Subsidising Renewable Energy Makes Sense: BP’s Chief Economist

Supporting the innocation of renewable energy and letting it grow till it can compete with traditional sources is a sensible approach, said Mr. Spencer Dale, Group Chief Economist at BP at a recent interaction with journalists in New Delhi. “There is a theory that states that there should be support for new industries (such as renewable energy) till they find scale and it makes perfect economic sense,” he said.

“Once it (renewable energy) has hit scale, the economic argument for continuing subsidies becomes less compelling. But, continuing them for the period of time when new technologies find their feet and begin to compete against established technologies in the energy sector makes perfect sense,” he added.

But, the prevalence of subsidies in the energy sector on the whole does not find his agreement. He said, “In terms of subsidy at the point at which you use energy, moving gradually away from them leads to more efficient allocation and consumption patterns. Otherwise people end up either using too much of one energy or don’t end up using it more efficiently.”

India’s energy mix

BP’s Energy Outlook 2018 edition has said that in India, renewable energy growth is going to be a chunk of the total growth. “In terms of the fuel mix, we see a rapid growth in renewable energy. We see wind and solar energy together accounting for about 20 per cent of the growth of energy over the next 25 years,” Mr. Dale said.

Despite the spurt in renewable, coal will remain the mainstay of India’s energy mix. “Coal remains a very significant part of the fuel mix. We see the share of coal gradually declining over time, but in the evolving transition scenario, coal is accounting for about half of the overall growth in energy demand and still has a share of about 50 per cent by 2040. So, coal remains as an important central feature of the Indian economy. Coal today accounts for three-fourth of all power generated and under the evolving transition scenario, we have it falling to two-third,” Mr. Dale said.

According to him, electric vehicles may not exactly have a significant impact on fossil fuel demands.