On this subject Europe is much better, heavy duties on oil/car

SECONDLY –
STOP combusting the scarce OIL -for the ONLY purpouse of private transport !

I feel UN should come deeply into the picture on the upcomming oilcrises. UN should demand – say from 2020 onwards, all private commuting by cars and motorbikes be done by “manmade renewable fuels”, biodiesel or others. This would speed up needed technologies and supply sceems, in an interesting speed. Thus generate millions of new and everlasting jobs all over the place – planet Earth.

The rest oil would last for houndreds/thousands(?) of years, supplying all variety of petrochemical industries, producing an array of products which are for the better cause………
Also renewable energies are oil based.Take the windturbine, their blades ar made fron fiberglass, which is an oil produce.

Also it would ease the struggles of the airline industry, eg fuelcosts, actually it would SAVE the airlineindustry / tourism. There are (to my knowledge) no replacements for the jetengine, by now, nor fuel. OIL is high energetic, there is NOTHING LIKE IT !

Think again, and fast…….

Less to do with the environment. More do do with balancing our grids, and saving money as the technology rapidly continues to become more efficient ( particularly when one looks offshore ).

I feel that if every country on the globe were to develop wind power such that it made up 10 – 20% of each countries energy portfolio we would all be doing ourselves a favor.

Daily peak demands parallel supply for 35% of a year, typically in the colder months, when energy demands are higher, and solar activity is not so present ( save for some of the planet’s deserts of course ).

Keep nuclear, keep coal, keep hydro ( clean the technologies up a bit by putting more R&D into them ), and diversify our supply with Wind,solar, Biomass, Tidal, Waste to Energy, Geothermal, Hydrogen, and all other technologies that quite simply make sense if the application is efficient.

I am the President of two wind power companies, so of course I have a vested interest in seeing wind power do well. However, I also do volunteer work for NGO’s and worked as a geoligist for many years prior to moving into wind power.

Canada is a primary resource nation. We are innovators in extracting resources from the earth. We have spent the last 20 years letting European nations lead in the wind power business, and are presently playing catch up. It would seem as if India has embraced wind power, this is fabulous!

I am always looking for partners to do business with in Asia (India of course included in this vague geographical description ).

If anyone reads this and would like to discuss developing wind farms, I invite them to contact me at: ckuntz@cogeco.ca or direct 1 705 497 3764.

Cheers. Interesting Blog. Chris Kuntz

India’s next big business?Possibly oil, says CNET News.com’s Michael Kanellos. The country’s deposits are twice the size of Iraq’s.

Hi Atanu:
I see what you are saying now. You believe that fossil fuels pollute and solar doesn’t so solar is better. But it may not be cost effective to promote solar energy even if the pollution benefit were factored into the price of each fuel (to some extent, fuel taxes are there to prevent pollution). When I was a child, pollution was bad in the U.S. I remember being sickened by the smog. Today, I live in a major metropolitan area and I don’t notice the polution at all. The difference: better engines.

Of course, fossil fuels cause global warming. I would not think that this would be so very high on the list of priorities for India, but it is there. Still, I am not convinced that there is any truly “clean” fuel that can take over. Can you run a car on solar energy – I don’t think so. I don’t think there is enough solar radiation landing on a home to keep it fully powered (perhaps I’m wrong).

Economies of scale do not necessarily mean market failure. They can lead to natural monopolies but most situations in which you see economies of scale, there is still a limiting size that makes it efficient to have three or more private firms operate simulataneously. And, in any case, a natural monopoly could easily be a private company. The “scale economy” argument doesn’t explain why firms don’t produce solar power in abundance.

But Atanu has a reasonable explanation in his comment, that there is more to it than the usual downstream economic effects replacing the broken window. Reduction in pollution is one aspect. Geopolitical reasons and energy independence (which were alluded to in the post) are other important downstream effects, which are positive enough to make breaking that window attractive.

With high gas prices, cleaner energy solutions stand a chance. We don’t have to conserve any non-depletable source of energy. Solar energy, in all its forms such as direct solar to wind to biofuel, is one of the options. (Note, biofuel is solar energy.) The other is nuclear.

In India’s case, we are dependent on importing nuclear fuel. So India is better off going in for solar energy (which, I repeat, includes biofuel, direct solar, wind, etc). India is located in the tropics and sunshine is plentiful.

Why don’t people use solar technologies now? Because the technology is primitive and therefore the products are too expensive. If the technology were developed, then the solution would be more efficient. Then there is the problem of scale. Scale economies are massive in any mature technology. Solar will not achieve scale economies unless it is supported by forces outside the market. That is where the role of the government comes in.

To give a concocted example, suppose at 100,000 units, the average cost of a widget is $1; and at 10,000 units, the average cost is $10. Suppose at a price of $10 per widget the total demand is 5,000 units and at a $1 price, the total demand is 100,000 units. The market will exist only if 100,000 units are produced.

In other words, the market for widgets deviates from the ideal conditions for competitive markets in the sense that these widgets have positive scale economies. Therefore, someone has to build a factory huge enough to make these widgets to get the whole business going.

In the case of solar energy also, there are not only scale economies, but also very high fixed costs, often much of it sunk costs. (High fixed costs are a deviation from ideal market conditions which are assumed to have zero fixed costs.) So these fixed costs have to be funded by the government.

This government funding of sunk and fixed costs is not unheard of. The research and development which led to the internet and the world wide web which has enabled countless businesses to flourish was funded publicly funded.

So I argue that the government of India has the wherewithal to fund the research and development of solar energy (biodiesel, wind, direct solar, etc) technologies for use domestically and for export. Once the basic technology is developed, the private sector will jump on it and create neat gadgets which you and I will buy and put up on our roofs.

Government’s role is to correct for “market failures” which I identified as high fixed costs and scale economies. The former is fixed by massive funding, and the second by encouraging private participation for the commercialization of the products.

Regarding your point about taxing fuel to encourage conservation: it happens. Check out European prices: $6 per gallon as opposed to US $2 per gallon until recently. The Euro prices most of it taxes encourage conservation in Europe. What they do with that tax money I don’t know. But if they put it into funding R&D for solar energy (biofeul, biodiesel, wind, direct solar), then they are doing the right thing.

Oh sure, it may not be so bad in the long run because the higher price will spur conservation and alternatives, but the same thing could have happened if the government had merely taxed oil imports when the price was lower and it would have had some revenue. I see this as sort of like Bastiat’s broken window fallacy. Just because the economy efficiently produces a new window to replace the broken one doesn’t mean that it was good to break it. In the same way, just because the economy might efficiently produce a new form of energy to replace cheap oil doesn’t mean that it was good that cheap oil is no longer around.

Second: I wonder what you see as the government’s role in producing new energy policy. You wrote, “That we should have a good public transportation system instead of cars, a great rail system instead of expressways, a national goal of developing alternate energy source by 2010 instead of sending a man to the moon—that is not part of our thinking.” Maybe sending an Indian to the moon is a waste, but is it really the government’s job to promote alternative energy sources.

If solar energy is the great new thing, wouldn’t individuals willingly place solar panels on homes and on businesses? If it doesn’t pay for individuals to do this, why should government try to push these things? Maybe there is some kind of externality here that is important, but I do not really see it. Energy independence is not a public good.