Energy Insights speaks with Sugandha Srivastav about all things energy poverty and developmental and energy economics.
Sugandha is a British Academy Postdoctoral Fellow and lecturer in the Environmental Economics at the Smith School of Enterprise and the Environment at Oxford University. Throughout her career she's focused on designing effective climate policy in low and middle-income countries, along with exploring incentives for clean energy innovation and finance and the political economy of energy transitions.
We talk about energy poverty and access, the developmental implications of energy poverty, the micro and macro costs on countries with populations still reliant on biomass, developmental and energy economics, the gender implications of energy poverty, the just energy transition, the new Just Energy Transition Partnership deals, carbon offsets and the economic diversification of economies and regions still reliant on fossil fuels, and many other topics.
Web: Sugandha Srivastav - Smith School, Oxford
Twitter: @sugandhasri
LinkedIn
Energy Insights speaks with Sugandha Srivastav about all things energy poverty and developmental and energy economics.
Sugandha is a British Academy Postdoctoral Fellow and lecturer in the Environmental Economics at the Smith School of Enterprise and the Environment at Oxford University. Throughout her career she's focused on designing effective climate policy in low and middle-income countries, along with exploring incentives for clean energy innovation and finance and the political economy of energy transitions.
We talk about energy poverty and access, the developmental implications of energy poverty, the micro and macro costs on countries with populations still reliant on biomass, developmental and energy economics, the gender implications of energy poverty, the just energy transition, the new Just Energy Transition Partnership deals, carbon offsets and the economic diversification of economies and regions still reliant on fossil fuels, and many other topics.
Web: Sugandha Srivastav - Smith School, Oxford
Twitter: @sugandhasri
LinkedIn
Host (01:37): We are here with Sugandha Srivastav. Sugandha, thanks for coming on the show. It's great to get you on here.
Sugandha Srivastav (01:43): Yeah. Thanks for calling me.
Host (01:44): Before we get started on talking about a really important topic on energy poverty and energy access, could you give us a quick background on who you are and what you're currently working on?
Sugandha Srivastav (01:57): Yeah, sure. I'm a senior researcher at the Institute for New Economic Thinking at the University of Oxford, and I'm also affiliated with the Smith School of Enterprise and the Environment. A lot of my work focuses on climate policy in low and middle-income countries, power sector reform, and also how to incentivize clean innovation.
Host (02:20): What brought you to this area? Was this always an interest for you or did this kind of develop over time?
Sugandha Srivastav (02:27): I would say that it developed over possibly decades, though I spent a significant part of my childhood in Fiji, and from a young age, it was very clear to me the challenges presented by sea level rise and climate change. But also, if you remember the hole in the ozone layer, which you did feel quite a bit in that part of the world. So climate issues are really salient and I think that just sparked a lifelong interest which has been with me ever since.
Host (03:03): How long have you been at Oxford for now?
Sugandha Srivastav (03:07): I've been at Oxford since 2018. I finished my PhD here. Now I'm part of these institutes as a senior researcher. It's just been an absolutely great place, an intellectual hub to sort of explore these issues. So that's just been fantastic.
Host (03:26): Cool. I think it would be useful to just start with some kind of basic terminology here for people who aren't really aware of the issue of, say, energy poverty and access. I was just wondering what these terms mean for you. And I ask this because I feel as though they're very important topics yet they don't really get discussed that often. Especially, if we are talking about in the mainstream media, for example. I feel like it's very important because energy is really the kind of bedrock foundation of improving one's life, right? So if you were to give us your own definition of what energy poverty and access is, what do you think it would be?
Sugandha Srivastav (04:09): Yes, absolutely. And I agree with you that energy is the bedrock. So much of human progress is dependent on the type and the form of energy that we've [been] able to harness. Energy poverty, you can think of it as being able to access energy. Do you have access to electricity? Do you have access to [a] grid connection? Do you just simply have it at all? And if you don't have access to electricity in the way modern society understands it, then maybe you're just using biomass, which is a very old form of energy, and one that human civilization depended on for centuries. But we know that that is not the best sort; burning biomass has adverse health consequences.
I would almost think of it as; A) Do you have access at all? and B) Even if you do have access, what is the quality of energy that you have? What is the type and the quality? There's a huge difference in the level of energy that you can have. The best case being what people in OECD economies are used to, right? It's grid connection. You can run a tv, your iron, these very energy-intensive appliances, with the lowest being just enough to run a light bulb. I would look at both access and quality as very important dimensions. And then, of course, is that energy reliable and clean? I think that makes a huge difference. And this interacts with poverty quite deeply because a lot of modern society relies on highly energy-intensive services. With climate change, one of those services is cooling in peak temperatures. So I think it really does determine the quality of life that you end up living.
Host (06:16): Now, I know this topic is quite broad, and there's, as you've really kind of illustrated just now, there's a lot of interconnected issues. But if we were to kind of try to boil [it] down to a really minimum level, what would you say would be the main cause of energy poverty, for example?
Sugandha Srivastav (06:35): Sure. At a minimum level, I would say energy poverty is caused by a lack of infrastructure investment, and I think that comes from just the development trajectory of countries and whether they have the public finances to undertake that infrastructure investment. You can think of it as the same story with roads. We have come a long way in building out transport infrastructure that connects different cities and rural areas. It's the same thing with the electricity grid. You do need a lot of public infrastructure investment. In the absence of that though, you do have other solutions like off-grid, mini-grid that are coming to the forefront now.
But if we were to really boil it down, at the end of the day, energy is a capital-intensive sector. It does require investment, and not every country is in a position to undertake that level of investment, nor is it in a position to necessarily attract international investors who have the deep pockets to finance this sort of stuff.
Host (07:52): Keeping in mind, just lingering on what you've mentioned about, there's differences in different areas in terms of energy poverty, for example. I guess because it is such a blanket term, I'm just wondering if you can say anything on the uniqueness of different regions, for example, going through different things or, generally speaking, can we see a trend over different regions, but is there uniqueness in levels of energy poverty, for example, in different countries or different regions?
Sugandha Srivastav (08:23): Yeah, it's extremely heterogeneous. I mean, so if you look at the energy access question, how many villages in the world have access to a grid connection? You can see that the trend is overwhelmingly positive, that most governments are building out the electricity grid infrastructure. You are having more villages get connected. But I think that that margin is less interesting now. What is really interesting is the quality of that energy access, and there you see a massive heterogeneity, right? If you just look at the top-level statistics of how many villages have access, you'll see this overwhelming positive trend. But if you dig deeper into what that statistic really means or what's beneath it, you'll see this massive heterogeneity where some countries just define it as one household having a connection, and that connection maybe just means two hours of electricity a day. Whereas in another economy, that could mean your classic 24-7 grid connected-electricity [to] every household in the village.
(09:32) I think going deeper from that top level-statistic is what we really need to do. I think once we do dig deeper, that quality of energy access is a huge question. So, at least in a lot of countries in South Asia, you would've heard the term load shedding, which means that every day, several hours of the day, there's a planned brownout. You don't have access to electricity for those number of hours. I think really that is pointing towards this issue of how the power sector as a whole is managed. In some cases it might mean that there's a scarcity of supply, so the demand for electricity outstrips the supply, and therefore you need to have these planned reductions in the amount of electricity available. In other cases, it is even more curious because there actually is enough supply, but it's a management problem. It's just that we're not able to trade electricity. Some area might have a surplus of production, another area has a surplus of demand. Normally what economics would say is, great, just have trade between these areas and you'll balance it out. But actually, that sort of trade is not happening in many places because it requires two things. It requires good connection across the areas to facilitate the trade from a physical angle, but even if that exists, the other problem could be the economic. Are those markets integrated? Is the policy environment enabling that sort of trade?
(11:15) And then I think comes the question of, what is the institutional structure of the power sector? What are the barriers that are stopping this? In some cases it could be institutional rigidities. If we take the example of India, actually there are, India's a geographically diverse area, and it has one grid that physically now connects all of the country. But we aren't seeing so much trade between states because they're political barriers and institutional barriers. And that is something that the country has to work on. Because if you do have that trade, you know, take the desert in Rajasthan and take all of the excess solar production coming out of that and export it to the regions that don't have that surplus, right? And then you can have cheaper electricity.
(12:09) So, really, coming back to your question on the heterogeneity, every context is quite unique. You can have other contexts. Now if you move to Sub-Saharan Africa, where you might have regions where there's kind of dispersed populations, and it's not a huge hub. And in that case, the government might rightly say, do I need to invest so much money in building out the grid to this region? And it might make more economic sense to have a mini-grid that's powered by distributed renewable energy. That might make more financial sense. But then again, the question becomes, for that model, how do you get the investment? Because again, coming back to that basic point, no matter which form of energy you look at, it is an investment-heavy sector. I think the huge challenge for developing countries is they're perceived as riskier. We know that there are financial needs. A lot of developing country governments suffer from indebtedness, so they can't necessarily finance this themselves. How do we get the Global North to finance this? And by Global North, I don't just mean the governments. I'm also talking about the private sector. We need the private sector to get involved at a scale I would say is not quite happening. I mean, we need the high street banks, right? The household names to be involved in financing distributed renewable energy in the Global South. There's a lot of topics we can dig into why that might not be happening or what we can do to enable it.
Host (13:48): Yeah. I do wanna touch on that a bit later. I think one thing that you mentioned, that you touched on in terms of India, because I've spent quite a lot of time in India working there. And it reminded me of a particular area in the Himalayas where I was working, and you have this incredible infrastructure development of dams everywhere, right? But then you have these villages that are very close by to the dams or maybe not, as the crow flies, they're pretty close, but driving it can take some time to get there. But you would have these load shedding environments where you'd have this huge hydropower station, say 20km down the road, but then in the village, there's only light for like an hour, and they would really have to rely on the small solar panels that were on the roof that were donated by an organization. So I feel like there's obviously, there's just this mismatch between the supply and where it's needed, for example. I mean, I assume that a lot of that power is going to power cities, right? But it would make, I feel like it would make ethical sense to at least distribute some of that to a localized area as well.
Sugandha Srivastav (15:10): You're completely right. I mean, this is the really interesting point that I wanna make because sometimes if you don't have electricity trading across the geographic length and breadth of India, what you then have to do, or what people end up doing, is either going off-grid and sometimes that means diesel generators, which are extremely polluting and quite expensive to run, right? Now you're exposed to the price of diesel, and we know that that price can fluctuate quite a lot. It can be extremely high, and that has two adverse consequences. One is [that] not everyone can get diesel. In fact, we know that the diesel generators go to the higher income groups within India. Two, it's harder for the grid to recover its revenues because now you've gone off-grid, and that's actually cannibalizing the grid's own business model. And third, actually diesel generators are extremely polluting.
(16:14) Actually, because of this, the odd situation that you mentioned happens all the time. I mean, you even have it in the coal areas of Jharkhand, where you're right next to a coal mine. You're taking that coal to a local coal-fired power plant, and yet the village nearby still has this issue. This is what economists would say; it's a classic kind of failure because gains from trade, I mean, you can really have gains from trade, especially if you wanna take it one level deeper. The fact that India has one grid across a geographically diverse area is a huge strength because it means that we can have a diversity of energy resources ranging from hydro to wind energy in Tamil Nadu to huge amounts of solar in Rajasthan. This geographic diversity can smooth out the intermittency problem. So, it actually just helps to have a lot of uncorrelated generation on your power grid. But in order to tap into the full potential of that, we need to remove the barriers and enable the smooth flow of electrons between these geographic regions so that you don't have this odd situation that you just described in the Himalayas.
Host (17:39): Yeah. I think another thing that this also ties into is; you have all this, for example, I mean I keep coming back to India because it's just such a great example of all this stuff, right? So you have this interconnected grid, right? But then you also have this problem where, again, going back to what you mentioned about the quality of energy. So you have hundreds of millions of people, for example, still using biomass as their main source of energy simply because one, they can't afford to get connected to the grid, and then maybe the grid's not reliable. Then again, going back to what you mentioned, the next best option is diesel. And that's very expensive and quite challenging to get a hold of. I think this is particularly relevant for rural areas in a lot of countries as well.
I guess I wanted to just get your reaction on the current situation. For example, there's a lot of, there's been a lot of developments that should be celebrated, but then there's still a lot of challenges that are still there, that need to get ironed out. What's your take on how we can kind of move forward in this area and give those people that need the energy the most access to it, for example?
Sugandha Srivastav (19:00): Yeah, I think you're very right that multiple realities exist, especially in a large country like India. The National Solar Mission has been hugely successful in increasing our installed capacity of solar. Yet, at the same time, we are seeing biomass dependency. And, really, I think it's a very heterogeneous picture. Before I move on to some of the pathways, I would also just like to bring in the health dimension of that dependency on biomass and wood burning, the sort of cookstoves that are used across India because I think increasingly when we think of energy, we have to now bring in the health dimensions, especially for a country like India where we have doctors galvanizing around the impact of air pollution on children's lungs or the elderly's life expectancy.
We already have very fantastic evidence that shows that being close to a coal mine in India increases child mortality by a significant amount. I mean, we already have academic studies that show that very clearly. We have academic studies that also show the impact of wood burning and cookstoves on women's health. So I think that has to be part of the conversation now. It has to be something that we consider as the costs for the type of energy that we use. With that, we have to then recognize how much reliability matters because if you don't have reliability on your grid, then you will move towards a diesel generator or back to biomass, or you could do rooftop solar if you're able to get the pay-as-you-go model or the upfront loan, which is something that we should actually…
(20:55) I think there's two solutions here. One, we need to improve reliability as an absolute priority, but number two, in parallel, I think we should be making off-grid alternatives easier to access and particularly by the poor. I think here is where those innovative financing models for rooftop solar make a lot of sense because India is a price-sensitive economy. A lot of our households don't have the type of cash in hand or to finance upfront investment in solar panels. So this pay-as-you-go model or soft loans is a really good enabler to help households, poorer households particularly, get access to it. Especially full solar home systems where the solar panel is combined with some sort of storage is what we need to go towards since that kind of gives you that nighttime energy as well. So I think those are ways forward.
I also think that a deeper issue here is that we need to, on an institutional level, think about our strategy for coal. I really say that because there’s a lot of things that are happening at the margin that could be better, right? The price of coal is fixed by the government on a quarterly basis, and often because of that price fixing, you can't really get the benefits of certain things. So just to give you a very concrete example here. A lot of coal in India is very ash heavy, okay? So it's dirty coal. It has a lot of ash content in it. And normally, what you do with this type of coal is you wash it. Washing is an expensive process, so if you wash it, then you can ordinarily charge a higher price because now you have a higher quality product. But you can't charge a higher price. It's simply fixed. So what ends up happening is you don't wash the coal. It has a lot of ash content. That ash content creates more air pollution when the coal is combusted, and that causes needless levels of high air pollution. When I talk about these deep institutional factors that can make either the energy sector more efficient or can reduce the negative health externalities, I'm talking about some of these deeply rooted institutional rigidities that also need to be re-examined.
Host (23:32): What about the costs? If we look at just the economics of what's happening right now. For example, you have women who are now wasting a lot of their time still collecting firewood, for example. I mean, that's a classic example of that. You have children who don't have access to electricity, so therefore they might not be able to, for example, study. I mean, these are really textbook cases. How does this notion of energy poverty or energy access affect a country both on a macro scale and also [on] a micro level?
Sugandha Srivastav (24:11): I think the distributional consequences are fascinating. On the cookstove side, women are disproportionately exposed to that pollution because they are the ones who are cooking and right next to it. On the air pollution side, epidemiologists have found evidence that children are more adversely impacted by air pollution because the blood-brain barrier is thinner in children. So that really small particulate matter, it's easier for that to get lodged around a child's body, and so there's a disproportionate impact on young children. In fact, there are doctors in India who are looking at the lungs of 15-year-old girls and saying that this looks as bad as a lifelong smoker. In Northern India, I think around November 2018, the AQI was so bad that it went to 999, and our devices didn't have four digits to even record what the actual level really was. On the micro scale, women, children, and the elderly are disproportionately impacted. Yet at the same time, the interesting thing is that air pollution knows no boundaries. It is really; our atmosphere is a common pool resource. At some level also, you can't escape it. We all have to spend time outdoors or indoors. We are all affected to it, but of course, there are those distributional impacts and inequalities.
(25:48) I think on a macro scale, what we are seeing in terms of those costs and impacts is absolutely staggering. I think we have a national health emergency on an unprecedented scale, and I would say that this is one of the greatest injustices that is happening in our country. I mean, if we think of common pool resources that are necessary for life, I would say it's water and air. Okay? When it comes to water, India already has issues, okay? We have issues with our wastewater treatment, having access to high quality piped water. But the other thing, which I think we used to have better quality and now it's degraded, is our air. So we look at the basic building blocks of life, water and air, and actually to not price that. I will say this on the public record, if I see any academic or public policy study coming out of India that does not size the externalities and the costs of the nation's biggest public health emergency and then does energy policy advice, that's like saying, here's a drug with efficacy, but I'm not gonna tell you it's side effects nor am I even going to quantify it. We know that that's not allowed, right? We don't do that for drugs, so why should we do it for energy or for things that affect the air we breathe? I don't think we're in a position to do that. That's not an excuse we can make anymore. So I'll go on the record and say for any forthcoming or existing work, you absolutely have to size in and price this huge externality.
Host (27:37): I mean, and it's not just India that is facing this problem either. It's multiple countries in the Global South. You go to a place like Jakarta, for example; you have a similar issue with air pollution. You go to Lagos in Nigeria; you have a similar situation. I mean, it's a massive problem. The West is, by comparative context, we've gone through all of that stage, and it wasn't pretty. You had some serious issues going on there in terms of health and that seriously can affect the productivity of the economy in general, I guess, too. The amount of days that people miss, working days, for example, if you're to take air pollution costs into account there, it's staggering. Now, keeping in mind the idea of the cost and the development, I wanted to just get your thoughts on; I guess this does relate to what you were just saying about ignoring the externalities of air pollution for example. But, there is a discussion that is happening in some circles about doing and using whatever energy is available to develop an economy or a country.
(28:54) Now, for example, some countries are proposing just continuing to use unabated coal to develop their economies to move people out of poverty. Bearing this in mind; like China is a great example of this kind of policy working and bringing people out of poverty. Of course, the West has done that as well, and there is a certain sense of moral weight behind this. It's like, oh if you've done it, why shouldn't I be able to do it? Right? But then you have to take into the context, of course, the health implications and then, of course, climate change as well now. Then, of course, those impacts kind of exacerbate on poor and vulnerable people.
Do you think that there is any weight to this kind of argument, or do you think that we are now at a stage where the alternatives that are available are at a point where we can just skip over that nasty part of energy and development?
Sugandha Srivastav (29:58): Sure. So really, to answer that question, firstly, Great Britain started the Industrial Revolution, and London was an absolutely filthy city. The amount of smog and coal, if you look at the historical records, you would see deaths. You would see children dying. You would see people complaining about what a terrible place it was. I actually love going back to that history because to some extent, we only hear about the glorified bits, but if you dig deeper into that record, you will certainly see the sort of devastating air pollution impacts and how there was a huge drive to actually clean up even back then.
To just give you a little story here, because I love going into that history. Actually there were dreams of a solar-powered world back in 1909, even across the states when the fossil fuel infrastructure was being built out. In fact, there was this chap named George Cove who actually invented and demonstrated a solar panel. The way technical magazines wrote about him was that, wow, this technology can free the masses from energy poverty. It's clean and it was almost like a beacon of hope. It's a different story that, actually, George Cove got kidnapped and told to shut down his solar business. This is the time Edison Electric and JD Rockefeller were growing their oil and coal businesses. That's a different story, but just to let you know, this historical vision of a renewable energy world is not a new thing. The idea that fossil fuels are dirty and polluting also is not a new concept. This has been known.
(32:02) Now, coming back to historical responsibility. Without [a] doubt, we know per capita emissions, and there's a huge difference between countries like the small island nations, sub-Saharan Africa, India; well, India is now close to the European per capita emissions but it's still far less than the US. I think India, I would now rank as sort of somewhere in the middle. It probably has some responsibility towards the small island nations and poorer economies because it is an emerging market. It's done fairly well. Of course, I mean the US and Australia are far more. So that inequality exists and I acknowledge it. But what I would do as an Indian citizen, actually, I would just say, well, what is good for us now? What is the best technology that we just have available for us? And solar is five x (times) cheaper than coal. I mean, that is just a fact. So, why would you not go for something that is five x cheaper? That just simply makes economic sense and that is economically rational. Not to be too facetious here, but I wouldn't propagate the horse-drawn carriage just because that would've been the transportation method that was used to unlock prosperity back in the 1700s, right? I would say, well, actually, let's just move on to some modern technology that's probably more efficient and more cost-effective.
(33:42) I think it's sort of the same story here. Technology has changed. There's modernization. As you said, the challenges are different. We're in a different factual situation. While these arguments on historical responsibility and ethics are interesting, I think we need to draw a line between what is just in your unilateral interest, given the new technological and cost reality, versus this other ethics argument. I think we need to not confound things either.
Host (34:19): Yeah. I think this, in a sense, ties into this whole concept of a just transition as well.
Sugandha Srivastav (34:27): Yeah.
Host (34:28): Now, for example, I feel like this, again, can relate to many different contexts all over the world, but we've got this big energy infrastructure that's been based off [of], for example, fossil fuels like coal, oil, and gas. And, you have a significant amount of people that rely on, for example, that supply chain for their incomes. Now this is particularly sensitive in countries, for example, in South Africa or a place like India, any kind of developing country right now still has a significant portion of their employment and their industry that's connected to this supply chain. I feel like, for example, if the coal industry in India disappeared tomorrow, you would have millions of people out of work, and that's not really what needs to happen, right? I mean, that wouldn't be fair to take away that income from people. Taking this into account, for you, how important is this idea of a just transition that moves away from dirty to cleaner fuels?
Sugandha Srivastav (35:42): Yeah, that's a really good point. I think what I find… Well, first of all, again, going a little bit back to history, at least in the case of India, the coal sector was in financial distress in the late eighties, and it was actually about to fail. What made it survive was [that] the World Bank gave very low-interest loans and injected capital into the Indian coal sector in the early nineties, and that paved the way for open-pit mining in India. Now, when we talk of the just transition, I think we really need to remember this history because open-pit mining across Eastern India displaced a lot of people and a lot of traditional livelihoods, which were based on farming or forest foraging. Jharkhand, which is one of the main coal-producing states, the name Jharkhand means the land of forests. It was where a lot of people were engaged in these traditional, tribal lifestyles, and that was completely obliterated with open-pit mining. Now those people, what they had to do instead was either steal from the coal mine, which was; actually, most of them resorted to that. Or, for the lucky set, get employed by the sector.
(37:07) The way the land acquisition; land acquisition in all countries is a very messy topic, but to elucidate the legal side of it, there is a 1957 ACT called Coal Bearing Areas Act. You don't actually really need to do too much due diligence to acquire coal in India. It’s a special Act, which is different from the general Land Acquisition Act, LARR. The social impact assessment isn't needed. You don't actually have to do too much due diligence. You actually don't also have to do public hearings with people there. The reason I bring up that history is that many of those who are directly employed in the coal sector, or indirectly, let's say, stealing from the mine or perhaps involved in the transport of coal, in some sense, it's actually aggrieved parties. They had a life prior to this huge industry emerging, but now we're in a situation that coal is there. We can't go; open-pit mining has such a devastating ecological impact that it's unclear if agriculture will even be possible in those areas. So we're left with this issue of what to do. And I think you are right. It's a huge issue. It's one we absolutely must consider.
(38:27) For me, I think what I'm very interested in is a diversification story because a lot of countries have had success in labor market transitions, but areas with a healthy labor market are not the areas with natural resources. In fact, where there's natural resources, we see the natural resource curse. You have mafias appearing; you have stealing from coal mines; you have people in these really tough jobs. This is not a glorious job by any standard. It's not the job that helps you escape poverty either. As development economists, we can be very clear about this. No one views a coal mining job as your ticket out of poverty. It's not. I think that what we need to do from a just transition perspective is go back to good old development economics and say we need economic diversification in those areas. Actually, one of the key ways to do that is [to] remove this huge dependency on one natural resource and actually add more industries; add more services; add diversity. Diversity is key. We need that. I think that is what we need to do; that's not so much a climate issue. I would actually frame it as a classic development issue that you want areas to have a broad base of jobs rather than just have one sector.
So, of course, just transition is sort of a new packaging, but it's actually a very old concept. I would almost go back to the literature on natural resource curse, economic diversification, and job security. It's a very, very old literature.
Host (40:15): What do you make of the new just energy transition partnership deals that are now kind of coming out, signed between developed economies and developing countries. For example, Indonesia's receiving 20 billion dollars in support. Given what you've just talked about in terms of diversification, how important do you think these partnerships are and are they the right financing models that we need to help move away from this idea of having people stuck in a fossil fuel industry, for example?
Sugandha Srivastav (40:50): Indonesia's a really interesting example and also a country I've lived in, and I think Indonesia, South Africa, and India are all connected by the presence of this huge local coal industry. I think the just energy transition partnership is very helpful from an equity perspective because, as we know, there is this huge historical discrepancy in responsibility over the problem. But also, I think from a financing point of view, it has been challenging for developing countries to get the necessary levels of investment, especially at concessional rates. I think the cost of capital has often been quite high, and it's been tricky to get it at a lower cost of capital. In some sense, actually, this 20 billion that's getting unlocked for Indonesia, obviously, the devil lies in the details, but from a top-level perspective, getting concessional funding can also unlock private sector funding. It can be used to leverage more private finance, and if it can have that second-order impact, that can be very, very powerful because the bulk of financing will ultimately come from the private side, but the public has to galvanize it.
(42:14) How it is used is absolutely critical. I know that there's a lot of emphasis on re-skilling coal labor and even closing down coal-fired assets. This is all really important, but I think we need to be quite careful about the details. If you are refinancing a coal-fired power plant, obviously, it has to have additionality. It shouldn't be the case that it was one that was going to shut down anyway, or it was one that, or at the same time we're building new coal while you're paying to shut down existing. It has to have additionality. I think on the labor market side, retraining and re-skilling programs are obviously there, but we should also think of… I mean the JET-P’s, should be also used for that new investment in new modern energy infrastructure. I think that that is part of it, I would say that's almost one of the most important parts of it, as well as building the institutional capacity for grid operators to manage a renewable energy grid, which is technically different from a thermal-based grid, and just the way that is managed.
Host (43:39): Do you see, this is not related to just energy transition partnerships, so something you said just earlier reminded me of offsets. Do you see, like, given all the problems with offsets, I think it was when you mentioned additionality, which reminded me of offsets and given all the problems with offsets that have kind of come up historically and, of course, recently, if an offset market was perfect. For example, do you see a role for offsets in this just transition?
Sugandha Srivastav (44:15): It's so hard because we're so far away from perfect offset markets, and there's a question of whether we can ever get to a perfect offset market. But, to indulge that fantasy for a second, if, let's say, we could show that there is real additionality, if we could show that the CO2 reduction is meaningful and will last for a meaningful amount of time, then I see no reason to not unlock that channel of financing. Think of it as a market match. There are people who wanna pay for CO2 reduction, there are people who can do CO2 reduction, and on the premise that this is all real CO2 reduction, there's no reason to block that trade, you know? But the key assumption is that it's real CO2 reduction, and I think that's the hiccup which we've been trying to resolve with these various offset markets where you don't wanna give false confidence if it really isn't real CO2 reduction.
With that said though, I do think there is almost an interesting opportunity on the biodiversity and nature management side that it's not all about CO2. Actually, some of it can just be about restoring biodiversity, about creating incentives for protected areas and actually if there is financing for that, that can be helpful. So I think that there's a space for that. I think that it's always something you do in addition to your national plans. It is never a substitute. You never wanna create a moral hazard that now you've offset it, and you can lie back and feel good about yourself. I think the world has moved towards a paradigm where it's always a cherry on top. It's good to have. But it is never sufficient. It's only a compliment. It's only an add-on. It's only a plus. It is never a substitute. I think that's a reasonable principle, actually.
Host (46:26): If we go back to the health argument here, for example, if a policy were to be put in place where offsets would be used to clean up indoor cooking facilities. I think minusing the idea away of carbon reduction, if we just look at it from a pure developmental perspective, do you think there's also room for that? If it is put into a correct…
Sugandha Srivastav (46:54): Yeah. I've done some analyses of the returns on these health interventions or even just reducing local air pollution, and it is massive, and it pays itself back really quickly because there is evidence where you can show how increases in air pollution, or even just indoor air pollution from cooking stoves correlate with hospital visits, a reduced life expectancy and child mortality. And even actually child stunting and poorer performance at work, and reduced labor productivity. This literature, I mean, if you just look at the health impacts of air pollution and the econometric robust evidence, it is such a rich literature. You even have literature that shows how pregnant mothers being exposed to indoor air pollution give birth to babies that are less healthy than those that are not. I would say that really the returns on this intervention are so high and using a transfer or financing mechanism makes a lot of sense from a social return perspective. It's actually, I would rank it as one of the very high-impact interventions. For those NGOs or social impact investors who might be listening to this, yes, do it. It has a fantastic social rate of return.
Host (48:17): Ending on that good note. Now, if we were to look at all of the economic gains for, say, if everything played out really well, right? We had a just transition; we had a great rollout of energy and energy access for everybody. Are there any good examples that we could follow to get to that path that have already proven themselves in history, for example?
Sugandha Srivastav (48:43): Yeah, for sure. I mean, going back to the, I think the UK is a poignant example because it was filthy with the industrial revolution, but also grew. And now if you look at the UK grid, coal is almost gone. So in the last, so what the UK did was it introduced a carbon price floor. It was on top of the carbon price and the EU emissions trading scheme, and it sort of topped that up. That policy, there's a good friend of mine called Marianne Lautier, who did a study. She showed in a decade that tax on carbon essentially phased out coal from the UK electricity system over a decade, and it's pretty much out. I think that's a poignant example, especially because it also cleaned up the energy emissions, and we don't have electricity shortages. It's actually fine. The built-out offshore wind by Scotland and that's providing too much energy that they're able to export it.
If we look at other countries, there are countries with vast amount; actually, I've talked about the UK, but when we talk about renewable energy potential, the Global South is in a fantastic position because it has solar irradiation at levels that are far higher than many countries at northern latitudes, and they also have the space to build that out. What I'm seeing, for example, in India, is a very positive story. Is actually some of the cheapest electricity the world has ever seen in all of history coming from Indian solar farms. And that is far cheaper than the solar electricity being produced in the UK, for example. If I were to paint a vision of the future or even draw examples that I'm seeing now, it would be something that's really optimistic because we know that now we have tapped into the cheapest source of power available that can reduce bills for consumers. Energy is the backbone for many other industries, right? So if they can get cheaper energy, their input costs go down, and that unlocks productivity and better functioning of industry as well as households.
People might tell you, okay, there's issues with grid-scale batteries. You need, intermittency is a problem. But the fantastic thing that we're seeing here is learning by doing, and the fact that costs are coming down year on year, actually following a very predictable relationship that was first observed for airplanes, that with every doubling of cumulative production, you see a very stable decline in unit costs. That's happening for large-scale batteries. It's happening for solar energy. It's happening for wind. Really, I think sometimes we have a status quo bias, and we think of how hard things are, but actually, the data and what's coming out with the unit cost is a very optimistic story that we are heading towards the cheapest energy future that humanity has ever seen. So, why not jump on the bandwagon and unlock development benefits while we're at it?
Host (52:10): Well, thank you so much, Sugandha. It was wonderful to talk to you about all these really fascinating and educational and important topics. Thanks for coming on.
Sugandha Srivastav (52:20): Yeah, thanks so much, Ashley. This was great.