India Can Turn Energy Volatility Into Strength: Atanu Mukherjee, CEO of Dastur Energy

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Hello and welcome to The Core Report's weekend edition. India's energy security is a matter of much discussion and debate. One of the reasons this has become relevant even to consumers like you and me is because of the ethanol controversy.

We are blending ethanol with petrol and the ostensible reason is to reduce our imports of oil. We import more than 80 percent of our crude oil requirements as India and by reducing it we're obviously improving our energy security and also contributing to sustainability and so on. But the larger issue is of energy security.

Now I know that many people think that putting ethanol in petrol means that your mileage will reduce, maybe some components in your internal combustion engine will get spoiled, but that's a different issue. Let's talk about energy security and why it's important and why a country like India and everyone in India needs to think about it more consciously and more frequently. To do that today on The Core Report's weekend edition, I'm joined by Atanu Mukherjee, CEO of Dastur Energy.

Dastur Energy is a Texas-based energy technology firm but it's also an offshoot of MN Dastur, a very well-known and leading industry, particularly metals industry consultants in India who's worked with groups like Tata Steel for decades. Atanu has been working mostly in the US. He has a joint graduate degree in engineering and management from MIT School of Engineering as well as the MIT Sloan School of Management.

He was also a research fellow at MIT in their computer science and artificial intelligence laboratory but he's also worked in technology including with companies like Microsoft. So Atanu, thank you so much for joining me. So the theme is energy security.

So tell us about how you see it. I mean, India is obviously in an unusual place, maybe similar to China in some ways, that we need to import a lot of our energy requirements because we don't produce enough of oil, at least when I talk about energy, right now I'm talking about fossil fuels, we don't produce enough of that in-house or within the country. So how do you view it and what are your thoughts as you've been seeing this evolve?

Right, absolutely. Thank you so much. I think the key thing for India from an energy security perspective is how do you complement what you have in terms of energy resources and are you able to exploit those endowments to the extent that you can and complement that with energy sources from outside India.

And so energy diversity becomes a key component in terms of how you secure energy and it's both diversity from a geographical perspective and diversity from the nature of the energy perspective. And so that's a key factor which drives energy security in the nation, any nation for that matter. And so any nation will have different endowments of different kinds and the question becomes how do we really exploit those endowments in the best possible way.

Now you have, for example, situation in India, endowments in some of the what you call fossil fuels which are mostly used like oil and gas is limited and that's a reality. And so you don't have a choice but to figure out hedged mechanisms or the most optimal mechanisms for importing that from different places in the best possible way. But equally important is that there are substitutes to that which can be exploited.

So ethanol, you mentioned about ethanol, you certainly substitute but there are limits to what you can do. So the question becomes to what limit can you push ethanol because ethanol is great in terms of a substitute up to 20 percent, for example, without engine modification that you talked about. It is something which certainly has this claim to have lower footprints in terms of emissivity and emissions.

But again, that's a debatable topic. At the same time, you have its economics of what you call, you know, operation and the overall economics has some effects which may not be complementary towards driving the best in terms of consumers, if you will. That's one part of the thing.

So there are certain amounts you can do. But at the same time, you got to look at the other piece in terms of what does ethanol do to the other production systems like agriculture, right? Is there a distorted incentive in terms of driving rice producers and agriculture producers towards more of sugarcane because it drives you, what do you call, gives you an incentive to what you call produce that which creates an asymmetry, if you will, between agricultural consumption needs and what you call energy needs.

So that's a tough one. And the third thing is also, I'm just sticking to ethanol for just to give an example, is that, you know, these things like ethanol or oil for that matter, they've got different kinds of what you call as energy densities, which means how much of energy do you produce per unit of land, for example. Ethanol is a very low energy density, power density, what it also consumes a lot of land, water, a lot of what they call resources.

And that has got indirect and direct impact, right, in terms of how it shapes the overall ecology, which has got an impact. So I think we need to just take an example of ethanol. Yes, we must.

But to what extent is the question and how do the economics make sense? Because yes, you can give subsidies to some degree, incentives to some degree, but you need to complement that with other mechanisms. So, for example, so one is that how do you make substitutes to what you import and to what extent do you make those substitutes?

So second, you all know, for example, is we've got a lot of coal, lots of coal, right, 200 billion dollars and counting. And so the question becomes, can we harness coal in a different way than what we are used to by burning it in boilers to produce power? That's one way to do that.

But by the way, coal can be utilised to do many other things, if I like what the prime minister talked about in 2019-20 in terms of how about converting coal into gas, useful chemical gas and then utilise that for producing a variety of chemicals and energy generators. So coal is an important resource and how we can convert coal into very large scale commodities like chemicals, like energy generators becomes very, very important. And so that becomes a complement and a hedge to petroleum, for example, or crude, because if I do that, I require less NAFTA.

I require less NAFTA for chemical production, which I generally import at a pretty high price and of course with the volatility. I don't in this case, if I do coal, but can I do the replace entire NAFTA? No, I cannot, but I can complement that to a significant degree if I want to in the right way.

So you know, emphasis of coal in driving it towards other uses, you know, in economically viable manner is very, very important. Third thing is, of course, if you combine that with the mechanisms of carbon capture, you're able to make it cleaner in terms of its emissivity and becomes better than what you call oil and gas. So that's one more example of how you add diversity based on sources.

And then third comes, for example, you know, you've got this whole thing around oil and gas. Yes. One of the biggest advantages India has got is India has got a lot of refineries, 23 refineries at about 250 million tonnes right now and counting going to 300 million tonnes per year or about 5.5, 6 million barrels a day. Now the interesting thing about Indian refineries, if you look at it, the very interesting thing about Indian refineries is that most of the refineries, right, are heavy refineries, which means there's been a lot of investment in Jamnagar, probably about close to 25 billion dollars since inception. Vadinar, for example, and others, Paradis. These are heavy refineries, which basically means they have the ability to process, you know, highly discounted heavy crudes, which are a category of crudes, which are, you know, which cost you less, but it has the ability to produce the entire product slate, which is a wide variety.

Very few nations have that capability, by the way. United States is one, you know, the India is one more, which has got very heavy refinery capacities and those and China is the third one. These are the three, right.

18 million barrels per day out of the United States, right, mostly heavy. India, almost all heavy except for a few. China, you know, about 20 million barrels per day, again, mostly heavy.

So if you have heavy, I can source crude from different parts of the world. I'm not stuck to lights only in certain regions. So I can, for example, you know, use Venezuelan heavy crude, if regulations and sanctions and all those mechanisms allow.

I can strike deals with Canada for that matter. We understand that Canada supplies most of the most of the heavy crude to the United States through pipelines, but with the ongoing tariffs and turmoil and changing geopolitical situation, that's an opportunity window, right, which the alliance has already tried, by the way, and they're working on that, I believe, in terms of a pilot that tried that for a million barrels. And so can I use Canadian heavy at a discount?

Now you'll say, oh, what the hell, you know, you're going to ship this all the way around the world, the Pacific, and put it in what you call Jamnagar port. Yeah, I will, because my cost of shipping that over the Pacific, right, it's about $1.50. But my discount I get is anywhere from $10 to $15 additional. So why would I not do that?

My GRMs, the gross refining margins go up, my product basket becomes what you call better.

But you're saying Canadian crude could be at a $10 discount?

Yeah, $10 to $15 discount.

So that would make it cheaper than Russian crude?

Yes, it would. Okay. Absolutely, it would. You know, Russian Urals are better crudes, certainly, right. But our refinery capacity is such that it can process Canadian crudes too, with the right kind of blending, of course. And so you have an advantage in terms of processing discounted crudes or heavy crudes, which not many countries have, right.

And so yeah, I can have Canadian crude, I can. So I can have these combinations of different hedges, if you will, and sourcing mechanisms, if I have the right kind of platform, right, to be able to optimise my crude capacity and crude imports based on geographical situations and geopolitical situations, and use volatility as my friend, use uncertainty as my friend, rather than a foe. You know, this sounds a little counterintuitive, but that's exactly what you can do, right, if you have the right mechanisms to do that.

And so the third thing is, how do I use this geographical diversity and uncertainty and volatility to take advantage of in one specific area of crudes to optimise that better in terms of maintaining continuity and economic continuity and physical continuity of the goods right over time. Complement that with like coal, right, for example, in terms of other sources. Complement that to a degree possible with other mechanisms like ethanol.

Complement that with electrifying a lot of the areas, right, that is possible. So and that's what the whole thing is all about in terms of, you know, things around electricity and the grids and renewables.

So when you say electrifying, you mean, for example, the way railways have electrified?

Yeah, electrify industrial processes to the extent that, no, all is not electrifiable because of the nature, but a lot of it is, right, a lot of it is, you know, and we can. And so we can use electricity as another mechanism. And how do we do that?

Well, we can have renewables that India is endowed with, you know, in terms of solar capacity that we can harness. So certainly, yes, we can see how best to utilise that. But then there are, again, things that we need to do out there in renewables, which allow us to do that in the most effective manner, right?

So I think end of the day, you know, it's about energy diversity that creates energy abundance, you know, and that creates energy continuity and availability at, very importantly, at the right economics, right, which is extremely important. And so these few pillars that I talked about, how you use local endowments or domestic endowments like coal, and with that to complement what you have, how do you really utilise your capacity and your capability and competency in refineries, for example, to widen the basket of foreign crude that are being sourced in the most effective manner? Third thing, how do I really utilise electricity, right, renewables, for example, in an effective manner?

Again, people talk about put solar, no, that's not what I'm talking about. I'm saying, how do I harness different sources of electricity in the most effective manner to create economic continuity at the same time, making sure that I have more abundance of electricity in the right form to be able to complement what I have in terms of production systems, as well as forced consumer systems. And finally, I think we should tie all these things together in terms of making sure that you have as low an emission as possible.

And I differ here a little bit because people talk about we'll go all green. I don't think that's the right strategy.

Spoken like a true Texan.

Yes, probably. But the right strategy, any country, any nation, any region is got to do with the question to answer is that how do I make Govind's consumption pattern, right, of different commodities that he consumes in the most economic manner, right, at the lowest CO2, not at necessarily zero CO2, because that's an aspirational goal that one should have. So that is the problem that we need to answer.

That is the solution that we do frame for the nation and the industries out here. And how do you organise the basket of energy sources in the best possible manner to provide energy diversity, energy abundance and energy continuity at an economic point, which makes a sense for all of citizens and industries.

Okay, so I'm going to come to the gas and the electrification part in a moment. But starting with refineries, now, you talked about our advantage. And so firstly, is this advantage because chronologically, many of our refineries came up later, including Reliance, which has almost half of India's capacity?

Certainly, yes. So if you look at the history of refineries, except for the United States, you know, most of the refineries initially, there's this balancing act you got to do within capital investment, right. And obviously, the returns of capital that you get.

And so initially, the whole tendency was to use low complexity refineries, which basically means it processes light crudes, right, like the West Texas Intermediate, for example, the Brent for that matter, which is light, right. And they got limited products that are produced, but the investments are also low, right. And they've got a certain GRM based on that, which is kind of like low, right, because the light crudes are more expensive, right.

So you trade off it. And that's how all these things came out, specifically in Europe, for example, right. European refineries are mostly light refineries in a lot of other parts of the world.

United States, on the other hand, long back, you know, went into heavy refineries, because the US didn't have that much of oil for the shale bore, right. And so they had heavies, which they invested in long back, and that's a legacy that continues, which is why if you look at the United States, you know, you produce a lot of shale white oil, but you export that oil, you know, and you import vertical heavies, because the refinery is basically heavies. India, similarly, right, was on a track, which started later, except for some of the refineries that came up earlier, the Benar refinery, for example, this was a light refinery, and the state refineries initially were light.

But with Jamnagar, for example, in 1999, or late 1990s or so, you had this onset of, look, you know what, if you're making investments, right, in the long term and looking at the fact that I do not have that much access to internal crude of certain type, and I would definitely like to invest in flexibility, right, that's the best thing I can do is cost me more. But over the long run, if I take a calculated bet, I'm pretty certain that I'll have a higher GRMs, right.

And I would say that's gross refining margins.

Yes, gross refining margins, that is correct. And therefore, at the same time, my investments are more calibrated towards the higher end over time, my returns, gross margin is going to be better, right, the return may be less on the capital, right, but over time, if I discounted over time and take it to the present value, it'll be better. And I have this whole flexibility, and the value of flexibility and continuity and affordability because of flexibility is huge.

So India had this situation because of, you know, the availability of that type of crude, to have the flexibility and people understood that, you know, a lot of them are heavy refineries. Most of them are heavy refineries. And so I think historically, and from a trajectory perspective, and from a situational perspective of the nation and the world, it invested in mostly heavies, right.

So heavies can process not only discounted, it can also process light depending upon. So you have this situation which you can exploit, you know, take advantage of to really what we call create economic and commodity continuity, as they call it, right.

So, and this is something we're doing right now. And we've been doing for some time now. And of course, the mix has shifted.

After the Russia-Ukraine war, we're importing 40% of our crude from Russia. And that might change or may not change. But my question is, how does this change or impact things from an energy security point of view?

Also, given the fact that we are exporting our finished product, which is another reason the United States is upset with us, to let's say Europe. So just sort of if you can put all of this into perspective.

So I think that, you know, and I keep on saying this, that, you know, we should use volatility as our friend rather than a foe, you know. And I think, yes, there will be geopolitical situations, which will impose or kind of like threaten to impose certain situations, maybe, you know, in terms of tariffs and sanctions.

You can do for certain things, but you cannot do for all the things. Right. It's impossible.

It's just a physical impossibility. Right. So, yes, there'll be threats and there'll be what you call, there'll be what you call potentially tariffs.

But if you look at the basket of geographical sources that you could exploit is way more than basket of geographical sources, as well as, you know, how they change over time. There are way more options that you can exploit than one can impose through geopolitical situational stances. Right.

So to me, it's a volatility always is an opportunity, though it sounds very counterintuitive, like I say, because the options are many, right, that you can exploit. That's one. And the second thing is that, you know, you, India can become a platform, right, for being a player in the global petrochemical and related finished product marketplace.

If you look at it, we already do a lot of exports to Africa. You know, Europe's refineries are going down.

And the reason why they're going down, if you look at it, they're closing down over time. And the reason why they invested in light refineries, for example, they are difficult to sustain, you know, given where they are and given investments. So Europe is another opportunity area.

And so I think you are basically a toler or converter into products from crude slate that comes from different parts of the world. And like I said, you can do some impositions, but you cannot do all impositions all time.

And so you always will have this opportunity to organise your basket. So that requires an institutional mechanism, I think more aggressive or more open institutional mechanism, which we don't have in this part of time.

Which allows us to do that. It is also about how do we engage in the world of trade, and world of trade in the energy space.

And as you might know, you know, a lot of these trades can be made under difficult situations by having the right engagement with the right kind of trade mechanisms and institutions. Right. Which we do, but other countries can have done it more effectively and can we can do better.

So combination of these mechanisms allow us to exploit volatility and differences across different geographical boundaries to be able to assimilate. So that's point number one.

Secondly, because you've got a platform which is able to convert into a slate of products much wider than most refiners could do. And the nature of refining that's happening, that's changing in Europe, for example, and the nature of demand that's emerging in a lot of places that they don't have it like Africa and other places. You know, you have a basket that you can produce and support.

And especially so in a lot of these nations, which is going from, you know, what I call us from crude combustion to crude conversion. You know, so we are used to seeing petrol and diesel. Yeah, sure, that is true. But importantly, you know, crude to petrochemicals, crude to plastics, crude to chemicals.

That is. And that's happening. I mean, a lot of the projects that have been announced, including by the public sector refineries is along those lines.

So the value transfer, the value migration to some degree is happening in the petrochemicals and plastics and chemical space, which is obviously complementing and expanding the basket of crude to combustion. And that also is opening up markets outside because of some of the dynamics that I talked about. So I think it's an opportunity, in my opinion, rather than just a security issue.

Yes, it makes us more secure by being able to exploit these different sources in the right way, like I talked about. And also being able to expand ourselves, not only from a perspective of our domestic consumption, but external consumption, which, you know, helps us, I would imagine in terms of our trade.

But would you say that, so again, looking at refineries, you said we have about 23 refineries, 250 million tonnes of output. So we are clearly not consuming everything that we refine because we are exporting it to Europe, for example. So are you saying that we should therefore be looking at more refineries or changing the mix of what we are producing right now?

I mean, if you were to look around us.

Yeah, yeah, sure. So I think if you look at it at this point of time, based on the current trajectory, probably going five years to seven years from 250 to 300, going to 300 million tonnes per annum, which is, again, a fair growth. And I think a lot of it is going to be, you know, things around crude conversion, crude combustion.

A crude combustion is also growing, it is growing based on the energy growth. But at the same time, we are one of the lowest consumers of petrochemical based products right in the world, given our GDP, given our population. So I'm not professing that you've got to have all petrochemicals.

No, I'm saying, but there's a minimal need, right, the economy, which you need to satisfy. And so that's got a lot of headway. So I think going forward, you will see a lot of emphasis on things around crude conversion, increasing integration of chemical, petrochemical production processes and mechanisms into the refining process, right?

There's this whole thing that's happening in terms of crude to chemicals, you know, mechanisms, which bypass some of the refining processes to make it more effective. It's still getting there, but Aramco is working on that, for example. But Reliance is very bullish on that.

So I think the general trend is that, you know, apart from, you know, conversion of combustion, crude for combustion, which is petrol and diesel and jet fuel and the likes, you are seeing, you know, migration, right, towards an expansion towards petrochemicals, not only because that's needed for consumption in the society, but also the fact that they have better value margins.

So two quick questions. So one is, when you mentioned crude directly to petrochemicals, so how does that work? I mean, you're saying that it will not go through an entire refining process?

Yeah, so it may not go through an entire refining process, right? And so I think that you avoid a lot of what you call the standard processing steps that may be required, like distillation, you know, the different forms of cracking that you do, and from cracking, you know, you could do evaporation and things of that sort, you know, you may be able to jump some of these processes, right? And there are ways to do that.

Still not fully there, but that's the direction. But in general, you're seeing more of integration of downstream units of petrochemical production, right, into the refining system, than just producing, let's say, you know, diesel or jet fuel, or, you know, what we call as, you know, C5s or C4s, or light, light, light, light.

And I'm going to come back to coal, or rather come to coal in a moment. But so how does all of this help in our energy security thrust?

Yeah, so I think, like I said, you know, I mean, A, if you look at some of these sources, coal, for example, it is obviously, if you do this, what you're talking about.

I'll come to coal in a second, but I'm talking about the refining part, you know, does that by, let's say, stepping up our petrochemical output, and going, as you said, for conversion, as opposed to combustion, does that in itself help in our energy security endeavours?

It certainly does, you know, I mean, if you have an advantage that is because, you know, a lot of these, a lot of these conversions that you're talking about in terms of end products, is also have imports that you want to compete with.

Okay, so you're saying substitute?

Substitutes a lot of imports, right? Again, I am of the firm opinion that you must have, end of the day, that you got the right balance between imports and what you produce, and what you can produce based on economics of the situation, and of course, situational situations that may arise, which may really hijack the nation. So you've got to balance that, right?

So I'm not saying that you don't, no, that's not the message. I think the message is that how do you integrate the right amount of production, or the advantage that you've got while ensuring?

But you're saying that, that when one thinks of energy security, don't just think of oil and gas, but also think of plastics, you know, that we use in our daily lives. I mean, and if we can produce more of that domestically, we're also therefore achieving more energy security, and not just my, whatever, four-wheeler or scooter or whatever.

Absolutely. These are all energy products. These are all energy derivatives, right?

They're not just products by themselves, and they're dependent upon energy as the basic input, which is, you know, your oil and gas today.

Got it. So let me come to coal. So when you talk about coal gasification, I mean, I've heard the term before, but walk us through what it means. And also, I mean, I'm sure it's not as simple as it sounds, because there must be a cost to that conversion. There may be, I'm sure there's capital expenditure. So where are we in that journey today, and where could we go?

Yeah, so I think if you look at coal gasification, right, per se, if I talk about it simply, so you have this coal, which you burn today in a boiler, for example, and you generate steam and you run a turbine for generating power. Simple, right? You completely combust coal.

Instead of doing that, what we are saying, or what is being done in lots of the parts of the world earlier in today, is you take coal, don't fully burn it, half burn it. If you half burn coal under certain conditions, you get something called a gas, which is called a syngas, as it's known in parlance, energy parlance. It's a combination of carbon monoxide and hydrogen, right, which has got energy.

And once you have syngas, right, with different combinations of proportions of carbon monoxide and hydrogen, I can do anything I want, essentially, because any production process, if you look at it, it's a petrochemical process, you know, I can, when you take naphtha or natural gas, you first convert to syngas, and from syngas you convert, you use the chemical process for producing methanol or XYZ. Similarly, I'm saying, don't use what you call those sources, don't use naphtha, don't use petrol, use coal, convert to the same thing called syngas, right?

And once you've got the syngas, do the same thing what you're doing, right? There's no difference, right? The question then becomes, is my conversion process, right, of converting this coal into the syngas better, matched, and more effective than my conversion process of using naphtha or other crude derivatives into the syngas, right?

That's the question, and it is true that if you've got the right kind, if you've got the right process, your production cost of that specific syngas, as they call it, can be very, very effective at large scale in India, right? However, there are challenges, right? And this is the challenge that we need to walk together, and the challenges that do have solutions, provided we have the right kind of framework with this.

One of the challenges that, as you might know, is that Indian coal, low calorific value, yeah, it's one, and it is unique. This is a very, very interesting, this thing that not many people talk about. Indian coal is, yes, low calorific value, and it's unique in the sense that it has got high ash, and the composition of its ash is unique because of the way it has formed in the Gondwana Basin over so many millions of years, compared to any other coal in the world.

So therefore, a, to convert that requires certain ways of doing it, based on gasification technologies, which is converting this, that's been available for many, many years, decades for that matter, it works. But to adapt that towards Indian coals is one of the things that needs to be done very effectively, to produce this thing economically at the right scale. That's one bridge that we are crossing, but there have been fits and starts, and it's very possible to do that.

And so the question becomes, how do we direct incentives? How do you direct programmes and policies to be able to bridge that gap of taking what we call these high ash coals, or unique chemistry, as we call it, and convert that into syngas in the most economically possible manner? That's the challenge.

But if you do that, and you can, right, and has been done, your cost of the thing that you produce syngas is four to five dollars per MBTU, which is fantastic compared to, let's say, if you import LNG gas, natural gas today, compared to syngas as a closest comparison, you'll probably pay about 12 to 15 dollars per MBTU, right, at the boundary gates.

And what's the capital cost? I mean, you know, like for example, we talked about boilers, where let's say you burn coal, and then you get heat, and yeah, but in this case, what would you be investing in?

Yeah, so if you look at it, you'll, so if you want to produce methanol, right, I will, here in this case, I will introduce a gasifier, which gasifies, changes the stuff that I talked about from coal into this gas. And that's the the cost that you incur. And typically, depending upon the conditions of what you produce, you will say, you know, I'll incur probably about half a billion dollars to a billion dollars.

I'm giving you a range, right, based on the quality of the gas, half a billion dollars, a billion dollars in capex, per million tonne, or per one and a half million tonnes of coal that needs to be processed. Which is, is it a little more than corresponding what you call conversion processes using, you know, conversion process like steam methane reforming, you know. Well, yes, it is a little more, right.

But if you look at the cost of the feedstock, it's really low. Indian coal, yes, unique characteristics, but I can, if I got this commercial coal mining going and people kind of buy that stuff, right, you're talking about, I mean, 30 to 40 dollars, right, which is, which is cheap, very cheap. So if I look at the value chain and combine that with efficiencies, you know, coal cost, feedstock cost is so much, capital cost is so much, and therefore the capital cost load per tonne is so much, and the conversion cost is so much, I get a very effective solution, right, a 4 to 45 dollars per unit for that syngas, compared to 12 to 15 dollars per unit of LNG that I import.

In India, it doesn't have gas.

So this you're saying is a LNG substitute, I mean.

It's kind of, yes, it is kind of like, LNG or substitute for petrol for that, or petrol derivatives, or crude derivatives. You know, I use NAPTA, for example, a lot of it for fertiliser plants. If you look at today's fertiliser plants, a lot of it is using NAPTA, right, NAPTA processing, and then I don't need NAPTA.

I don't need necessarily natural gas to that extent, right, I don't need crude derivatives, right, to process, to create other chemicals, because I have this mechanism to transport converting. So again, I'm not saying everything is going to be coal, no, no, that's not what I'm saying. I'm saying that it's a complement and substitute to a large part, and that's what creates energy security, energy diversity, right, with the right complements and capacity, creates the security, right, through diversity.

And that's what I'm talking about in coal, right, so don't use just coal for power generation. That is a no-brainer, and we do, and we probably need to do something else out there, and we can talk about it, but use coal for conversion into commodities and products, which are substitutes, right, and complements to existing mechanisms of production.

And has anything changed, or what's been changing in the technology for gasification that's made it, let's say, more economical or viable compared to what it was a few years ago?

Well, so gasification has always been viable, right, in different parts of the world, specifically it came out of the United States and Europe, right, a long while, 50, 60, 70 years back. The core technology has not changed, so you might hear all these things, oh, how new is it? No, it is not very new, it's something that's been there for a long time, starting with World War II in Germany, when Hitler, you know, Germany wanted to produce petrol, right, out of coal, using fissure crops process, they used gasification, right, that's when it started off.

It was expensive, so we optimised the cost of operation, the capital cost over time in the US and other places, and they, if you look at 1970, 74, there was a huge impetus in the United States in terms of going for coal gasification because of the whole oil crisis in the 1970s. That's the way it progressed, and there were some, quite a few projects which were successful, but again, if you look at the United States, then the whole shale revolution came. You cannot beat three dollars of MBTU gas, right, with coal gasification, no way, right.

Do I need to beat, would I go for six dollars of MBTU syngas compared to LNG at 15 dollars? You bet I would. So it's situational, right, so yes, it's developed.

If you look at the biggest gasification system that is there in the world, it's in South Africa, right, established in 1955-60, right, and it's been working non-stop, producing different kinds of chemicals and petroleum, for example, and that was obviously dictated by apartheid and blocking up of that nation that precipitated the whole gasification in South Africa, but that's one of the biggest ones, the biggest one.

And who are the, so is it mostly power companies who have gasification plants or refineries, or both?

Both, so if you look at it, a power company, so we work with a power company called Duke Energy out of the United States, and you're working on something called, you know, IGCs, or gas, syngas-based power generator, which is taking coal, converting that into gas, and then generating power, it's cleaner, right, and it's more efficient suddenly than just running a steam turbine, because now you don't need a gas turbine, so it's better, right. So yes, power companies do use that, and a lot of power companies have done that in the late 1990s and 2000s, Wabash Valley in the United States, there's a bunch of them, right, then to generate for chemicals, for example, right, if you look at the largest, what you call power and hydrogen production unit is Jizan, Jizan in Saudi Arabia, right, it's very large, 12 billion dollars of investment, right, running the entire generation of hydrogen and power for, you know, the refineries, if you look at Coffeyville, right, and of course, Coffeyville is a fertiliser production, and then the biggest example of all, right, which has harnessed this most effectively in the world is China, 340 million tonnes of coal being gasified every year, so India produces about a billion tonnes of coal, think about it, one third of that coal will be gasified in China, 340 million tonnes, into a vast variety of chemicals, and with a significant advantage, you know, price advantage, because they have optimised it for the Chinese coal conditions, right, and invested in that technology, right, through different mechanisms, and they're probably the most efficient gasification technologies in the world, better than what originally it was, as it came out from the United States and Europe, so yes, it is being utilised for power, has been utilised for power, and more so now for commodities, chemical commodities, largely in China, and also examples I gave you, right, in the United States and Europe and South Africa are some examples, so it's very contextual, right, it's economics, and then I believe, end of the day, economics drives everything, you know, you can have the best technology, and you can have all, that's very nice, and we should always keep on investing in technology pathways, but end of the day, it's economics which drives, you know, the sustainability and adoption of a specific mechanism, or a specific technology, or a specific process, as we look at it, you know, economics drove away gasification in the United States, because shale, India, we don't have anything like shale at this point of time, right, it doesn't look like, right, our imports of gas, similar gases, is expensive, the moment you do LNG shipping from, you know, the United States, for example, Serene Pass, or Qatar, for that matter, it is expensive, that's the way it is, you know, it may drop down to $10, but still, $10 is not something which will run your, you know, your end product economically, so if I can get something which through this conversion with $5, $6, $4, $5, $6 for the combination, hey, you know what, I can produce methanol today, for example, which I import from Iran, mostly, and they give it dirt cheap, yes, it will not be that dirt cheap, right, but it will be competitive, right, and I think given, and here's something that you need to maybe, it may make sense for the government to introduce incentives and subsidies out here to drive that, because it is in the interest of the nation from an energy security perspective at large scale, right, and adoption of, you know, technology in this area, and large scale, so it may make sense, Iran is very, as you might know, you know, Iran, India has 2.5 million tonnes of methanol production, for example, Iran supplies most of that, our methanol production tripled because of that, now they, I would say dumped, but they are very aggressive, right, in terms of their approaches, and so that may need to be vertical addressed, so here's one example, so I think, yes, gasification does work, yes, it can be made to work, right, at large scale in India, there are certain bridges that need to be crossed, mostly for generation of chemicals, and substitution of crude based, what you call slate as inputs, and translate that with coal based inputs, so that you have the right complement and combination, which is best for the economy and industry.

Okay, so I'm going to come to electrifying, this is the last part, but before that, you said that there could be something that we could do, or we could do more with the traditional coal burning as well.

Yes, yes, so I think if you look at the traditional coal that we have, for power, that is power, right, and I think that if you look at it, you know, there are different kinds of efficiencies that power generation entails, so most of the Indian power generators, if you look at it, right, coal based power generators, 70 to 80 percent is still something called subcritical technology, but it's at lower pressure and lower temperatures of operation of the power generation system, 30 percent, maybe, efficiency, right, 70 to 80 percent, right, which is a significant portion of the entire fleet of thermal power generation, probably about 250 to 280 gigawatts, right, thermal power generation capacity, mostly coal, so therefore, A, just by today's technology, if you look at it, right, in coal based generation, can be significantly upped, 36 percent, if you go further, right, yes, there's an incremental capital investment, 40 percent, 41 percent, just by doing that, just by utilising less coal to generate more power, or the same power, you know, and replacing your coal fleet that are subcritical, right, over time, a lot of it is inefficient, you get a huge advantage, right, in terms of cost of vertical operation.

And what stops us from doing that? Nothing stops us from doing that, I think that one is that you need to have, and it's happening, it's happening, you know, if you look at all the Adani's powers, they're all going, but it's just that there's a large, still large fleet of the subcritical technology, and there needs to be incentive or a regulation to migrate them off towards investments into power generation with higher efficiency coal technologies, advanced supercritical, supercritical at the minimum, you know, so those are things that we could do, and that will have a direct impact, right, in terms of efficiency of generation, therefore coal consumption, therefore emissions.

So people talk about, oh, no, no, no, I want to produce renew, no, that's one way to do that, but people don't look at, should I use the word, unsexy way of looking at efficiency as a driver, efficiency is a big driver of, you know, everything, cost and emissions, and such others, right, so yes, we must do that, right, we can do a couple of other things, and we should, I think, if you can get oil gasification based, this gas, you can run gas-based power plants, our India, you know, that we have hardly any gas-based power plants, that's because it is just not operationally profitable, or it doesn't make sense economically.

Yeah, and we set them up all along a pipeline running from north to west.

Yes, yes, yes, yes, and if you look at starting from Dabul, for example, you know, I go back to Herondez, the fundamental reason why it didn't work was not because it's a technology product, it's just the supply chain of LNG, just blew the whole, what you call, power tariffs off, and MSCB would not, what you call, take that power, and they had to renegotiate the contract, or change the contract, if you will.

So I think that, you know, there's an opportunity, if you're creating, and gas-based power is required, because it is much more flexible than world-based power, and I can talk about it later, if you're integrating renewables, it's very important to have the right kind of firming power resources, which can start it up now, go down now. You can't do that with coal plants. So you need gas-based power, and you can do that using gasification, this is in four to five dollars, a little more expensive than coal-based power, but it gives you that option, option flexibility.

So yes, you know, I can utilise, you know, I can change a coal-based fleet, A, to probably reduce fleet, right, of much more efficiency, and much lesser emissions, complement that with gas-based, syngas-based generators, as I call it, from gasification plants, to the extent that it makes sense, and evolve the fleet, right, towards a lesser, not zero, lesser CO2 regime with lower cost, right, which complements our other electricity emerging sources, which is basically renewables, and you know, the low emissions, or zero emissions for that matter.

So let me come to the electrification part, or the electrifying part. So now, we're also, as a country, moving quite rapidly on the renewable side, 500 gigawatts, we've hit our targets of 2030 already, but there are also challenges, because all of that renewable is coming during the day, and we're not able to calibrate it, and storage is a challenge, and it also calls for investment, you know, so to pump that same electricity back at night, and so on. So as you look ahead now, in the context of energy security, so what are the gaps here that we can now, or we should be now, focussing on to create that sort of combined and efficient grid, which is also making us more energy secure?

Absolutely, and I think this is something that we must invest now, in terms of how do you harness the renewables? I call it harnessing, because you know, generation of solar power for the daytime, is not the electricity that you consume for 24 by 7. Go in the day, and the day wants power 24 by 7, at the best possible cost, at the lowest CO2 emission, that is what he wants, right?

He doesn't want power for four hours, and he says, no, no, no, I don't. So the problem is, how do you harness the renewables into the electricity system, in the most effective manner, is the question. Unfortunately, in the past 10-15 years, if you look at historical and geographical anecdotes, and examples, and cases, you would have seen that there have been some massive mishaps.

Germany is a classic example, right? Germany had this energy wind programme, and I'm giving this just to, just to substantiate this point, or to explain this point. They said, we will go all solar, Angela Merkel drove it, and wind, you know, and we'll stop the nuclear, we'll stop the gas, and we'll stop the coal.

Great, spent 600 billion dollars, 700 billion dollars, goes to a trillion now, going to a trillion by this point of time. What's happened? Essentially, end of the day today, the German power costs, right, have increased from 12 to 14 cents a kilowatt hour, to between 35 and 40 cents a kilowatt hour.

Why? It's because this whole, this paradox between, oh, I'll put sun, right, I'll harness sun, I'll harness wind, yeah sure. The problem is the following, that in Germany, or any other place where that matters, this is an intermittent source of energy, right?

And so German, for example, utilisation of solar is eight percent. So you have this huge capacity vision, only eight percent of the time. So what do you do for the rest of the time?

Okay, you have to. But even in India, it would be 20, 30 percent.

Yeah, exactly, that's what I'm coming to, right? If you look at German wind, they're wired up in the north wind, you know, okay, you generate that power, that's a higher percentage, right, 30 percent utilisation. Rest of the day of time, it doesn't.

Now it's generated, how the hell do I haul it to the south of Germany, right? There's huge transmission capacity required, who pays for the cost of transmission, which is not going to be utilised all the time, because it's going to only be like 30 percent of the time, right, when you're doing wind. So if you combine all these things together, and end of the day, me, the customer, wants 24 by 7, what do I land up with?

I land up a lot of backup mechanisms of power, imports of power. One of the backup mechanisms of power, basically coal-based generators in Germany. Okay, so refire backup the coal-based generators, maintain a full backup of these generators.

What happens, essentially price goes up, right, to run a double the capacity kind of like and complement that, and your emissions go down, but not to zero, much, much lesser, 20 percent, 30 percent, not more than that. Okay, so same thing in California, by the way, is happening in California at this point of time. So come fast forward to India, if you look at it, right, we are at 11, 12 percent renewable energy mix, renewable energy in the mix.

Anywhere in the world, right, and specifically favourite places in the world like India, 20 percent, 22 percent solar capacity utilisation. India doesn't have much of wind, some wind, but if it does, less, 25 percent, 30 percent, it depends on geography and region. So now you got a 20 percent capacity utilisation, which is intermittent, and 25 percent capacity, 30 percent capacity utilisation, which is again intermittent, wind is less intermittent, and you say, I want to put x kilowatts.

How does this x kilowatts marry with your overall grid and overall other generation systems when it is not producing to give you the power, right, at six rupees or seven rupees per kilowatt hour consistently at the least cost? That is the question that we need to answer, right. The question is not, right, about, and I hate to say this, aspirational goal of a thousand gigawatts of solar, okay.

The more you put after a certain point, the more instability, right, these intermittent sources cause in the overall electricity system, which includes the grid, right. So we must, we must be able to plan and provision and design your electricity system, right, in a way which is the right complement of different sources, which allows us in a trajectory to go in towards zero or lesser CO2 as much as possible, but not independently do this wind, do this vertical solar, do this grid. It's got to be a comprehensive integration which takes into account the gaps and the integration challenges which result in situation of, you know, providing non-intermittent power or intermittent power and situation of reliability, which is, which you cannot tolerate.

Economy cannot run that way, right. So that is the biggest challenge that we have got. It's not about how much do we increase this thing, it's how much should we or can we, right, to support these specific end goals, right, that is more important and that will dictate how much renewables, what kind of renewables, how much battery, right.

Yes, we must do battery, but battery is not a silver bullet. Batteries cannot run for like, you know, 12 hours, 15 hours. Batteries cost you today, if you look at it, at Indian cost going forward five years, will cost you about 20 degrees per kilowatt hour.

Okay, once you do the full amortisation numbers out, even at Indian rates, solar panels might be cheap, but the batteries are not. So if you combine all these things together, how do I make it most effective for you, the consumer, that is the most important question, right. And therefore, the question becomes, how do I design the renewable portfolio, what plan should I, how do I design the grid to accommodate that.

I cannot, so for example, Rajasthan is great in solar, for example, and wind, but that is not the demand centre. So if you look at Rajasthan prices of electricity, if I am not able to evacuate that, my prices are going to be negative, what we call as locational marginal prices are going to be negative and that's what happens, right. So I'm going to evacuate that, now I'm going to say, oh okay, you know what, I'm going to put an HVDC line.

Sure, I can put an HVDC line, but go to understand, if I evacuate Rajasthan through HVDC line for a billion dollars or something, right, I put in per kilowatt, that HVDC line is only occupied for 20% of the time. So my effective cost of transmission is five times then what it would be if I were to load the transmission line with all kinds of vertical generation systems. So my cost of transport is higher, I can transport it now, it's much higher, so my cost that I'll get just that intermittent load into Delhi, for example, will be higher.

Now if I combine that to make it continuous load with other generators, it'll be even higher. This is just a basic economics of technology, there's no rocket science out here. And so therefore to proclaim that I want to have 50% penetration of renewables or 60% needs to be calibrated with logic and reality of what can be done and what should be done addressing these specific goals.

And if you do that, I think that's the most that we can do for creating available energy at the right cost across different precincts, with the right design, and that gives us much more security than just saying I want to do for renewables. And is the market doing some of this correction already? Some of it they're realising that at this point of time, right, they're realising and so we work, we do work with, we are working with some of folks and bringing this out and it'll take a little while but yes, I think they have this cognisance of this and it changes the whole nature of how you design grids, how you operate what you call electricity systems because it sounds very simple, oh this is intermittent. No, the moment there's uncertainty in what you call load or uncertain generation, it creates havoc, right, in the entire electricity generation system and distribution system and consumption system which expects constant electricity 24 by 7, right, with as much reliability as possible with as little mishaps. Now what you're saying is that I'm going to have this whole set of uncertain generation sources and convert that into a reliable generation for all of you.

Sounds simple, it's a very very difficult challenge. Okay, so therefore the question becomes not just renewables but how they integrate renewables in the right proportion, the right capacity along with other mechanisms like batteries, like coal, like gas and combine that together to give you that not at zero CO2 but the lowest CO2 that is possible at the cost that I can maintain if I jump your cost to 15 rupees a kilowatt hour, you know the screen. Okay, so that is the question to answer, right, and that's what we're working on and this is a different problem.

So we're running out of time, so let me ask you one last quick question and I'm sure we're going to interact again on any of these three things that you've talked about. So you've been in computer, I mean you were a computer scientist and you worked with Microsoft, so what got you interested in energy? I mean I know it's a job but I mean what sort of brings out the passion in energy and energy systems and so on?

I think energy systems are way more fascinating, the depth, the breadth, the impact is just way more, I think, right, than what I used to do earlier. I used to work in semiconductors in Digital Equipment Corporation, you know, which was the fastest chip at that point of time in 1992. Alpha chips, you may or may not have heard about it and then I went to Microsoft Corporation and used to design Windows operating system.

They have impact, certainly, absolutely they do have significant impact but I think energy systems of the future and related what you call industrial systems have way more impact, I think, than what I used to do and so that was a fundamental driver for me to move in this area, right, and I think that over time all these things in terms of information technology systems like, you know, we work quite a bit, I used to work quite a bit in AI long back and people don't know about it, you know, people say, oh the AI is not here, it's just a reincarnation because now it's possible to do certain things because of the nature of the computing power that you got and the nature of, you know, stories that you got and all that kind of stuff, right. But yes, all these things, the information technology products and AI and such other things complement the energy systems.

If I'm just the one that I talked to you about, for example, renewables integration, this is a classic case of application of AI technologies to make that it's a classic case, right, and nothing very fancy but very simple.

And also, I think a lot of the energy surge that we're going to see is to power data centres which in turn will power AI and people are investing, the same investors who are investing in NVIDIA are also investing in power companies because they're going to supply data centres.

Yes, power is going to be, you know, it's significant. I mean, Google says today, I think it costs about one alkaline battery, if I'm not mistaken, but ChatGPT, what do you call this thing, costs 10 times that, right. So the power requirement is huge and being able to have reliable, affordable power to drive, you know, these engines is going to be fundamental, right.

So I see this, you know, this transition or transformation is very exciting. I think this is going to be the bedrock of a lot of things that are going to happen in the future. And I think certainly, yes, information technologies and computing technologies are going to be very important.

They will complement this area and other areas too and see that as a complementary mechanism, you know, to work to shape the energy transformation of the future which is very exciting.

Atanu Mukherjee, it's been a pleasure speaking with you. Thank you so much for joining me. Thank you so much.

Thank you.