet.
But who is funding these power plants? Who funds NTPC's power plants? Is it Indian banks or some other investors? And if they, in a hypothetical case, we have to shut down and somebody says, shut it down, then is it the banks who in the Indian system will be impacted majorly?
And what would be the first order and the second order of impacts to that?
So first, who funds it? And second, like if hypothetically one has to shut down because it's easy to say shut down, but if there are huge impacts, even just from a financial point of view, like you can't do it. Right. So.
Abhinav Jindal: So, I mean, all our sector assets, they come under the umbrella of roping in equity, which is anywhere between 30% 20% and getting the rest tied up through debt, which is somewhere between 70 to 80%. So most of the equity is through the independent company. Right. And most of the debt is through a number of banks and a number of non-banking financial companies, which are PFC and REC in this case.
So the idea is the tie up of debt, not just for plants, which are centrally owned in this case, NTPC, but even for players, which are there in the private sector, as well as the state sector for them to get debt at a relatively advantageous rate. The tie up is through banks, which are able to kind of write an undertaking also. Right. So it's like a sovereign guarantee in that sense.
So, I mean, I have never talked about closure of a plant in case of a hypothetical closure, as I mentioned, even the debt has not been paid off. So when we say that the debt has not been paid off, which means that it is directly impacting the financial investors, which is our state-owned banks, which is impacting our general people. You see, because people's deposits are in those banks. It's on the basis of those deposits these banks are able to lend. So can we talk about harming the deposits of general people by shutting a plant? Probably not. Right.
That is one of the reasons it becomes very difficult for a Western audience to understand the issues that are involved in closure of a plant ahead of its debt repayment also.
Now, coming to the repayment of equity, we also need to understand that although there are some financial mechanisms in place, which talk about prepaying equity by retiring a plant ahead of its schedule, there is always an underlying opportunity cost when any investment is made. And that opportunity cost is borne by the equity investor when they fund a coal plant in place of funding any other asset. Although you are somehow paying back in the equity, whatever rate, concessional, whatever, but you are not able to pay back the kind of opportunity he had in terms of getting returns from other assets. And this is going to jeopardize a lot of investor sentiment in India.
In the Indian context, most of the private power plants have been funded by investors in the country. In fact, all of them. So do you want to happen their animal spirits by kind of closing down plants and impacting the entire infrastructure segment when the economy is somehow trying to limp up and come out of that COVID limbo? Probably not.
And this is very well understood by our policymakers. They understand the criticality. I mean, I don't call it a coal asset in retiring any infrastructure asset without serving its economic life. You see, I mean, the kind of impact any infrastructure project has when it gets, when it collapses ahead of schedule, any bridge, any road which is not able to service instead, it becomes a non-performing asset.
So probably if you don't have substantive financial mechanisms to undertake such kind of exercises, it's probably not the right time to even think about it, talk about it.
Sandeep Pai: So both from an energy security, but also from finance. I mean, obviously, this is something many experts in India know, but I was pushing you so that you can explain what the implications to even common people, forget like banks and assets like could have on that.
So, you know, what is the journey that India should undertake from here in terms of even thinking about or creating frameworks? I mean, I know you have done a lot of work, but you have written quite a bit, created frameworks about repurposing. I mean, which plants should we think about repurposing? And obviously, it's on a case to case basis.
What are some factors that can help you identify? Okay, this is a plant where we can sort of explore whether repurposing is an option as well. But before you answer this question, I think just for the benefit of the audience, maybe you could explain what is repurposing? What does it mean? Into what? And is it only repurposing to clean energy or is it repurposing to like a completely new sector? It's just using the existing assets.
So, you know, SQAM had this, you know, South African utility, SQAM had this repurposing and repowering. So, yeah, I wonder if first you can explain that and then subsequently explain how to choose power plants. Which one in the Indian context?
Abhinav Jindal: So, I mean, repurposing is utilizing an underlying asset for another productive purpose. But when we say that we are going to utilize for another productive purpose, we need to establish the productivity of that asset at the first place. Number one.
Number two, we need to see what is the opportunity cost of utilizing that asset for a fundamental purpose. For instance, I saw that in the US, a number of assets, coal assets were repurposed to gas assets. I mean, I hope you know that, right? In Europe also the same happened, right? So, what happens is then you are kind of utilizing an underlying asset without doing much change to its form or figures to make it productive for another fuel altogether.
So, although it reduces your emissions to a large extent, it improves the productivity in terms of reducing emissions. So, the US found a very innovative way of reducing emissions by moving away from coal to gas. India, we've done a paper, we've tried to figure out, is trying to find one such mechanism where some of its coal assets can find a way towards more sustainable use.
I think you are aware of the fact that India has repurposed its Badarpur coal plant to an ecological park, right? So, and that ecological park is going to give a huge health benefit, which although has not been monetized, but because it serves as the lungs for Delhi, if you start monetizing that benefit, the benefits will far outweigh the costs that were happening or that happened for repurposing that asset.
So, in Indian context, I would say or in generalized repurposing concept, repurposing requires an analysis not only from an economic or financial appraisal standpoint, it also requires an analysis from an engineering standpoint, where we need to undertake some kind of a feasibility report assessment, which is also like an environmental assessment of the futuristic technology, right? And then see whether the benefits of that technology are applicable to the original site or not.
For instance, if you're trying to repurpose a coal plant in Delhi, do we have enough insulation happening in that Delhi? We could do that on paper saying that this much land could be used for solar, but it may not have the solar potential, it will have the kind of cloud cover. So, we need to worry about the altitude, we need to worry about the latitude, longitude, insulation potential. So, in other words, we need to go deep into the engineering aspects also, while working out as to what is the preferable repurposing option.
Sandeep Pai: Great. Thank you for explaining that. Let's move on to another interesting topic, which is state-owned enterprises, something I'm also very interested in.
What do you think would be the future of state-owned enterprises? How can they diversify over time? I mean, it's not like this decade.
Especially Coal India, NTPCs, that category of central PSUs, how can they diversify their businesses? What are the new businesses that they can get into, if you have any thoughts on that?
Abhinav Jindal: So, and in fact, this is also the sum and substance of my futuristic work. Very often we talk about climate related financial risks, right? And then we talk about how firms, particularly state-owned enterprises, and a number of financial institutions, when we say financial institutions, we use them replaceable by the word banks, are kind of exposed to this kind of risks, right?
But I mean, the future stride of my work is not focusing on risks alone. I find that research a bit regressive. I want to focus on the opportunities. And I say this climate-related financial opportunities. And this is going to be the kind of topic of research that I'm trying to see can happen with Imperial College and Oxford. And then we are trying to see if we can work that around. I mean, we are talking about a more substantive and positive research. And also the impact going forward. So we are talking about focusing on climate related financial opportunities.
So we talk about diversification plans. When we talk about diversification plans, we at times use the word mitigation plans in the same place. Is it really mitigation? Are organizations, particularly state-owned enterprises, therefore mitigation alone, are they not in a place where they can make enough money out of the clean technologies? Probably the way forward is not a mitigation plan, but diversification opportunities. And we need to develop production pathways where we work significantly on such diversification opportunities.
And probably you've touched upon a new strand of research we are trying to develop where we're trying to work on the climate scenarios on the one hand, business as usual, and then the net zero scenario and see what opportunities both the scenarios offer. And to find out what extra opportunities the net zero scenarios will offer to what state enterprises and then what are the capacities and capabilities these state-owned enterprises would develop or need to develop to leverage some of these opportunities going forward.
So I can't reveal all the kind of things that are happening in this domain, but this is the research agenda for the next one year I'm going forward. Although we are still looking for agencies to help us to go ahead, but this is the larger objective going forward.
Shreya Jai: On this note, I just wanted to get your view on this. Would state-owned enterprises be receptive to this kind of paradigm shift? Why I ask is because in the last decade or so when India has taken the first step to energy transition, a lot of state-owned enterprises have missed the bus. Bail being the prime example, which could have been the manufacturing backbone of the India's green energy sector is nowhere to be seen.
There are only a handful of public sector companies which are planning a green energy future. There's NTPC which has some sort of plan. Coal India is thinking of, but we have not seen any concrete plans. Not to take any specific,... if you don't want to take any specific names, but how prepared would central government enterprises be?
And I like to think that the problem worsens when we go towards state-level public sector enterprises, which are still a little back in time when it comes to technological advancements and future planning with regards to energy transition. Would like to know your thoughts.
Abhinav Jindal: When I'm confronted by this question, and trust me, I'm confronted a lot, right? So I have my answer ready on a plate. So I think you're aware of the fact that Punjab National Bank predates Indian independence. So it was before our country was even independent. Britishers came and left, but it is like in place. Such are its systems. If they say no to a project, they really say no to it.
No power in the world can make that financially feasible. Such are its systems. Although at times we may not agree to it due to a number of pressures, internal and external, but still the due diligence mechanisms of Indian banks, financial institutions is very, very robust, both in letter and spirit. I just wanted to point out one segment of our state-owned enterprises, right?
Now moving on to the technological enterprises, many of them are more than 50 years old. They have stood the test of time. We're talking about energy transition. They have undertaken a technological transition. They have seen that. They have also undertaken an information technology transition. And I'm sure that they will be able to undertake this energy transition also.
There have been some hiccups. You've talked about one such state-owned enterprise. The idea is, if you talk about the overall objectives of any state-owned enterprise, besides being commercial, it's also to kind of help other sectors of the economy grow in the long run. BHEL in that sense is trying to help a number of other power sector organizations come up right to the level it is.
For instance, it is the backbone of NTPC in developing coal plants for it. It is now also, I don't think, I mean, if you're aware of it is developing Vande Bharat trains for the entire Indian railways on a huge scale. They have earmarked a huge capacity for development of one. Probably they have metamorphosed from largely a commercial entity to an entity which is driving the development agenda for now. But probably it is the need of our.
I think probably we need to draw a distinction from a distinction with respect to a highly capitalist orientation where we see a very minimalistic role of state-owned enterprise to a more developmental orientation where we see state-owned enterprises evolving, metamorphosing and giving the state an opportunity to grow.
And if you take a look at the largest market capitalization of Indian companies, you will find at least three, four state-owned enterprises in that cohort till even today. And if you see the growth of Maharatnas in India, they started with three. Now there are roughly seven to eight Maharatnas in India. And the number only increases, which is a testimony to the fact how they have grown, obviously with state support, but definitely with a commercial objective.
And I'm very, very bullish on their growth going forward, not just NTPC, but a number of state-owned enterprises. And the way forward is not good riddance, but to kind of helping them grow ahead by the state support, by the kind of hand holding that is required for them to come up to terms. With the challenges that are faced from energy transition going forward.
Shreya Jai: Compared to the two dozen Maharatnas that are there in the country, there are more than 50 CPSUs which have perished in these many years since independence. I want to ask is that, you know, I'm sure as you said that these PSCs have stood the test of time and some of them would be leading us into the future.
Who or what agency do you think is right now fit enough to lead the energy transition of this country? Because I'm sure even if there is a buzzing market of energy transition, there are several players, private, public.
Given the nature of market regulations in the country, it is usually obviously a public sector enterprise which leads a major goal like this.
So in terms of energy transition, what do you think? Which one would you recommend? Which or which all PSCs would it be?
Abhinav Jindal: That's a very good question. In fact, a very insightful question and we've tried answering this question in one of our papers on JetP. I mean, although we couldn't express it in that paper because of space constraint, but in the underlying argument somewhere in the annexures, we made this point that the Indian transition journey is going to be mammoth in terms of the scale and the speed. And it may not be one state actor alone which could spearhead this transition going forward. It's a complex, arduous task which requires a number of stakeholders and it requires not only the state-owned enterprises, it also requires a number of private players to come to terms with what is happening around. And precisely this is what is happening in Indian context.
If you recall, when the green hydrogen mission was announced, a number of state-owned enterprises came forward and developed pilot projects in the Nook and corner of the country. On the one hand, on the other hand, you saw companies like Reliance and Adani which have announced that by 2027, they will try to bring down the cost of green hydrogen to $1 per kilogram.
So, I mean, it's like a mixed bag. We have private players starting from Reliance and Adani. We have state-owned enterprises. We have IOCL, HPCL, NTPC. They've all set up pilots.
We have this EV happening where NITI Aayog is championing that. We have double ESL which is roping in a number of EVs. So probably, and I'm not dismissive of the question, but I think probably a simplistic agency, state-owned enterprises for such complex, arduous task is something which has to be acknowledged. I mean, and probably we require a number of factors. We've talked about why SECI alone cannot drive renewable energy. Probably, I keep writing to a large extent that the burden of renewable energy procurement when it was solar and wind alone was on SECI's shoulders. Probably, we require a number of agencies like SECI, a number of MNREs to shoulder this and develop it manifold.
So, and probably, I think going forward, we will be getting a new agency for renewable, for green hydrogen also. That has been one of our recommendations in our paper. We require an agency which can collate and collect the demand requirement of green hydrogen from a number of agencies. And then it could kind of come up and start auctioning projects for green hydrogen. And so that we are able to decarbonize those sectors which we have not been able to touch through renewables, battery storage, and through other mechanisms.
So probably, we'll require another SECI or half a dozen SECI to take this transition because NTPC has the DNA school. It's moving to renewables at full scale, but then it can't do green hydrogen alone. We will need a number of other actors to complement NTPC in its journey of energy transition going forward.
Sandeep Pai: Abhinav, this has been a really wide-ranging conversation.
Before we kind of get into the end of this, I want to ask what is Abhinav's agenda for the next three, four years? You mentioned some, you know, you'll be working on the state-owned enterprise piece, but is there any other piece of research or new methodology that you're developing or even framework? So I'm curious about your research agenda for the next few years.
Abhinav Jindal: So obviously, we are trying to see how we are able to impact policy in India and how we are able to draw on the best practices from other jurisdictions, the US, UK, Europe, into India again. So the objective is to see how we enable this transition going forward through our research.
Obviously, it is very easy to get critical, and at times we do get critical, but the larger objective is to see that we are contributing to this transition in a meaningful way. And obviously, I mean, we're trying to see which cutting-edge technology is probably fits into the overall scheme of things when it is India's energy transition.
We've tried working with battery storage. We've figured out what are the policy enablers. Then we did the same for green hydrogen. If required, we'll do the same for a number of green chemicals, green methanol, green ammonia and all. See how India can do well in terms of being an export hub for these green chemicals, if how India can garner revenue out of it.
We are also trying to see if we are able to develop some innovative financial mechanisms to make India more future-ready if and when India decides to retire coal.
We are also trying to see how India can develop a holistic model of energy transition, India being a union of so many states, how the aspirations of each of the states has to be taken into account when any such financial mechanism or a financial ecosystem is designed. How do we kind of see a state which is already ahead and a state which is far behind? Both the states are kind of brought along when we have such models ready.
So a lot of things on the table, a lot of policy actions that have to be met and we are working wholeheartedly, relentlessly to see some of that fructify. We will need the support of all state and non-state actors, all friends, colleagues and mentors, many learned people like you and your team to help us spearhead India in our journey of energy transition going forward.
Sandeep Pai: Wonderful. Thank you so much for your time.
This is really great. I learned a lot of different things.
Shreya Jai: Thank you Abhinav. It was a very wide-ranging conversation. Thanks to you, we dwelled into a lot of topics and as I said earlier, the whole supply is something that you already are presenting.
Abhinav Jindal: Thank you Sandeep, Shreya and your team.
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