Saturday Dec 14, 2024
Saturday Dec 14, 2024
Tuesday, 4 February 2014 00:01 - - {{hitsCtrl.values.hits}}
Energy costs are an issue for all South Asian nations. In Sri Lanka’s case, large hydro capacity is more or less exploited to the full. There is more space for mini hydro development but there are cost, purchase price and environmental issues.
Solar, wind, wave, dendro, tidal and geo thermal as potential sources of power are almost in virgin condition, virtually unexploited, except for a few wind farms and limited solar applications. The technocrats, bureaucrats and politicians in the sector seem infatuated with coal and other fossil fuels, notwithstanding the high cost of fuel oil and the tragedy and/or farce of Norochcholai (26 breakdowns and counting!). Sampur is set to follow. There are a bunch of people who are also talking of going nuclear! Poor Sri Lanka!
The knockout punch is the prediction by the National Movement of Electricity Consumers that we would have the virtual ‘Hobson’s choice’ between higher electricity charges or power cuts, very soon! Thomas Hobson was a livery stable owner in Cambridge England, who hired out his 40 horses. In order to rotate the use of his horses by customers, Hobson offered customers the choice of either taking the horse in the stall nearest to the door or taking none at all. We will also have a similar choice for electricity, pay more or no power!
Nissan Leaf to the fore
Bhutan is doing something sensible in the energy sector. Recently elected Prime Minister of Bhutan Tshering Togbay announced a plan to start replacing official government vehicles, currently run on petrol or diesel, with the Nissan Leaf, an electric car, by March 2014. At a later stage, taxis and family cars would be gradually replaced by locally assembled electric vehicles. This will make Bhutan’s capital Thimphu a global electric vehicle ‘hot spot’ and a showcase for green technology in South Asia.
For Bhutan, electricity is like oil for a country in the Arabian Gulf region, it is the most important resource; water cascading down from the Himalayan glaciers supplies a constant source of energy to driver turbines, which hitherto has mainly provided electricity which Bhutan sells to its neighbour India. Almost all the income from these clean energy exports Bhutan’s utilises to import highly-polluting fossil fuels to power Bhutan’s transport infrastructure. Environment and air pollution is becoming an issue in the Thimphu valley due to the large number of vehicles.
By 2020 Bhutan plans to reduce by 70% its fossil fuel imports. This is vitally important as fossil fuels are now imported to Bhutan through India and India also provides a subsidy. The Renault-Nissan Chief Executive Carlos Ghosn met with Prime Minister Togbay at Thimphu recently for discussions on the supply of electric cars and battery charging systems. Bhutan has also spoken with the American electric vehicle maker Telsa, based in California.
Ideal ground
Bhutanese officials as well as Nissan executives point out that Thimphu and its current population of 120,000 is the ideal ground for a venture of this sort. Tashi Wangchuk of Bhutan’s Thunder Motors, the assembler of the prototype electric car, also agrees.
Hydro power is cheap, due to the mountainous physical features. Most road trips are short. At present Thimphu’s residents depend heavily on a fleet of 3,000 minicabs. The introduction of hundreds of electric vehicles will have an immediate effect and impact in such a small and compact city. A typical taxi driver in Thimphu presently spends around US$ 13 a day on fuel, whereas it is estimated that recharging an electric car would cost just 16 US cents.
The Nissan motor company in a statement ‘applauds the initiative taken by the Bhutanese Government to leapfrog oil dependent mobility, in favour of zero emission transport and is keen to support their ambitions’.
However Nissan’s CEO Ghosn admitted that the global sales of electric cars were more than four years behind expectations. He confirmed that Nissan was in commercial talks with Bhutan over the supply of Nissan Leaf electric cars and charging infrastructure. The newly-elected Government of Bhutan seems determined to make Thimphu a research and development centre for electric vehicle technology. The segment is one of the most fiercely contested battlegrounds in the automotive industry worldwide and manufacturers are competing to dominate the future market for these futuristic environmentally friendly green cars.
The Bhutanese Government is seeking foreign donor or investor support for this project, but has said it is determined to go ahead even on its own. Presently the import of personal vehicles into Bhutan is banned in order to conserve foreign exchange, but the Government intends to introduce legislation in Parliament to exempt electric cars soon.
Thimphu’s Thunder Motors Wangchuk, a Yale trained environmental scientist turned businessman, says his company has already spent nearly US$ 2 million on research and development on electric car technology. The company plans to spend another US$ 1 million on producing the first 100 electric cars, using the bodies of Suzuki-Maruti cars from India, imported batteries and electric motors and the proprietary technology for the interface between the engine and the gear box.
Bhutanisation
Breaking out of its dependency on imported fossil fuels is vital for Bhutan due to fossil fuels all being imported through India and the Indian Government providing a subsidy to Bhutan on the cost of the fuel. Indeed this dominance of India over Bhutan has resulted in a new word entering the lexicon of international affairs: ‘Bhutanisation!’
The word was coined in the context of political, security and economic relations between the tiny Himalayan kingdom of Bhutan and its giant neighbour India. The earlier Government of Bhutan while holding on to the traditional dependant relationship with India also broke new ground in initiating a dialogue with the People’s Republic of China, the Himalayan neighbour to the North.
As has been pointed out, Bhutan is a virtual hydropower reservoir for India. India builds the reservoirs, damns and turbines, installs the power lines and pays a negotiated price. India supplies Bhutan with subsidised petroleum products, among others things. It also guides Bhutan’s foreign relations.
There is an Indian Army Brigade garrisoned in Thimphu, Bhutan’s capital city. The only golf course in Thimphu is run by the Indian Army, and the control of access to this facility and the Officers Mess/Club House, gives a whole new meaning to the words “domination” and “influence” of the Indian Brigade Commander over the Bhutanese golfing elites, UN, diplomatic, INGO and expatriates resident in Thimphu!
Labour from the neighbouring Indian state of Bihar migrate to work as daily paid labour on Bhutanese construction projects, as the Bhutanese themselves have land and are primarily agriculturalists. They have no need or wish to work as labour on road or hydro power construction projects. Bhutan has an ongoing problem with encroachment by settlers from neighbouring Nepal. The induction of Indian migrant labour compounds this problem.
When Bhutan scheduled the recent and only second general election, the existing Government was challenged by the more pro-Indian present Prime Minister Togbay’s Opposition party. Inexplicably, just a few days before the voting at this election, the Indian Government suddenly announced it was withdrawing the fuel subsidy, given to Bhutan. Fuel prices in Thimphu and the rest of Bhutan, went through the ceiling. The sitting Government crashed to a resounding defeat at the election. The winners declared that relations with India would be strengthened. Bhutanisation in practice! The Indian fuel subsidy has since been restored.
Finlandisation
Bhutanisation is similar to Finlandisation. Finlandisation entered the lexicon of International Relations, in the context of the old Union of Soviet Socialist Republics (USSR) and the common border with Finland, 1,340 kilometres long. Finland was economically and politically in a literal USSR ‘bear hug’. Finnish politicians had to ensure that the Soviet Bear was kept in good spirits all times. This status of having to be being overtly docile to a neighbour was labelled the ‘Finlandisation’ of an independent country.
Older Finns remember that at that time, a major component of their compulsory military service was securing the forested and freezing 1,340 kilometre border. The grip on Finland’s economy by Russia, the successor to the USSR, to the disquiet of Finns, is slowly tightening.
Recently the Russia State-owned United Shipbuilding Corporation declared an interest in purchasing a Finnish company, Arctic Helsinki, a Finnish shipyard specialising in making ice breaking ships. The opening of Arctic shipping routes due to the effect of global warming brings into sharp focus the need of large number of operational ice breaking tugs to escort convoys which would use this Arctic shipping route to Europe from Russian and Asian ports. This is a much shorter route and would be much faster than the Southern Oceanic Route, which passes Sri Lanka’s Dondra Head and the Hambantota harbour.
Ice breaking capacity will be critical for the operational viability of this Arctic Route and clearly the Russians are thinking way forward. For the Finns, this comes hot on the heels of the Russian investment by Rosatom, a Russian atomic reactor builder, to rescue Finland’s troubled Fennovoima nuclear plant by investing a one-third share and also selling a nuclear reactor to the Finnish company.
The USSR was a huge trading partner of Finland, not necessarily by Finland’s free choice. When the USSR collapsed the Finnish economy plunged into a massive recession in the early 1990s. But not all Finns seem concerned. At a recent Nordic Council meeting in Oslo, Jyrki Katainen, the Finnish PM, said of the Russians: “I wouldn’t say they were tightening their grip. We are very satisfied if there is more Russian investment into Finland. We need foreign investment into Finland.”
The recent declines in the paper and pulp industries and the sale of the flagship Finnish corporation Nokia to the USA’s Microsoft have made the Finns increasingly worried about what will provide the impetus for economic growth in the Nordic nation. One Helsinki based business executive commented: “I understand why people are cautious about the Russians coming to Finland. But with the forestry industry and Nokia suffering we need all the help we can get.”
To ice hockey crazy Finns, the most symbolic transaction was the sale of one of the nation’s main ice hockey clubs, Jokerit, to a consortium of Russian businessmen, close to the Russian PM, Vladimir Putin. To the Finns it is disconcerting that Jokerit will from 2014 play in the higher-powered Russia-based Kontinetal Hockey League.
In the same way, Finland’s trade with the EU has been decreasing, while at the same time, trade with Russia has increased. The Finnish PM has publicly stated: “The economies are integrating.”
Finnish exports to Russia have almost tripled, with Finnish companies such as tyre maker Nubian Renkaat and retail giants Kesko and Stockmann showing strong growth in trading with Russian corporates, mainly in the State sector. Over and above business, a record number of Russian tourists arrived in Finland, in 2013. A total of 1.3 million tourist visas were issued to Russian travellers by Finnish authorities. The demand by Russians for Finnish tourist visas is so high that the Finns are opening up new visa offices in southern and central Russia as well as Siberia.
Today, Russian is the most spoken foreign language in Finland. The Head of Finland’s Institute of Migration has predicted that Russian speakers in Finland could displace Swedish speakers as the largest number of foreign language speakers in Finland, by 2050. Swedish is the official second language of Finland by 2050.
Katainen, the Finnish PM, explains: “Because of our history, there are people who have negative memories from the war time. But there are more and more people who tend to think it’s only good that our people reintegrating.” The PM has expressed disappointment that too few students are learning Russian. He also points out to a larger number of Russian businessmen coming to Helsinki. The PM says: “Previously it was industrial. Now it is entrepreneurial too and that is good.”
However, some Finns are worried about nuclear project Fennovoima. The Finnish Finance Minister has stated that she wanted Finland’s Parliament to reopen its debate on the permit granted to Russia to build the Fennovoima nuclear power plant. So among Finnish society, Finlandisation, even in the post-USSR era, is still a live issue, as is Bhutanisation is to the Bhutanese, similar to any small economy neighbouring a humongous one, as we Sri Lankans well know!
Gross National Happiness
Bhutan is also well known for championing the measuring of Gross National Happiness (GNH) it’s instead of the traditional measure of economic development Gross Domestic Product (GDP). The environment sustainability aspect of electric cars is an important part of the GNH philosophy. Bhutan pursues the measurement of GNH by studying the four platforms of economic development, environmental preservation, cultural promotion and good governance.
In 2008 President Sarkozy of France appointed a Commission on the Measurement of Economic Performance and Social progress chaired by Nobel prize laureate economist Joseph Stiglitz and including another Nobel Prize winning economist Amartya Sen. The Commission presented its report in September 2009, calling on the world, in the words of Stiglitz, to abandon its ‘GDP fetishism’.
The Commission agreed with the criticism that GDP, as a measure of well being does not take into account the depreciation of capital goods, although the value of reduction is based on market prices, not everything has a price , the value of services such as owner occupied housing and voluntary child care by parents is imputed by assumption.
The Commission also examined the well being of future generations. Our successors will inherit a stock of resources, machines, buildings and institutions, the quality of their lives will depend to a great extent on our behaviour and investments we make today, especially in their human capital, education, health and environment. Economic activity can be considered as sustainable if future generations can expect to be at least to be well off as us.
The Commission concluded that finding any one measure which catches all this seems too ambitious and that it is wiser to look at a wider range of indicators that is a basket of figures broadening official statistics beyond GDP alone. The Centre for Bhutan Studies has developed a GNH index with nine domains, 33 indictors and 124 variables, including an unpolluted environment.
Sound political reasons
Over and above Gross National Happiness, we see that Bhutan has sound political reasons, in trying to break its dependence on fossil fuels for energy supplied through India. For hydropower development, Bhutan has so far collaborated with the Government of India.
But in the forest around the Dagachuu River in Bhutan’s Himalayan foothills, the first Indian private sector developed hydro power project is coming on stream. India’s Tata Power has a 26% stake in this project which is co-financed by the Asian Development Bank (ADB). The power generated by this 126 MW plant, will be transmitted to India.
In the world’s first example of cross border use of the UN’s Clean Development Mechanism, Bhutan is permitted to earn carbon credits, as the power exported to India will reduce emissions across the border by 500,000 tons of carbon dioxide per annum. In reality so far only around 6MW of the potential of 1,500 MW of hydro power is being produced in Bhutan; in winter when the flow of water in the rivers is low, Bhutan has still to import electricity. But even at this low level of exploitation, hydro power is Bhutan’s largest export and accounts for 1/5th of GDP.
There is also the disruption caused to the environment by big hydro power dams and reservoirs. Bhutan would prefer run of the river hydro projects, which like Sri Lanka’s mini hydros take advantage of the altitude differences in the country’s steep terrain, directing water through tunnels and shafts to power turbines, leaving part of the river to flow along the original bed.
But this dependence on hydro power as the single biggest export item is a manifestation of the Resource Curse that affects countries which have one humongous export item, which stunts the growth of other parts of the economy. Like Sri Lanka’s export of labour which has resulted in shortages of manpower for local labour intensive industries. Bhutan has to diversify its agriculture and animal husbandry, develop tourism, small, medium and micro industries and enterprises.
At present the only exploitable asset is hydro power, but overdependence will cause problems. If all vehicular transport in Bhutan can in time be electronic and not fossil fuel based, then that would really improve the Bhutanese people’s Gross National Happiness, quality of life, the environment and also secure the nation’s independence and sovereignty. Bhutan could be a model for the rest of South Asia’s fossil fuel emission polluted mega cities on this aspect of electric powered transport.
Remember Colombo’s electricity-driven trams? We in our usual short-sighted and infinite wisdom scrapped them. But London’s Lord Mayor Boris Johnson is hitting the road with a ‘green’ electric taxi cab innovation which is scheduled to hit the streets in March 2014. While Nissan already has a prototype electric cab, the NV200, Metrocab is also working on one. The Chinese automaker Geely is also in the running. Nissan has an agreement with the Spanish city of Barcelona to supply electric cabs. Thimphu will have company.
(The writer is a lawyer, who has over 30 years of experience as a CEO in both State and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)
