Q&A

May 18, 2020
Solar’s Future, India’s Mega-Market, and Why Saying No Isn’t a Viable Energy Strategy: Q&A with Varun Sivaram
By Varun Sivaram, Todd Moss

Varun Sivaram heads anyone’s short list of global solar power experts. A physicist, best-selling author and clean energy technology expert with experience spanning the corporate, policy and academic sectors, Sivaram was most recently the CTO of ReNew Power, India’s largest renewable energy firm. His 2018 book, Taming the Sun: Innovations to Harness Solar Energy and Power the Planet, was heralded by the Financial Times as “the best available overview of where the industry finds itself today, and a road map for how it can reach that brighter future.”

Now Sivaram joins The Energy for Growth Hub as a Fellow focused on grid modernization and clean energy in India. Todd Moss, executive director of the Energy for Growth Hub, sat down with Sivaram to get his thoughts on what it will take to deliver on solar’s full promise to help fuel global energy for growth.


TODD MOSS: In 2018 you wrote Taming the Sun, which received wide acclaim and which I see as the book on solar technology and the innovations we need for it to reach its full potential. What is the most important thing you think people just don’t know about the future of solar?

VARUN SIVARAM: Even though solar is the fastest growing power source in the world, if we don’t invest right now in the technologies and systems to integrate a whole lot more solar, then solar’s historic growth rate could peter out over the next decade or two. And if that happens, it’ll be way too late to then make the investments that will continue growing clean energy and transitioning to a low-carbon economy.

Right now in most parts of the world — including India, where I just spent my past few years working — there is still only a little bit of solar and a little bit of wind on electricity grids. The more intermittent solar and wind you put on an electricity grid, the more difficult it is to integrate the volatility of that power. It’s not impossible — in fact, jurisdictions around the world from Germany to California to Portugal to Spain have made tremendous progress on integrating a whole lot of solar and wind power.

But it’s important to make a lot of investments to do so. You need a very flexible grid that has a lot of transmission and responsive demand. You need generators that are not renewable energy — like natural gas, hydroelectricity, or even nuclear — to buffer the intermittency from solar and wind. You may need batteries, which are increasingly important, though they still aren’t as important as some of these other solutions. And in the long run, I still believe we’ll need new solar technology.

These investments are even more important now that solar is even cheaper, not only so that it can replace existing sources, such as coal and natural gas, but also so that solar can power brand new uses of energy. It can power the production of clean hydrogen, for example. And that’s going to enable us to decarbonize sectors of the economy that normally aren’t coupled to electricity, whether industrial processes, transportation, or heating and cooling buildings.

Solar needs very far-sighted investments or it could quickly hit a wall over the next five, ten, or 15 years.” —Varun Sivaram

I’m super excited that there are hundreds of gigawatts more solar in the world than when I wrote the book. But to get to the terawatts and tens-of-terawatts scale, I still think we’re going to need to be very far-sighted in the investments we make. Because even though solar is growing so quickly right now, it could quickly hit a wall over the next five, ten, or 15 years, depending on where you are.

 

 

TODD MOSS: What are you most excited about right now in the solar field, and what are you most worried about?

VARUN SIVARAM: I’m most excited about the maturation of this industry. Folks are getting very comfortable with solar. For example, investors now really understand how to invest in massive solar farms. Just ten years ago we had never seen a solar farm greater than 100 megawatts. And now you’re seeing mega solar projects sprouting up all over the world. This is enabling countries around the world to rapidly scale up solar power.

Additionally, developers, like the one I worked for in India, are gaining expertise. We’re much better at nailing the costs of a plan well before we build it. There’s a lot less speculation going on across the entire ecosystem, including suppliers.

Last year I spent a week in China meeting with every CTO from every major solar production company there. It’s fascinating to see how automated those factories are, how quickly they churn out solar cells and panels, and how reliable they are. And, we finally have data on how long solar panels last, which is more than the 25 years that they’re normally warrantied for. It’s primetime for this industry.

Despite my excitement and how hot the industry is right now, I’m still worried about people — investors, leaders of innovative companies, policymakers — getting too complacent. We’re starting to see trade barriers pop up around the world that make it harder to trade solar products. For example, we’re seeing tariffs on Chinese panels coming into India. We’re starting to see limited investments in innovation.

When I talked to those CTOs in China, I loved the fact that their products are meeting customers’ needs today. But it wasn’t clear to me that any of those Chinese companies were investing five or ten years ahead in the technologies of the future. They don’t need to right now. That’s not how the industry is structured. But complacency really worries me, because where the industry needs to be in ten years is not where it is now, even though where it is now is far better than where it was ten years ago.

 

TODD MOSS: You just spent time as chief technology officer at India’s largest solar company. What surprised you most about the power sector in India?

VARUN SIVARAM: I expected the power sector, and the renewable energy sector, to be dysfunctional. But then, when I was on the ground, I was most surprised by how much stuff actually gets done.

Before that experience I could sit here in the US and say, India has an entirely unsophisticated power sector. It’s highly illiberal. There are these long-term contracts. Market forces are very limited. The electricity distribution companies, the lynchpin of the entire system, are insolvent. And if they’re insolvent, then how on earth does revenue flow from customers all the way to power producers? How does power ever get produced and sold? The Indian grid loses nearly 20% of the electricity between generation and the consumption, whether it’s through theft, poor networks, or mismanagement. There are all kinds of things that you would expect to be totally dysfunctional. And these things are in fact true in reality.

But when I got there, I was amazed at how the countervailing ability of the Indian economy to somehow manage with all of this dysfunction and still get massive projects done blew me away.

The company I worked for, Renew Power, now produces one percent of India’s electricity. Founded by a visionary entrepreneur Sumant Sinha, Renew has been around for less than a decade, and it’s rapidly expanded its portfolio of utility-scale wind and solar farms. Every year the company puts up one to two gigawatts of wind and solar power. Doing so requires a hybrid of top-notch project management and a distinctly Indian way of doing business.

To underscore how incredible this is, I’ll share a brief anecdote. On the day of Diwali, India’s biggest holiday, the whole country shuts down because everyone’s celebrating. As it so happens, because they’re popping fireworks, the skies of New Delhi, which are always smoggy, become even more smoggy. On this particular day we were contracted to open one of our biggest solar plants. This enormous plant is supposed to open, and suddenly the laborers are not coming over. People in the field were making phone calls, trying to get hundreds of other laborers to come to make up for the ones that didn’t show up. There are trucks parked with our equipment — our inverters and our panels — and we can’t open the trucks because it was chaos.

And yet with close to 1,000 people on that 250-megawatt site the whole thing got commissioned on time. That blew me away. Because the chaos somehow managed to overcome the dysfunction, and just by sheer willpower people on WhatsApp and their cell phones coordinated this massive, complex technical operation to energize each individual string, inverter, block, substation, and send power to the grid. And it all happened on time. That plant powers hundreds of thousands of households. And the company is going to keep building them.

Most of the stuff we do in the U.S. to help create a high-energy future for all people around the world is not actually that helpful.” —Varun Sivaram

TODD MOSS: That’s a great story. And actually thinking about moving from something that looks totally broken on paper to something that manages to find a way through is how I think of Nigeria all the time. So that’s a very familiar story I’ve heard.

Now you’re back in the United States and there’s been a big effort in Washington to help boost energy sectors around the world. What do you think is the biggest thing the United States could do in the coming years to help create a high-energy future for all people around the world?

VARUN SIVARAM: Most of the stuff we do in the US to help create a high-energy future for all people around the world right now is not actually that helpful.

What do we do to ensure that countries around the world are able to have a sustainable future? We do things like tell multilateral financial institutions not to fund fossil-fueled energy projects. Now, that’s good insofar as it’s not great to build new coal plants around the world. It’s important for climate change. But it’s probably not great insofar as natural gas can actually help countries like India start to decarbonize. And in doing so, those plants can also provide flexibility to the grid in order to accommodate intermittent renewables.

I’m not saying that a lack of World Bank financing in India is what’s holding natural gas back. But around the world I do think that our engagement strategy — which tends to be, “Let’s tell people what not to do: don’t go borrow from China, the Belt and Road Initiative, don’t go borrow for fossil-fueled energy plants, don’t go borrow from Japan for coal-fired power” — isn’t a very useful engagement strategy if what we want to do is help countries around the world achieve a high-energy, sustainable future.

There is no moral or practical reason for the United States to say to India, ‘Hey, use less energy.‘” —Varun Sivaram

And, I intentionally say “high-energy” first before “sustainable” because the average resident of India uses ten times less energy per capita than the average American. There is no moral or practical reason for the United States to say to India, “Hey, use less energy.” India should be using at least three times more energy as it currently does.

And if we’re going to enable them to use energy-intensive systems but also be sustainable, our highest-leverage vector of helping a country like India is innovation. American innovation is by far the best way to enable countries to achieve clean-energy transitions. If we in the U.S. develop technologies — ideally in partnership with countries like India, where we then take our technologies that are either developed here or co-developed with them, and they’re customized to the Indian context — that’s a great way for India to find affordable alternatives to what is already a fairly affordable fossil-fuel system.

Because affordable fossil fuels come with disadvantages: They cause horrible air pollution. India is energy-insecure and dependent on imports of oil and of coal, and moving them away from those sources is advantageous for some reasons. But we shouldn’t kid ourselves that the point is to force them to use less energy. That is something of a straw man, but we should also not be forcing them to curtail their energy growth.

Sure, energy efficiency is super important — it’s the number-one way that Indians can achieve affordable energy. But beyond taking energy efficiency measures, Indians do need to use more energy. And so do many other emerging economies around the world.

 

TODD MOSS: What else could the United States do to help India’s transition?

VARUN SIVARAM: A bevy of things. American and European electricity markets can provide something of a model for how India liberalizes its electricity sector. It’s not a perfect fit, but India should try and adapt what’s worked in the Western world. Many of the regulatory lessons that we’ve learned from liberalization here can be ported over to develop well-functioning wholesale markets.

Next, it’s really important for investment flows from the West to reach sustainable infrastructure in countries like India. States should provide a constructive alternative to just saying “Don’t take money from China.” Our company, ReNew Power, depended heavily on American capital, not only from our major equity-holders like Goldman Sachs and CPPIB, but we also raised money and debt finance through the international dollar bond markets. International debt and equity capital was super important for us to put up utility-scale solar and wind projects.

Going forward, greasing the wheels of financial flows from the West to emerging economies is going to be important. That’s not to absolve emerging economies of their responsibilities. The reason that many Western investors do not want to invest in India or other emerging economies is because of particular risks that those economies need to deal with, including the risk that the distribution electricity company won’t pay for the power it buys, thereby causing default on the loan to build the clean energy project.

Those are some of the high-leverage ways that the United States can help these countries. But to be clear: saying no is probably not the best primary engagement strategy.

I think India’s energy transition is the most important in the world, bar none.”—Varun Sivaram

TODD MOSS: We’re so thrilled to have you join the Energy for Growth Hub as a fellow. But why are you joining the Energy for Growth Hub?

VARUN SIVARAM: It’s similar to my answer when folks would ask me why I left the United States to go to India. People in India were perplexed. They had never seen an American who had decided to leave America and take his career to India. It always works the other way around.

But I went because I think India’s energy transition is the most important in the world, bar none. It’s crucial for India to have a high-energy future. Just five percent of Indians have air conditioning, and only two percent own cars. The amount of energy growth that’s necessary there, just for people to have a normal modern lifestyle, is a moral imperative.

But it’s also the case that as India grows over the long run, between now and 2050, India could become the world’s largest emitter, passing the United States and China. So advancing clean energy in India and making sure that the world can deeply decarbonize without compromising India’s development goals make India’s the world’s most important energy transition.

That attracts me to the Energy for Growth Hub? The ethos that energy and growth go hand-in-hand.”—Varun Sivaram

What attracts me to the Energy for Growth Hub is that its fellows, scholars, and you, Todd, share that philosophy, that ethos of “energy and growth go hand-in-hand.” It’s of course important to be as efficient as possible, and as clean as possible. But emerging economies face deep, profound development challenges. And it would be irresponsible of us not to first and foremost address those development challenges, and try to find a way to be sustainable about it.

Often I find — and I’m sure you’ve found — that the solutions that we tend to think about get those priorities mixed up. We might find, for example, that the dollars we’re spending on a rooftop solar project or a solar cookstove could be spent far more effectively on a centralized low-carbon energy source. The fact that we are misallocating scarce dollars seems to be a reflection of the fact that we aren’t thinking very carefully about our priorities. Development is absolutely central to the work that you do here at the Hub, and the work that I want to do, so I’m thrilled to get a chance to work with you and the great community of scholars on development and sustainability. Thanks so much for having me.

 

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