Wasted Cash & Sunken Belongings: Subsidies and Financing for Fossil Fuels – CleanTechnica – TechnoNews

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Below the auspices of the India Sensible Grid Discussion board, the assume tank based as an umbrella group over India’s 28 state utilities to supply thought management, share main practices, and produce worldwide insights to India, I’m delivering bi-weekly webinars framed by the Brief Record of Local weather Actions That Will Work. With the glories of on-line recordings and AI transcription instruments, it’s comparatively simple to share each the transcript and the slides that I used, so I’m making a behavior of it.

Reji Pillai (RP): Good morning, good afternoon, good night to all individuals welcoming you all for this eighth version of our webinar sequence. Immediately Michael might be speaking in regards to the futility of losing billions of {dollars} in subsidies for fossil fuels. On one facet we’re all speaking about internet zero, limiting local weather change to 1.5 diploma by by finish of this decade, and on the opposite facet, persevering with to subsidize and finance fossil fuels and tens of millions of tons being nonetheless excavated and burned. So how will we sort out this? There are very fascinating numbers which Michael might be presenting right now. So over to you, Michael. I gained’t take any extra time within the introduction, so over to you and let individuals ask their questions. We’ll come to the specifics later. Thanks.

Michael Barnard (MB): Thanks, Reji, and thanks as at all times to the ISGF for giving me the chance to supply what insights I can to help an ideal nation of India, to string the difficult needle between local weather motion and bringing the rest of your inhabitants out of poverty. It’s a troublesome act and India is working arduous on it. I hope to have the ability to present some helpful insights to allow it to do barely higher. So, sure, regardless of figuring out because the 1850s that CO2 is a greenhouse gasoline and that fossil fuels have important issues for well being. There’s at all times been an ethical argument, up until not too long ago for persevering with to burn fossil fuels. However that ethical argument is within the rearview mirror for many of the world.

And so the query is, how little can we spend on fossil fuels, from what sources to allow us to get by the transition? And the place ought to we be spending cash? What’s the fitting steadiness? I might say proper now many of the world has the steadiness incorrect. And so I’ll be speaking a bit about that for the subsequent jiffy.

Let’s begin with what are subsidies? There’s a variety of arguments about this. Lots of people attempt to faux that lessons of subsidies aren’t precise subsidies, they’re one thing else. However I are likely to go together with the Worldwide Financial Fund definition. From 2010 to 2015, they normalized what they thought-about to be subsidies, and it’s a giant bag.

They discuss direct subsidies, which is those all people thinks about, which is giving cash to the fossil gasoline trade. They discuss oblique, or, you understand, or additionally giving cash to shoppers. Oblique subsidies, which is placing a cap on retail costs or beneath pricing, underpricing fossil fuels on the gasoline pump or the opposite stuff, or paying shoppers a payment to cash to allow them to purchase extra fossil fuels. Additional, we’ve acquired foregone income the place taxes are lowered on fossil fuels, so the federal government isn’t amassing cash. These are all fiscal preparations which are instantly associated. Lots of people attempt to exclude oblique. That’s an inappropriate selection.

And naturally, there’s the massive kicker within the room, the detrimental externalities. A few seminars in the past, we talked about carbon pricing and carbon pricing schemes all over the world. That could be a course of that costs detrimental externalities for the financial, human well being and environmental impacts they trigger.

And people are very important as we take into account it. We’ve been gaining advantages from fossil fuels for human well being and longevity as a result of they’ve been offering purification of water. They’ve been offering lights that allow higher productiveness exterior of daylight hours. They’ve been offering energy for automation, which allows us to do drive leverage in order that we’ve got higher financial outcomes. However we’re at very a lot the purpose the place the detrimental externalities are outweighing a variety of the benefits, and we’ve got options.

And so as soon as once more, that ethical argument is within the rear view mirror. It’s time to place the cash into issues that don’t have almost the identical diploma of detrimental externalities that don’t trigger our children to finish up with bronchial asthma and numerous illnesses that don’t trigger our dad and mom and grandparents to endure with cardiopulmonary illnesses and that don’t destroy the pure setting.

As we glance ahead, what we ask the query is why are we subsidizing fossil fuels as strongly as we’re right now? In some instances, there are good causes, and I’ll attempt to pull out a few of these nuances for India as we discuss this. Let’s discuss in regards to the Indian context versus different issues. That is Worldwide Financial Fund data from their 2023 replace. What it does is it pulls out gasoline, highway diesel, coal and pure gasoline. What I’ve accomplished is I’ve assembled only a subset of the bigger tables in order that India is contextualized towards China, the US and a few consultant massive economies in Europe. I’m at all times attempting to contextualize India towards the bigger economies on the planet, as a result of that’s the place it must be contextualized as we transfer ahead.

China, like India, remains to be within the creating world class. Clearly Europe and the US aren’t. And clearly Europe and the US supplied the overwhelming majority of the CO2 emissions up till pretty not too long ago. And now the creating economies are growing their share, particularly China.

This purple diamond on every of those signifies the precise pricing in these economies for these classes of fossil fuels. And the bars combination the several types of prices to an economic system for these fossil fuels. So right here we see in Germany that their prices are roughly the identical because the precise environment friendly worth of that gasoline. That implies that Germany has internalized all of the detrimental externalities of fossil fuels and isn’t successfully subsidizing fossil fuels. The identical is true of France. China, then again, is subsidizing important quantities of the prices of fossil fuels by its worth level. That’s enabling them to have cheaper gasoline than they might in any other case have, and in addition cheaper diesel. That is the best way you learn this.

America, which purports to be a pacesetter on this area, has considerably underpriced gasoline, which does contribute to their very important automotive tradition. It’s simply filth low cost to drive round in the US, they usually drive massive gasoline guzzlers partly as a result of they aren’t pricing gasoline effectively. So equally, as we take into account highway diesel, which is far more vital for the trucking trade, China as soon as once more isn’t pricing effectively. India isn’t pricing effectively. Germany and France aren’t almost as virtuous for diesel, which has a lot greater particulate emissions and far greater well being impacts as they’re for gasoline. America is in the identical place, inefficient pricing.

As we get to coal, China and the US have very poor pricing for coal by way of its impacts. France and Germany aren’t excellent. India is healthier than China. United States pure gasoline, which is, you understand, much less utilized in India at current however growing pretty quickly, is nearly effectively priced, which is an efficient signal. The way in which to consider that is that coverage ought to push the purple diamond to the purpose the place the IMF or India’s interpretation of the same sort of information says that the pricing must be to cost the product appropriately for the vitality. Germany and France are nonetheless underpricing pure gasoline. There are modifications in that regard.

Up till not too long ago, Europe has been tending to cost each the price of pure gasoline and the price of electrical energy excessive to advertise effectivity. They’re realizing that’s a false dichotomy now and they’re decoupling the price of electrical energy from the price of fossil fuels and offering industrial charges, within the case of Germany, which are less expensive. Up till final 12 months, industrial charges in Germany had been twelve cents US per kilowatt hour. Now they’re exploring for large industrial shoppers charges as little as six cents per kilowatt hour. That allows electrification to proceed far more rapidly, which is the virtuous path each from an financial perspective and different views. Proper now we are able to begin to decouple that as a result of photo voltaic water storage and transmission are enabling us to decouple the price of electrical energy from the price of fossil fuels and begin actually decarbonizing economies of electrification.

Let’s discuss in regards to the subsequent piece. What does that imply for India? So the G7 made a pledge and the G20 made a pledge in 2009 initially. Components of the G20 made the pledge in 2009 to remove fossil gasoline subsidies. Most have accomplished a horrible job of it. Canada, the place I stay, acquired slightly methods into it after which in 2015, when the fitting authorities was elected which really cared about that stuff, versus the earlier authorities which made the pledge, however it was simply lip service and didn’t do something, the federal government that really tried to do one thing was having important challenges.

India made the pledge in 2015 with the G20, however has solely managed to impression direct subsidies. Direct subsidies, as a reminder, are solely a portion of subsidies they usually’re the direct subsidies to fossil gasoline producers, producers, distributors. And in order we take into account this, India has been taking good motion, however not on oblique or exterior subsidies. So fairly a major lower on this blue bar right now. Nonetheless, as we take into account this, we’re nonetheless at some extent the place oil and gasoline and coal have vastly extra direct subsidies than renewable vitality or electrical automobiles. That is the inverse of acceptable subsidization. Within the 2020s, to ensure that India to really be a part of the trendy economic system, it wants to impress far more quickly and invert this.

Now, there’s nonetheless an argument for some fossil gasoline subsidies and funding for particular functions, and I’ll get into that later, however to not this diploma. So let’s discuss what these subsidies appear to be in India. As we see, there’s $5 billion allotted to the Ministry of Petroleum and Pure Fuel within the present price range. That’s some huge cash and that’s particularly dedicated to increasing extraction of pure gasoline and petroleum, dominantly utilizing enhanced oil restoration and fracking. For context, enhanced oil restoration goes into an current oil effectively that’s tapped out because the stress contained in the effectively is insufficient or the constituency of the crude oil is just too sluggish, its leftover tar to have the ability to be pumped out.

One of many dominant types of enhanced oil restoration is pumping carbon dioxide into the effectively, often in supercritical kind, to loosen the oil and improve stress and switch right into a flowable liquid once more, then have the elevated stress and extra liquid oil be pumped out the opposite finish. This isn’t carbon seize and sequestration. That is growing the output of petroleum with a powerful detrimental impression for local weather change. So if anyone tells you that enhanced oil restoration is carbon seize and sequestration, effectively, that’s pure greenwashing and dominantly it’s what’s been accomplished with carbon seize and sequestration globally. I think we would have a full carbon seize and sequestration effort as a part of this sequence, simply as we’ll have a full hydrogen session.

There’s one other $700 million for strategic oil reserves. I normalized these all, by the best way, to US {dollars} as a result of there have been values in my analysis in each. My apologies that they’re not Indian foreign money, however I made a decision it could be extra acceptable to not less than do it in numbers that I understood and I hope that’s ample for the viewers. So extra on getting extra oil, extra on liquid petroleum merchandise. Now this one, keep in mind the oblique is lowering the tax or lowering governmental revenues to reinforce the flexibility to extract produce, ship extra oil and gasoline to shoppers at a cheaper price. And so there’s a 75% low cost on gasoline royalties transferring ahead, which is, to be clear, utterly opposite to local weather motion, however could also be justifiable with some elements for the interim.

But it surely’s a very robust argument, and policymakers ought to actually have their ft held to the fireplace over any determination giving some huge cash to grease and gasoline. The previous three years have seen document income for oil and gasoline corporations globally, so it’s obscure why they want extra money from taxpayers. ONGC investments, a few billion for drilling, $7 billion in enhanced oil restoration initiatives. That’s some huge cash. These are massive numbers and pipeline infrastructure at this level, pipelines are heading in direction of being stranded belongings. A pipeline is usually a 30 12 months asset. What that is saying is that there are 12,000 pipelines being inbuilt India that are anticipated to nonetheless be working within the mid 2050s. Is that sensible?

I might say proper now, as I look all over the world, most of what I’m seeing is pipeline organizations trying to faux that hydrogen might be utilized in them, which it gained’t. After which we’re beginning to see strongly that it’s a shutting down of pipelines. We’re beginning to see a discount of pipelines. We’re beginning to see intentional sunsetting of pipeline infrastructure, particularly within the distribution facet, partly as a result of as we transfer ahead, the problem for gasoline utilities would be the demise spiral, the place prospects transfer to induction cooking, warmth pumps, full electrification, and in a area the place there may be, name it 100 prospects in a area, 20 of them go away to electrification, 40 of them go away, after which 50 of them go away. Then they’ve half the purchasers.

However all the prices of sustaining the protection and supply of the product, then they get to 70% and 80%, they usually can’t afford to ship gasoline for the charges that prospects can afford to pay. That’s the utility demise spiral. And so what we’re seeing now could be organizations all over the world, utilities all over the world are beginning to be compelled, usually to sundown gasoline distribution options, gasoline distribution networks in an clever and strategic style over the subsequent couple of a long time. Utrecht within the Netherlands is a superb case research in that, then again, India is quickly attempting to increase its gasoline utility infrastructure, which is totally opposite to what must be accomplished. It must be electrification first. Fuel, effectively, it must be costlier, ship it by bottles for the individuals who demand it and transfer on.

So let’s pivot to banks, as a result of it’s not simply governments throwing billions and billions of {dollars}. In reality, it’s not even billions. The IMF assertion for 2023 was that globally there have been $7 trillion of direct, oblique and detrimental externality subsidies for the fossil gasoline trade, $2 trillion of that, which is quite a bit, fairly a giant quantity. $2 trillion was direct and oblique subsidies, $5 trillion was detrimental externalities, to provide you a way of scale. However that is one other $2 trillion since 2016, because the Paris settlement was signed from JP Morgan Chase, American banks, Chinese language banks, Canadian banks, British banks and a Swiss financial institution. So we’ve got this drawback the place main monetary establishments globally are persevering with to supply investments, that’s debt financing and in lots of instances fairness financing, into the fossil gasoline trade. That is enabling these industries to increase extraction, processing, refining and distribution of fossil fuels once we know there’s a disaster.

And that is the worldwide view, it’s not a superb view, however India’s banks usually are not on the checklist of the worst ones, however they’re nonetheless doing a variety of funding. State financial institution is doing a variety of work with pipelines and gasoline initiatives. HDFC is doing a variety of work with oil and gasoline infrastructure. Icici has acquired some giant scale infrastructure. Entry is on this area, IndusInd is in right here. These are all banks who must be funding renewables, electrification, electrical automobiles, electrical automobile fleets, decarbonization of business warmth, and as an alternative they’re largely spending much more cash on fossil fuels.

That implies that there’s a major disconnect between local weather objectives and the best way the banks are this now on the planet. We’re beginning to see central banks just like the RBI, India’s RBI, establishing clear environmental, social and governmental tips for banking portfolios. And the perfect that RBI has accomplished has inspired it. So from a coverage perspective, extra enamel are required with that.

And the explanation for that’s as a result of there’s robust challenges and dangers related to this as we transfer ahead right into a low carbon future. As we transfer ahead into the long run, we see dangers from an Indian context.

So let’s begin parsing round these and finish with well being impacts simply because it’s helpful. So in all probability the worldwide vitality disaster that was dominantly a European vitality disaster fomented by the invasion of Ukraine by Russia, created vitality spikes throughout Europe, but additionally in the remainder of the world. As a result of Russian gasoline and Russian oil was an inexpensive commodity like Saudi’s product, it was being consumed globally after which plenty of sanctions made it an unlawful substance, which suggests it’s promoting much less, however meaning a decrease provide with fixed demand, elevated prices. We noticed important worth spikes. This can be a widespread factor as we glance all over the world. I can return to 1972 with the OPEC OilCcrisis, when the key oil producing nations on the time turned off the faucets to maximise their income and prices of vitality shot up with renewables.

We don’t have that concern as a result of renewables are inside a rustic’s area, far more so than fossil fuels. The value shocks and the considerations about geopolitical considerations, just like the conflict, just like the OPEC oil disaster, like different crises of vitality over the previous a long time associated to fossil fuels, you may keep away from these. After I talked to Australian funding funds, one of many questions they’d was, how will we make inexperienced metal made with renewables worth aggressive with pure gasoline? I stated, effectively, it’s important to worth within the volatility of pure gasoline, as a result of as we undergo the transition away from it, we’re going to see much more volatility in pure gasoline and oil. As mergers and acquisitions happen, as blocks of corporations try and drive out advantages for themselves, as battle, just like the Houthis blocking the Strait of Hormuz.

These kinds of issues all drive up the price of fossil fuels vastly greater than they drive up the price of renewably generated electrical energy. So avoiding that could be a actually good selection. Clearly, India is simply as topic to excessive climate as a consequence of local weather change, and presumably extra so. Each nation on the planet is seeing radically totally different climate. Ravi in Toronto and myself in Montreal proper now, lived by fairly excessive warmth final week, unusually excessive for the cities we’re presently in. However that’s now not as uncommon. In the meantime, two days in the past in Calgary, hail was shattering automotive home windows and destroying home windows and buildings, and terrifying residents of town because it destroyed their home windows and was hurtling into their dwelling rooms. And so we’re seeing all these occasions globally.

Let’s return to 2017, into the area the place you’re. There was the monsoon that flooded Bangladesh and displaced a 3rd of the populace. So these are occasions that are pushed by our consumption of fossil fuels, and we’re making them worse the extra we increase fossil fuels. So all of the subsidies are subsidizing excessive climate.

There’s reputational threat. India doesn’t have to be the primary on the desk, however they will’t be within the laggards. As we transfer ahead, India’s international popularity and its cultural enlargement and the willingness of individuals to provide it the good thing about the doubt, to persist in commerce offers with it, turn into extra in danger the extra it spends on fossil fuels. Not like Saudi Arabia, it’s not an exporter, but when it continues to subsidize fossil fuels, it finally ends up being probably thought-about the best way Saudi Arabia does with out Saudi Arabia’s financial clout.

The subsequent piece within the dangers is social inequity. A fossil gasoline economic system tends to supply the very best profit to the very best socioeconomic brackets, and the very best prices, the least profit to the bottom socioeconomic brackets. This can be a actuality of the fossil gasoline economies. As we glance all over the world, there’s a powerful correlation between GINI indices, the diploma of revenue inequity in a society, and excessive fossil gasoline consumption or petro states. There are outliers, like Norway, which is rigorously managed, however it’s an outlier. Have a look at the US. It’s now the most important exporter of fossil fuels on the planet, and its inequity has elevated considerably since 1980. On the identical time, it’s elevated its exports. So if we take into account social inequity to be a threat, and each authorities persists on the will of the individuals, whatever the political system, social inequity is among the issues to be very involved about from a coverage perspective.

Power safety is an fascinating one. As I stated, renewables largely get generated inside a rustic. India is large enough to generate all of the vitality it wants, largely inside its borders, however it’s additionally slender sufficient that it will possibly’t actually reap the benefits of photo voltaic highs and lows. And so at that time, you begin needing connections east and west and north. You begin needing an HVDC grid to attract vitality from the north to the south extra effectively. However vitality safety can also be a spot that’s an debatable place for present funding in fossil fuels.

As I stated, India is now beginning to do unconventional extraction of oil and gasoline to allow it to keep away from a number of the worth volatility in worldwide markets. And I actually acknowledge that benefit. But it surely must be on the benefit order. The consumption of that pure gasoline and oil must be on a benefit order on the backside of the benefit order. Proper now, it’s not India, and that should rework.

There’s additionally a regulatory threat. Worldwide laws. As I stated, the carbon border adjustment mechanism in Europe, which I talked about a few seminars in the past, goes to extend. As India expands its use of fossil fuels, versus increasing far more quickly its electrification, it places itself at higher threat of ending up on the incorrect facet of aggressive benefits with economies which haven’t been subsidizing fossil fuels, which have been remodeling to electrification. And so, as you take into account ahead for the subsequent a long time, elevated fossil gasoline use is a aggressive drawback and might be topic to regulatory shocks that may trigger challenges. You recognize, it’s simple to foresee. It’s a grey rhino threat, and India wants to concentrate to it from a coverage perspective.

There are additionally the dangers of stranded belongings. These billions of {dollars} for pipeline enlargement and enhanced oil restoration and strategic oil reserves are strongly liable to being far too massive, underutilized and even bankrupting. I’ll evaluate and distinction Canada, which is equally responsible on this regard. The federal authorities a number of years in the past purchased a pipeline from the oil producing area of Alberta to the coast so oil from the oil sands might get to water and be shipped. Their speculation was that it could go to Asia. Not going to occur. It’s really going to go to California for quite a lot of causes.

However the pipeline, they tripled it in dimension, to ship thrice as a lot oil. But it surely’s going to be a stranded asset. My projection is it’s going to be operating at a 3rd of its capability by 2035 and sure be bankrupt totally by 2040, which is why the federal government had to purchase it. Kinder Morgan, the agency that owned it, stated there’s no actual purpose to really triple this as a result of there’s no marketplace for this product. And that’s bearing out. The pipeline isn’t delivering the worth proposition that was articulated, so now they’re pretending it’s doing one thing else now that it’s in operation.

And eventually, there are well being impacts. Fossil gasoline burning causes individuals to get sick, and it causes much more individuals to get sick, much more individuals to get most cancers. It places loads higher burden on the well being system of India or some other nation that does that. And so electrification doesn’t. A wholesome populace is a productive populace. A wholesome populace is ready to interact in extracurricular actions like expanded studying and entrepreneurial actions. An unhealthy populace is simply attempting to get by the times and gained’t be a productive financial driver for India. So for India to be a strongly aggressive nation sooner or later, avoiding the well being impression dangers might be a good suggestion.

After which there’s the chance prices. Each greenback you’re spending on fossil fuels, you’re not spending on low carbon know-how. I attempted to make this make a mangrove tree, and I form of acquired partway there to get this concept. However it is a elementary factor. The billions of {dollars} that the federal government is throwing at fossil fuels and the oblique subsidies it’s offering for fossil fuels to maintain them low cost for shoppers usually are not enabling the transition to low carbon know-how.

As I stated, there’s an argument for some stuff for vitality safety. In all probability the one argument within the area. But it surely’s not the fitting argument. The proper argument is electrification, transmission, storage, renewables and funding these issues to keep away from all these dangers.

There some international locations to have a look at, and I might suggest the ISGF probably take into account or get one other sibling company who’s extra focused such a stuff to do a research based mostly on this. Go have a look at Indonesia, which diminished its gasoline and diesel subsidies to extend the worth of these issues to advertise electrification. And it shifted the fiscal sources it used to provide to individuals for gasoline and diesel social help applications. So the people didn’t lose the cash, they simply didn’t have it tied to fossil fuels. That’s the fitting selection. That’s a progressive strategy.

You recognize, the main practices are listed down the facet right here. There’s a set of literature on this. Incremental reforms are a key one. That’s the identical sort of factor for carbon pricing. You need to convey it in low after which improve it yearly a bit at a time in order that finally and with consistency, in order that strategic investments might be made.

Italy’s accomplished some nice stuff. They’ve stated, effectively, we’re not going to throw extra money at fossil fuels or as a lot, however throw it at renewable energies as an alternative. So as soon as once more, investing within the know-how of the long run as an alternative of the know-how of the previous as a lot as potential.

Consider it or not, Ukraine continues to try this. To try this. One of many fascinating issues about Ukraine is that within the early months of the conflict, one thing that had been mentioned and never acted on for years, which was connecting transmission and connecting Ukraine’s electrical energy grid to Europe’s electrical energy, occurred in months. It was simple to do. The invasion overcame institutional inertia, they usually did that. There was a powerful push up till the invasion for Ukraine to turn into a renewables powerhouse in japanese Europe. It’s an enormous, broad plain, very like the areas to east and west of New Delhi. And so there’s a variety of land for wind and photo voltaic and good sources. And they also’ve been working alongside that. And now as they arrive out of the conflict within the subsequent 12 months or two and Russia is shoved again behind its borders, it’s going to be fascinating to see what the subsequent steps are.

Thailand has been doing good work as effectively. And so there are main nations for India to have a look at, their main practices for India to think about align with the Indian context and to use. And so there are answers proper now. India has accomplished a superb job since 2015 with one portion of subsidies. Its banks usually are not the worst banks on the planet by way of investing in fossil fuels, however their palms are nonetheless soiled, their palms are nonetheless coated in oil. And so there’s an actual alternative right here for India to rethink this and to align extra successfully and effectively with the economic system of the long run and to keep away from all these dangers I talked about. So these are my slides. Now we have about 20 minutes for dialog, so please ask questions.

RP: Good, Michael, sensible articulation of the fallacy of giving subsidies for fossil fuels at this age, this period, once we are literally experiencing the implications of local weather change. Newest DoE USA paper says there have been 28 climate occasions in 2023 which broken the grid. We’re solely speaking in regards to the grid. And the financial loss in the course of the 12 months is calculated at $90 billion for the US from the climate occasions, which price outages for as much as 24 hours or extra. So 28 instances it occurred final 12 months and this 12 months it could be extra. And India and plenty of different creating international locations, we’re seeing some issues or the opposite. Each different day. Each different day, some nook of the nation is. Any questions?

Ravi: Thanks. Truly, this has been in all probability some of the troublesome components of a sequence of discussions, just because how do you get a cadre of nations or a area on the planet to point out trigger that there’s this system that may be adopted and it should be, it’s important to praise Michael for that, as a result of it’s a really troublesome topic that he’s attempting to convey on to say that these small modifications in insurance policies, if you’ll, price range to price range, regardless that they’re bigger {dollars}, they really set up a pathway for future budgets and future budgets to really help these so referred to as unwell insurance policies, if you’ll. And so you bought to nip this within the bud and say thats not the course we should always go.

However the important thing facet that I’ve, and I don’t have a solution or a remark is how do you kickstart this? As a result of in case you have a look at all of the COPs, there’s an understanding that the subsequent COP, due to all the issues on the planet, largely conflicts, isn’t going to draw even the COP 26 measures that had been promised a number of years in the past. And so the query, I believe, stays in a really troublesome approach. And possibly Michael can articulate how he hopes that this gospel, if you’ll, can really be applied on a regional foundation so that every one shares one another’s experiences? I imply, India would have been an excellent catalyst however now, in case you go searching India, you could have all types of conflicts.

And so that you shouldn’t have that stability, political stability round India to have the ability to say, okay, massive brother, small brothers, small sister, massive sister form of strategy that SAARC was alleged to create. So East Asia, maybe, and he had two experiences. There may be maybe one such the place there may very well be promise in forging this. And Reji, possibly in our visits afterward, we should always consider getting Eddie concerned on this, as a result of that’s the best way to do it. One nation, once they do it, and the opposite nation, neighboring nation, doesn’t. You will have at all times had this challenge as to. I imply, Canada is one good instance of that. He spoke of the pipelines, and but we’re very closely influenced by US insurance policies. And in order that simply turns into one space. So I don’t have a remark aside from a superb commentary. A really troublesome topic.

I believe that is probably the most troublesome in a sequence of discussions the place it entails foresight, insurance policies and a few degree of management. And I don’t see that degree. I imply, I’m going again to Maurice Robust. I imply, he was the chairman of Ontario Hydro at the moment, and I used to be a small man within the govt workplace pushing paper. And it took 1992 to 2000 to even give you the IPCC report. It took one other ten years to even come and perceive the 1.5 and two levels and three levels, the final ten years of which we’re seeing all these occasions really go up and up and up. However but, I’m sorry to say, in 2024, we nonetheless haven’t acquired what I might take into account as a pathway that’s totally understood and accepted by all to say that is the non fossil pathway.

We’ll go, not even in the US, not even in Canada. And so we’ve got these debates nonetheless as to what constitutes 2.5. And we utterly neglect that our cities are flooded, hurricanes happen, hail in the midst of summer season. I imply, all that’s simply there for us to see, however but we’ve got not. Our political system isn’t absorbing it. I don’t know why, however I don’t have a solution for that. So anyway, who is aware of the reply for this?

MB: I’ve a solution why our political system isn’t accommodating. It’s as a result of the entrenched particular curiosity teams which are the fossil gasoline trade, the gasoline utilities, know that their days are numbered. They’ve some huge cash, they usually’re creating confusion, creating disinformation, creating political unwell will, making a pretense of disagreement the place there isn’t really disagreement, and selling options which are non options, like carbon seize and sequestration and hydrogen with a view to delay the inevitable, nonetheless there’s.

Ravi: For Canada, I might settle for that. However for India, as you rightfully identified, the present price range is type of getting in an space that it hasn’t gone prior to now, and it’s dedicated a lot of sources it must preserve feeding this beast going ahead in subsequent budgets. So in a approach, it has chosen a fork within the highway that it by no means selected earlier than. And in order that itself type of alarms me. I imply, your factor was so nice that it factors out that they selected a fork which is the antithesis of all of the greenhouse and inexperienced vitality that India has been selling and doing for the final 5 years.

MB: Nicely, there’s a solution for that. One of many issues that I identified you began a number of years in the past was that fracking and shale oil are applied sciences, they usually allow extraction of fossil gasoline reserves that had been unavailable globally and they’d be exported. And so, as I level out, we’re seeing these applied sciences emerge in each China and India. There’s excellent news and unhealthy information with that. The excellent news is that the key oil producing states now not have a lock on it. So the geopolitics change. The unhealthy information is it allows international locations that couldn’t extract a variety of these issues to extract a variety of these issues. Nonetheless, the US expertise with fracking and with shale oil might be repeated globally. So let’s discuss that briefly, as a result of it has robust implications for banking and funding and governmental funding in these applied sciences.

So, transient historical past. In 1972, there was the OPEC oil disaster. Gerald Ford, the president on the time, in 1974 established the primary US nationwide funding for unconventional oil and gasoline extraction. And 30 years later that grew to become the shale oil and fracking growth for oil and gasoline, respectively. Mainly, pumping pressurized steam and grit and water into underground shale formations to fracture them. Go away behind quartz pebbles that preserve the fractures open to allow oil and gasoline to stream out. In 2019, what we noticed in the US was important bankruptcies within the shale oil and pure gasoline industries. Banks had been really not solely foreclosing, however seizing belongings, which is extremely uncommon. The explanation for that’s that each fracking fracked gasoline reserves and shale oils had a lot shorter lifespans than had initially been assumed or projected.

They had been assumed that after you’ve fracked or accomplished a shale oil effort, you’d have a 20 12 months lifespan or a 30 12 months lifespan for that asset. But it surely’s turning out to be two to 3 years. The heavy capital price and the heavy upfront price for these applied sciences was not paying for itself with the anticipated fiscal advantages. And that’s a powerful lesson for India because it adopts these applied sciences. There’s a important overstatement of the monetary advantages of those applied sciences and a powerful fiscal concern for investments in them. Have to have a look at them with a really involved eye.

Equally, what we’re seeing is insurance coverage charges are going up fairly considerably on all kinds of various applied sciences, industries and stuff. Because the insurance coverage trade says, we are able to’t afford to cowl these sorts of liabilities as a consequence of elevated local weather dangers.

And so there are fiscal pressures that are going to trigger bankruptcies of buyers in these locations. Proper now Canada is attempting to promote the pipeline and I’m simply attempting to determine who the heck goes to purchase it for what purchaser, sale worth. I’m fairly certain the Canadian taxpayer goes to eat $30 billion of the price of cash that’s put into the pipeline with a view to discover anyone who desires to purchase it. It’s simply not price what’s being spent on it and it gained’t final for, as I stated, greater than one other 15 to twenty years. So the stranded belongings are coming. The electrification transformation is transferring far more quickly than governments or trade assume.

I spend a variety of time nowadays vitality storage for warmth, for trade, residential and industrial area, and I spent a variety of time trying on the low price of batteries. Now we have the options for all this, however governments are nonetheless placing cash into the fossil gasoline trade due to a brief sighted perspective on that threat profile. I believe that the chance display screen for fossil gasoline investments is underappreciated by policymakers and bankers at this level as a result of they’re listening to the incorrect advisors.

Different questions or considerations?

Subir: Thanks very a lot. I had an commentary. I imply, in fact you drew the eye to the purpose that there’s a lot funding taking place by the federal government of India on subsidies to the ONGC for drilling, for exploration and in addition to organising the networks, oil and gasoline networks. I believe that there could also be some greater causes that a lot of funding is happening past the share economics and that could be pushed by the nationwide safety and people elements which they must look into fairly than simply the economics, fast economics per se. Any ideas on that?

MB: Nicely, yeah, if you wish to really create nationwide safety and nationwide vitality safety, renewables, transmission and storage are the best way to do it. The purpose of that is that if we take into account that fracked and unconventional gasoline and oil belongings are quick time period belongings, and that enhanced oil restoration of tapped out oil fields is a brief time period strategy of getting on the remaining 10% or 20%, these are going to expire rapidly, and then you definately’re going to left with a complete bunch of pipelines from locations that don’t have oil and gasoline to locations that count on oil and gasoline.

But when we as an alternative put money into the pipeline of the long run, excessive voltage direct present transmission and the vitality supply of the long run, wind, photo voltaic and water, and the vitality strategic reserves of the futures batteries and pumped hydro, then that’s really future proofing and that’s really offering strategic vitality reserves and vitality safety from that isn’t topic to risky oil shocks. As a result of committing to the fossil gasoline trade implies that as costs spike globally, you’re going to see all kinds of different issues.

Let’s take an instance with the US. Proper now. There’s a giant controversy in the US as a result of in 2015 they’d the funding tax credit score for wind vitality that was going to run out. And they also managed to do a deal between the individuals on the facet of renewables and electrification and the individuals on the facet of fossil fuels that allowed them to export crude oil. That was one of many different issues that got here out of the OPEC oil disaster. There was laws put in place that the US couldn’t export fossil fuels for vitality safety, which was affordable on the time, however then the unconventional extraction meant that they’d surplus, and they also needed to try this. Incentives for renewables continued.

What we noticed was that pure gasoline corporations in the US had been exporting LN to different markets, and worth spikes had been spiking inside the US for vitality, regardless that they’d important native reserves, and that’s important native manufacturing. So what we see is committing to a fossil gasoline trade that continues to commit to cost volatility from international fossil gasoline issues. It’s a reasonably straight line. It’s one of many key dangers. And having home reserves doesn’t isolate home shoppers from that as a result of the wealthy corporations will promote it to the very best bidder. If that highest bidder is in Europe or in China, then Indian shoppers will go begging or they’ll be paying international costs for the vitality.

And so vitality safety, I have a look at this, I have a look at vitality independence, and I at all times say it’s strategic vitality independence. Whilst you have a fractious relationship with Pakistan, you could have a superb relationship, higher relationship with Bangladesh, you understand, considerably challenged relationship with China, fascinating relationships with African states. There are nonetheless international locations you commerce with, nonetheless international locations you commerce all kinds of commodities with. I don’t take into account placing HVDC into these international locations to share electrical energy throughout borders any in another way than I take into account some other commodity or some other luxurious good. It’s simply one thing it’s important to hedge. The extra connections you could have extra broadly with HVDC, the extra you hedge any particular person connection and the extra strategic vitality independence you could have. However fossil fuels usually are not the best way to vitality independence or strategic independence anymore. I hope that solutions your query usefully.

Subir: Yeah, thanks for this attitude. I actually respect that. In its place, in fact, the HVCC investments are actually the best way to go, however on the identical time I really feel that, okay, possibly we’re contemplating the gasoline economic system throughout the nation, however I imply, if I have a look at it globally, I don’t see that the international locations like Qatar and all who have gotten massive reserves, they’ll any day scale down. They’ll carry on dropping the costs in order that they’re within the recreation for a few years to return. That’s what I really feel. I imply, I might love to listen to on this level that at any cut-off date these usually are not going to go away for possibly one other 50 years. It appears to be like like they’ll carry on dropping the costs to be within the recreation.

MB: However at that time the very best price producers begin dropping off. Venezuela and Canada each have very heavy bitter sulfur. It’s excessive in bitumen, it’s mainly largely asphalt that’s excessive in sulfur. And so these are very expensive to extract, price to course of, price to distribute. And as such, as the worth of oil diminishes, the oil sands will drop off, the Venezuelans oil will drop off. Shale oil is an costly oil by comparability, and it’ll turn into costlier as the price of vitality to extract and course of it will increase as a consequence of carbon pricing. Proper now, the key of enhanced oil restoration is that they burn a variety of fossil fuels behind the meter with a view to energy their processes. So their vitality return on vitality invested is down round two to 4, versus typical oil, which is ten to 18.

And they also’re spending some huge cash by burning a variety of fossil fuels, however it’s hidden from the price of that as a result of they’re simply burning stuff they’ve. As we begin pricing these emissions, that price goes up. And so as soon as once more we get to a degree sooner or later the place gentle, candy oil near water like Saudi Arabia’s, will proceed to be extracted for the diminishing demand for oil. And sure, the worth will go down, however there’ll nonetheless be important spikes as a consequence of conflicts, as a consequence of Strait of Hormuz and the Houthis inflicting transport distractions, as a consequence of regional conflicts which improve as local weather crises trigger inside and exterior displacements of residents and result in civil wars. We’re coming into a interval of world instability.

And the perfect strategic vitality is to make as a lot as potential inside to your nation from renewables and use it in excessive effectivity vitality, electrical energy and sources. It’s arduous for me to think about a state of affairs the place you’re doing something with fossil fuels which isn’t as a backup. For that, the first technique must be getting off of fossil fuels and getting out of that route race.

Subir: In my view, that’s an excellent level, that from the strategic perspective, it makes higher sense to have these sources throughout the boundaries. That’s the final word insurance coverage that one nation can have, fairly than relying on exterior gasoline for certain. So thanks very a lot on your factors, Michael. I actually respect that.

MB: I’ll share yet one more information level with you, which is form of enjoyable. So, Israel. Israel is form of the final word political island state. It’s in the midst of a area the place all people hates it, and that’s enjoying out once more proper now. When Mark Z. Jacobson did his 145 nation research of 100% renewables by 2050, he grouped them right into a set of teams. And a few international locations, like South Korea and Israel, he thought-about as remoted entities. In different phrases, they weren’t entities which may very well be a part of a regional electrical energy sharing group. There’s a nuance on that. And so even in Israel, it was cheaper to energy it totally by renewables with storage and transmit electrical energy simply round a small geography of Israel than it was to run the nation on fossil fuels. In order that’s form of assertion one, assertion two.

Nonetheless, proper now, there’s a cable in development from Greece to Israel, an HVDC cable, undersea cable, to allow Israel to be related into a bigger grid and to share electrons throughout important geographical distances. And so even theoretically remoted states like South Korea and Israel, really with fashionable HVDC know-how, don’t must be remoted. And as soon as then you definately select who you hook up with, why? And in case you’ve acquired main units of commerce with home, with third events, why wouldn’t you commerce electrical energy with them as effectively?

RP: The UK Netherlands HVDC connection, virtually 800 kv line was not too long ago commissioned, largely undersea cable. The ISGF initiated a dialogue in 2018 about connecting the South Asia grid with the western half, the Gulf GCC grid, and in addition with the ASEAN grid within the east. So from Saudi Arabia to Singapore, we’ve got 5 hours of time distinction, which may very well be actually an asset within the photo voltaic period. So we introduced all of the six international locations within the Gulf, cooperation international locations, six of them, they have already got a GCC grid. And on the japanese facet of India, ten international locations within the ASEAN, have an ASEAN grid with six of them are interconnected. One or two extra will get related by 2030. And in South Asia, India, Nepal, Bhutan, Bangladesh are already interconnected, and we’re doing energy buying and selling amongst this nation.

And sooner or later in time, Sri Lanka additionally will get related. So this South Asia grid, connecting to that GCC grid and with the ASEAN grid is a few concept which was initiated by ISGF approach again in 2018. And in 2019, March, we introduced all the important thing determination makers from the GCC, from ASEAN and India and our South Asia grid individuals. We had a day lengthy dialogue and eventually all people agreed that that is good for everyone within the rising period. And we are going to interconnect, beginning with two interconnections. One is an undersea cable line from Oman to Gujarat, western a part of India. So a 2000 megawatt HVDC line and an overhead line from Manipur to Thailand by way of Myanmar. These two had been mutually agreed by all of the events. I imply, there was a consensus on this and a feasibility research was to occur.

Some worldwide companies, just like the European Union, ADB, World Financial institution, USAID, all these individuals expressed curiosity. Nothing might progress a lot by the point the COVID got here, and it’s two years gone. So now there’s a variety of curiosity in the identical space. There have been discussions as an alternative of Oman interconnecting UAE with India and all undersea connections, as a result of our headline won’t come apparent, our neighbors issues. So we see that sooner or later in time, all people will see logic investing into that interconnection with ASEAN to South Asia to West Asia, and that GCC grid already getting related to Jordan and different locations.

So it’s going to be an fascinating time, possibly the gate course, the worldwide vitality interconnection, massive program of $38 trillion, a 50 12 months program that will take its personal time, however this regional grids getting interconnected is one thing which can occur at marginal funding and far greater profit to all of the individuals.

So we are going to cease anyone, some other factors? Thanks, it was an exquisite session. And subsequent session might be on 22 August, identical time, 07:30 p.m. India time.