Would India usher in the Third Industrial Revolution?

India is a magnificent and beautifully designed country by the creator.  It is not specialized in terms of natural beauty but is blessed with diversity which allows us to find beaches and hills, valley and plains, greenery and sand dunes in the same country if not the same region.  If one does a due-diligence exercise to evaluate the discounted cash flows from utilizations the naturally gifted resources in a sustainable way, one could futuristically look at India as a developed nation with huge cash reserves and zero liquidity problem.

 I personally believe that India has immense potential and should utilize the gifted talent to attain this potential.  This is possible only if the talented Indians exploit the domestic potential for macroeconomic progress, rather than imitating the rest of the world. This belief of mine was re-enforced when I read a recent interview of an American economist, Jeremy Rifkin who believes that India could usher in the ‘Third Industrial Revolution’ by utilizing its renewable natural resources; much like the way the second industrial revolution was spearheaded by internal combustion engines and heavy use of crude oil. He believes India could be the Saudi Arabia of renewable energy, but only if the resources are properly utilized.

Proper utilization of resources would require a number of simultaneous actions, which given the size of our economy is not an easy task. Renewable energy in India has been a persistent topic for almost half a decade now, but India still needs to do a lot more.  In a study conducted in 2011 by The Ecologist[1], India ranks 10^th amongst the G20 economies in terms of its renewable energy investments. Investments in clean energy in 2010 rose by 25 % to $4 billion, primarily targeted towards the wind sector. However, not only are we far from reaching our potentials in solar, wind, geothermal hydro and bio-mass energy, the pace is also rather slow.

This sluggish pace is the first obstacle that is hindering us from achieving our full potential. India needs to be faster and have a wider coverage to be able to herald in the 3^rd Industrial Revolution.  This would require significant amount of infrastructure investment coupled with RnD and wide scale implementation. Simultaneously performing the above three feats is no easy task. The global investment in clean energy 2011 was $ 260 billion of which the Indian market accounted for a mere $ 11 billion.  Renewable energy transformation is happening across the globe and for India to be able to be a leading power in this sphere, it clearly needs rapid progress.

Secondly, to fuel the above mentioned acceleration India requires investment and project implementation by public and private sector. India is ranked as the third best investment destination in the renewable energy sector and India has exploited this to set up a renewable energy installed base of over 22 GW.  Renewable energy minister Dr. Abdullah says that they plan to add a further 30 GW in the next five years. If this target is achieved, it would signal progress in the right direction.  The generation based incentives for wind projects; solar specific renewable purchase obligation and tradable renewable energy certificate are some policies which are being incorporated for enhancing the private sector investments.  Public sector projects are being implemented and some are worthy of appraisal. In particular, the Jawaharlal Nehru National Solar Mission (JNNSM) plans a capacity of 22 GW by 2022 and the National Bio-Energy Mission – aims to draw upon the over 15 GW bio-energy potential in the country.  Private sector giants Tata, Reliance, are investing in various renewable energy projects. Some other big players driving this sector are Suzlon, Adani group while other small players receive assistance from private equity firms and International Finance Corporation (IFC). Indian investments are moving in the right direction. Still we are not even close to the zenith.

The discussions of RnD for technology innovation and cost effective means of renewable energy generation and distribution are very popular and rightly so. In my opinion, what is more important is an appropriate forward- looking vision for this sector. India’s renewable energy vision is very similar to those adopted by most countries across the world.  It needs a more futuristic and innovative vision to bring in a new era, much like the design of engines in the 2^nd industrial revolution era. An interesting visionary recommendation by Jeremy Rifkin is to create infrastructure such that each building and house in villages or cities can generate energy by utilizing solar and wind energy.  He says that this could act as a level-playing field for rural industrialization, whereby households generate solar power and then sell this energy via internet or distribution companies. This is not impossible as our neighbouring country – Bangladesh has over one million off grid rural homes and rural traders which are lighted by solar home systems with rooftop solar panels. This creates employment and an increase in rural income. 

India’s total power generation is 170 GW of which only 11 % currently comes from renewable energy. Growing demand for power is driven by higher growth rates and rural electrification plans. Associated with this are supply constraints resulting from restrictions on non-renewable energy and inflated prices of fuel and coal. Current and anticipated excess demand of power should be met by renewable sources.  India can also contribute to global excess demand for power via its supplies of renewable energy heralding in an era of 3^rd Industrial revolution. This would be solved by simultaneous investment, project implementation and a great vision of a greener and cleaner future.

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[1] http://www.theecologist.org/News/news_analysis/829664/revealed_how_your_country_compares_on_renewable_investment.html