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Give tax benefits for green R&D in power generation
February, 08th 2007

The debate on climate change is hotting up. The latest assessment report of the Intergovernmental Panel on Climate Change (IPCC) says global warming is very much on the cards without proactive policy change and a low-carbon future. The newest projections suggest rising average temperatures and increased prevalence of droughts, heatwaves and floods should emissions of greenhouse gases continue unabated. The increased levels of carbon dioxide concentrations in the atmosphere seem squarely to blame. Yet the reaction in India has been rather tepid. Its high time for an overhaul of the policy response to climate change. It would shore up efficiency and productivity in power generation and generally pay rich dividends and bring down costs right across the board.

The latest computer simulations of the United Nations-mandated expert panel does suggest clear evidence of climate change in the offing. Now, it has been known for years that anthropogenic read human-activity emissions of a suite of gases (called greenhouses gases or GHGs) due to the use of fossil fuels, certain agricultural and industrial activities and deforestation, props up their concentration in the atmosphere and has the potential to significantly alter global climate. The latest IPCC report seems to be on even firmer ground with better data and extensive number crunching. The expert group now says that there is high probability of climate change and considerable increased average temperatures with unhindered, carbon-intensive growth. The mounting scientific evidence surely calls for appropriate policy design to tackle the increasing risks.

It is true that the bulk of the estimated 7 billion tonnes of heattrapping carbon released into the atmosphere annually is in the industrialised economies. So it could rightly be argued that the great chunk of the environmental cleaning up ought to be done elsewhere and not in India. As the national environmental policy says: Different countries bear different levels of responsibility for increases in atmospheric GHGs concentrations.

However, coal would remain our main energy source for years to come. And the fact is that the emerging clean-coal technologies are not just environmentally friendly. They in fact rev up efficiency in power generation by a third or more. The economics can be compelling indeed. But the fact remains that our research and development in clean-coal is quite pathetic. But then it may well be that the right incentives are sorely lacking. In the US, for example, there are explicit tax benefits and writeoffs for R&D on clean-coal power generation. We clearly need similar fiscal incentives here to boost domestic R&D, and to better leverage bilateral and multilateral energy co-operation now in the works.

The most prominent clean-coal method is termed Integrated Gasification Combined Cycle (IGCC). Under the process, coal is turned into a gas, which is then burned in a process that allows carbon dioxide (Co2) to be siphoned off rather than released into the atmosphere. And Co2 is known to be the most harmful GHG. Power plants built with IGCC technology release much less Co2 than conventional coal-based power generation. Actually, there is a futuristic option as well called carbon sequestration, in which the Co2 by-product is injected into oil and gas aquifers underground, eliminating emissions altogether! But that may be economically viable only in the distant future.

For the foreseeable future though, there is considerable scope for efficiency enhancement in converting thermal heat into electrical energy via the IGCC route. The conversion ratio could go up from barely 27% for conventional plants to 41% or more. This means getting at least onethird more power from the same amount of coal. One prominent environmental group, the Natural Resources Defense Council in Washington, has reportedly estimated that the extra cost of using IGCC and carbon sequestration in all plants being built in China and India would be no more than $6 billion a year. If the R&D could be advanced in India, the costs would almost certainly be far lower. Which is all the more reason for tax incentives for green R&D. However, the IGCC technology hasnt yet taken off. There are only two IGCC power plants operating in the US, and they both seem to be plagued with technical difficulties.

The point is, the right fiscal incentives for R&D in power generation would incentivise equipment makers like BHEL and power producers like NTPC to step up effort and build expertise for more proven know-how such as super-critical boiler technology. Such cutting-edge technology would significantly increase energy-conversion efficiency levels too, from the levels reached in the current pulverised coal method for power generation. Also, there is the possibility of foraying into ultra super critical boiler technology that is as yet commercially untested.

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