Welcome to Ideas Untrapped podcast. In this episode, I speak with economist Sugandha Srivastav about the hidden political economy of electricity in developing countries. Using examples from her study of Pakistan's electricity market, we explored how opaque power purchase agreements, regulatory capture, and poor procurement practices drive high costs and unreliable supply in many developing countries that are in desperate need of energy. Sugandha also shares bold insights on how competitive markets and renewable energy, especially solar, can transform the power sector and deliver affordable electricity for all. Dr Sugandha Srivastav is a Lecturer in Environmental Economics and a Senior Research Associate at the University of Oxford - and a Fellow at Energy for Growth Hub.

Transcript

Tobi: Welcome to Ideas Untrapped. It's nice to have you on the show. I've been looking forward to this, so thank you so much for doing this with me.

Sugandha: Yeah, thanks for having me, Tobi.

Tobi: Yeah. So, why I wanted us to have this conversation was I read your paper on power. By power, I mean electricity, and the corruption, and basically surrounding power purchasing agreements in Pakistan last year. So briefly, can you just summarise what that paper was about, what you found, and what were the general lessons that we can draw from that?

Sugandha: Yeah, sure, so basically about two years ago, we started looking into contracts in the power sector. And as all of your listeners know, electricity is so important to all of our lives. It's very important for businesses. It is hard to overstate how critical electricity is to our lives, so we were just really curious about how is electricity being procured by the government? What are the contracts that underpin this electricity? And, um, can we learn something about how much we are paying for electricity? So we wanted to dig into these power purchase agreements, which is what the contracts are called, but we very quickly realised that they're not disclosed most of the time. So even though this is government money, which is going towards paying for something as basic as electricity. The public has very, very little information on what these contracts are and one of the few places in the world where we could find information about power purchase agreements was Pakistan because they actually released a law which said that tariff agreements have to be disclosed. So what we then did was we spent, many, many months actually downloading all of these agreements and contracts and, in the end, I think it was over 6000 PDFs with very detailed contract information and we put together a database. And that's when we started discovering a lot of very interesting things. It became very obvious to us that some of these contracts seemed extremely generous and that raised some questions on why electricity is being procured with these particularly generous terms and conditions. And whether that means that the electricity sector is enabling transfers from the public to a certain groups of vested interests. So the long and short of it is that we think that these contracts are really important to study, and what we found from our investigative work is that a lot of these contracts are extremely lopsided and, you know, there isn't any competitive procurement, and we know when there isn't competitive procurement, you have no idea whether you're getting value for money, whether you're getting the best product. They're just being solicited bilaterally through these very, very opaque contracts.

Tobi: So, I mean, in that situation, and reading through your paper. After going through all the details and all, did you find out whether that was specific to Pakistan or is there a pattern across poor countries who have no power generally.

Sugandha: It's definitely a pattern. So one of the striking things is that across so many parts of the world electricity is not procured competitively and by competitively I just mean the normal process of firms submitting bids and choosing the least cost bid.

You know, that seems like an obvious way to do this, but that isn't what's happening. To give examples of countries where there are these very opaque power purchase agreements, um, Indonesia has them. Ghana has them. I think Nigeria, by the way, also has them. Mozambique has had them. And till date, we have just had very limited evidence. So what typically happens is that some journalist goes out there and finds a very specific scandal related to this power purchase agreement. And they report that.

So, for example, in Pakistan, journalists have said that the cost of coal being used by these power plants is much more than the market rate. Sometimes it's 50% higher than the market rate. And that's a very strange thing to observe. You know, why aren't power plants using cheaper coal? It turns out that power plants get reimbursed for the cost of coal. So if they say it's more expensive, they get a bigger reimbursement and that is the incentive behind lying. We've also seen that happen in India. So, to answer your question, this type of rent-seeking behaviour in the power sector is not unique to one country. We have seen it across the developing world. And one of the reasons it's there is that there isn't competitive procurement and a symptom is that the price of electricity becomes higher. And it also becomes more unreliable. And in general, you have this situation where public money is not being used efficiently. Unfortunately, yeah, it is a common story.

Tobi: Yeah. to use Nigeria example, not that I want you to respond to that specifically. Um, so in Nigeria, all sides of the bargain in the electricity market is complaining. Uh, the government complained about the fiscal burden of the subsidies. Consumers, citizens complaining because the electricity supply is not stable and the power companies do complain that they are not charging market rates, they are not making money, they are heavily indebted. What is it about the structure of the electricity market that creates this kind of dysfunction?

So, for example, some will argue that power purchase agreements are so structured because electricity is capital incentive and hence you need these lopsided contracts as an incentive for people who are willing to invest that kind of money. So what is it about the structure of that market broadly?

Sugandha: Yeah, so you do need risk reduction to incentivise entry in developing countries. I mean, that is a feature of developing countries. The question is how much risk reduction do you need? So you want enough so that people invest in your electricity sector, but if you give too much, then you'll create a debt crisis. And so there's a sweet spot in the middle where you allow entry into your electricity sector, but you're not going to create a debt crisis which creates havoc for your government.

This is where we think that some of these power contracts have gone too far on the other side. They're creating way too much burden on the government, and to put some numbers here, you know, often like the return on equity that is offered in these contracts, at least in Pakistan, we've seen can be up to 30%. But when you account for the corruption and cheating, so for example, as I mentioned before, power producers can get reimbursed for input costs. So sometimes they lie about their input costs and say that they're higher than in reality because they get reimbursed. So once you factor that in, we've seen some power plants making a return on equity of 83%. Which is much, much higher than the contracted value of 30%. So in that case, what we're documenting is actually explicit cheating.

Now to go back to your question of why this causes dysfunction in the entire power sector? If you think about it, essentially each step of the system is breaking and you know, so the power producers are making super normal profits in some cases. Then the utility, which is in between the power producer and the customers, they often can't charge higher tariffs because they're politically constrained. So they are buying this expensive electricity, but at the same time they can't pass on the higher cost. So they're making a loss. Then because they're making a loss, what they do is that they cut off power. So, because they make a loss per unit, they don't want their total losses to go above a certain threshold. So then their option is to simply switch off the power. That's something called economic load shedding.

So to your listeners, you can have load shedding for many reasons. Sometimes it's because of technical losses. Sometimes it's because you don't have electricity supply. But other times it can be just because your utility turns it off. Because they're not making a profit or in fact they're probably making a loss per unit of power, so they just turn it off. And that's a very under-appreciated reason why electricity is unreliable because it has nothing to do with supply. It has to do with the economics of it. And then you go to the government side because now that the utility is making a loss, eventually this utility has to be bailed out and the government does the bailing out. So then the government fiscally is in a bad position. This is how the entire system starts basically breaking down and the solution is simple. I mean, we need to have a meritocratic electricity system. So if an electricity generator can provide good quality, low cost electricity, they should be able to enter the market, sell and outcompete the old generation. It's as simple as that. And if that's risky, then you can provide risk hedging mechanisms that don't fundamentally distort the market the way they are doing now. Because right now it's a broken market, which is happening over and over again across the world.

Tobi: Yeah, so suppose I'm a developing country that is democratic. And I happen to inherit these contracts, uh, as problematic as they are. We also know that they are also notoriously long term. And sometimes the efficient or should I say fiscally responsible thing to do is to cancel some of these contracts. But again, as a poor country, you can bear at the reputational costs and economic costs for that. You're viewed as unreliable, there's no private property protection and not investment friendly. So how do you deal with this dilemma of handling inefficient corrupt contracts that are also very, very expensive?

Sugandha: Yeah, I'm gonna give a couple of examples. So, for example, In Indonesia, one of the very first independent power producers was called Python. And it emerged through really good investigative work that this independent power producer had such a generous contract and they were overcharging for electricity. And then it turned out that they were connected to the president of the country. They were connected to Suharto. And so what happened was that this actually went to court. Because there was all this evidence that emerged and because it was very clear that this was a case of corruption and using the electricity sector to benefit people in political office. One route is to use the judicial system and to go to court and say: these power purchase agreements are supporting incumbents or they're supporting politically connected individuals that they haven't been negotiated on a fair basis Because part of the legal system is to enshrine these protections and part of contract law is to ensure that a contract is fair and is a fair value to both sides.

So that is one option, you know, where you find very clear evidence of corruption and rent-seeking and the misuse of public funds to benefit certain interest groups you can use the judicial system. Now there's another side to it. If you don't find evidence of explicit corruption, but you're just worried about the fact that this contract is thirty years long, there was no competitive procurement, the tariff is three times the market rate for electricity, but you can't point to any specific corruption, it just seems like they signed a bad contract. In that case, it might call for renegotiation. So you get both parties on the table and you see what you can renegotiate because one of the other principles of contract law is if you're going to sign things that will last for thirty years, then reality might evolve, right? There could be very fundamental changes. And another principle of contract law is renegotiation - the ability to kind of meet and see what you can renegotiate.

So for example, Pakistan had a very, very big round of renegotiations. And one of the elements that they renegotiated was payment in U.S. dollar. So many IPPs were getting paid in U.S. dollar. But of course, Pakistan was collecting its electricity bills in rupees. And whenever there was an exchange rate issue, sometimes the price of electricity could double or triple because the rupee depreciated relative to the dollar. So the simple fix, they said, the government said, look: this is crippling our economy, this is putting too much pressure on our foreign exchange reserves, can you come to the table? Can we have a conversation and can we change these contracts from US dollars to rupees? And a bunch of independent power producers agreed, right? They could see that the country was in a very debt distressed state and that there was a lot of pressure on foreign exchange reserves and so they agreed.

And the good thing about a structured renegotiation process is that it doesn't decline your credit rating because in this case you have consulted with the other party. You have brought them to the table. You've talked it out. Now, that's assuming that they're willing to renegotiate. There can always be a situation where you think the contract is very lopsided, you think you're paying too much for electricity, and when you try to bring them to renegotiate, they decline. So now to give you an example of that situation, that is all the Chinese contracts in Pakistan. So in 2015, China built eight gigawatts of coal in Pakistan. This is now providing some of the most expensive electricity in the country. The coal plants are only used 20% of the time, which for a coal plant, if you don't use it 75% of the time, you're in big trouble. Because it is a high capex investment. You need the utilization rate to recover costs. But in this case, the Chinese coal plants get a fixed payment on a monthly basis, even if they're not used at all. These are called capacity payments, which are very common in power purchase agreements. So it means that in an ordinary situation, they would have gone out of business, but because of the generosity of the power purchase agreement, they're not going out of business. And these Chinese power contracts account for one-fifth of total Pakistani power sector debt, so there are really key piece of the equation when it comes to fixing that. Now this is a very tricky domain right because if you don't find outright corruption, you know, you can't litigate. You try to call them to the table, they refuse to renegotiate. And you're stuck. And it's a huge, huge, huge part of your debt.

This is where I think the international system needs to restructure, because this is when you have a really systemic issue and it goes like this: Pakistan gets bailed out by the right? It's on its fifth IMF bailout package. An investor from China can come and say we can write whatever contract we want and Pakistan will sign and ultimately the debt will be repaid by the IMF through the IMF bailout package. That creates a moral hazard. Because the investor ultimately knows that there's the IMF backstop. So one option is you take this to the international court of arbitration and Pakistan says we have to get out of these contracts. They're not fair. They don't reflect good value. The International Court of Arbitration hasn't been functioning well at all because there's something called the Energy Charter Treaty, and it is very biased in favour of power generators. And there's been a lot of criticism in the academic community about how the Energy Charter Treaty is being misused to prolong the lifetime of fossil fuels that are uneconomic. You know, if we had a normal market where you just have meritocracy, these assets would have been out of the system. so that's where I think we need structural change. And the final point I will say is going forward, looking into the future, developing countries have to do a couple of things. They absolutely, 100%, need to procure power competitively. You know, if there isn't an auction, a sort of beauty contest to see which power plants reflect the best value of money, citizens should ask questions because then you're always wondering, are you giving this contract to your cousin, to a friend, to, you know, I mean, there has to be competitive procurement. By the way, both in letter and in implementation, many of these countries have competitive procurement laws, but they don't follow them in practice.

And I think the second point is actually introduce a market for electricity, because even after the procurement stage, power producers should always feel the pressure. To deliver low cost energy. And that is what the market is for. The market creates the incentive to do that. Whereas if you just have long term contracts, they can sit back in their chair and say, ok, we won the first round, now we're here for thirty years, no one can kick us out. And that's not the right incentive. The incentive should always be that if we don't deliver efficiently, we can be out. You need that incentive. Otherwise, you won't have good quality energy.

Tobi: So, two-part questions, maybe I'll take them one after the other. First one is that there seemed to be some regulatory capture going on because I recall the last privatisation round that Nigeria did in 2013. It was not competitive. It was opaque. And of course we ended up with a mess and a lot of those power companies and contracts and assets ended up with government cronies. So, in terms of regulatory capture, what really can be done and is it unique to the electricity market or it is usually reflective of the general institutional and governance environment?

Sugandha: Yeah, I love that question so much because if I back up and give some context. Um, you know, in the 1990s, the Washington consensus was the rage, you know, everyone was like privatise, privatise, privatise. This will make you more efficient. That was the main recommendation coming out of Washington. And that's why a lot of developing countries started this whole endeavour of bringing private sector investment. But here's the thing. Privatisation only works if it has its key partner, and its key partner is governance reforms, because if you don't have governance reforms, then the privatisation can be misused and abused in the ways you just described. It can result in regulatory capture. And this can be across many sectors of the economy, right? It can be procurement related to construction. It can be related to sourcing materials. It can be related to sourcing electricity. But essentially, whatever type of procurement there is can be massively misused. And so the issue that happens for a lot of developing countries in the nineties, you know, for Asia, a lot of this privatisation of electricity really kicked off in the early nineties. I know for some parts, um, I'm not sure when it happened for Nigeria. What was the year you said?

Tobi: 2013.

Sugandha: So, so for a lot of Sub-Saharan African countries, it happened a decade, sort of a decade and a decade and a half later. Um, but, the key thing is you need these governance reforms and by that I mean you need to have a protocol of transparency. You need to have a protocol of competitive procurement and establish a clear rules-based system that has to be followed. And you also need to have monitoring and enforcement because, of course, things will still go wrong, but there should be fines, penalties, potentially jail terms associated with any type of misconduct and fraudulent activity. So those three pieces are so critical because without those, you can absolutely have the regulatory capture. And that is the other side of the story, right? Some of these contracts, when I looked at them in Pakistan's case, when they are signed in the 90s, any economist looking at that could actually say, oh, my God, if we honour this contract for the next thirty years, there is a risk this will cause massive pressure on foreign exchange reserves. There is a risk that this will lead to a debt crisis. And that would have been the time to turn back and say to the IPP, no, no, no. Let's sit down again at this table. Let's renegotiate, some of these terms need to be softer. Right. But one of the reasons that typically isn't done is because there is a regulatory capture. So I think that those norms of transparency, the rules-based system, the auctions and then the monitoring and enforcement, those are such critical aspects of institutional capacity and they go hand in hand with privatisation. They're compliments. You can't just do one without the other.

Tobi: So the second part of that question, uh, speaking on the electricity market specifically, so if you have to have private sector participation which is a position that most developing countries have found themselves. What are the core principles that should guide the relationship between, say, state-owned utilities and private power producers to ensure a balance between investment security and public interest protection.

Sugandha: Yeah, absolutely. Well, one of the key principles is don't just copy and paste old contracts. I mean, you'll be surprised, but some of these contracts do not change much. And in fact, You know, there's no reason why a contract that had to be very generous in the 90s looks exactly the same ten years later, because in that time there's obviously been development, there's been de-risking, etc. So one thing is really to treat everything on a sort of case by case basis to do a proper negotiation and not to just copy paste and this I think, you know, it sounds so simple and it sounds so intuitive, but when we looked at these contracts, what ends up happening is just the opposite. For example, if you're an independent power producer and I give you dollar indexation, then everyone who comes after you asks for it too. And I basically keep writing the same contract over and over again, even though the macroeconomic situation in the future may not warrant dollar indexation. So I think that's really important. The other structural change, which is something that you start seeing in advanced markets, is to have a place where you can actually bargain for power purchase agreements via a platform. So the UK has a platform for power purchase agreements. Uh, you know, the UK doesn't have a state owned utility. It has many, many different retailers. It has a retail competition, but what happens in this is that the independent power producer can suggest its contract terms and then the utility on the other side can look at this and it can look at other options of other independent power producers that suggest their own contract terms. And in this case you know as the independent power producer that if you ask too much, then someone else will win out over you and will get the contract. So it creates this incentive to basically discover the optimal contract just so that it's enough to cover your costs, it's enough to cover the risk of entering and the risk of participating in the electricity sector, but it doesn't result in super normal profits. And I think that's a really clever design.

Um, you know, one of my colleagues at Energy for Growth Hub says, why aren't power purchase agreements like mortgage agreements? You know, they should be very competitive. It should be very transparent. There should be a rules-based system. The information should be all out there. And we know mortgage agreements change over time depending on the economic situation, why are PPAs shrouded in secrecy, you know, this should be as standard as your typical mortgage contract. And I agree with that.

Tobi: So I'll ask you a question that I'm pretty certain that everybody that's gonna listen to this episode is dying to find out. To sort of like set the scene for that question, if you ask any power producer in Nigeria, for example, why electricity is unstable, it's always about tariff. You know, there seem to be no ceiling on tariffs. It's always tariff, tariff, tariff. We need to charge market reflective tariffs. It's why you don't have power. And it's a source of constant tension because the government then has to subsidise, you know, keeping an eye on energy costs. I mean, the cost of living crisis that the country is currently going through is mainly due to a surge in the price of energy. So what is the right approach to tariffs and pricing electricity generally? And can you give us a formula that you economists use to determine the market rate for electricity? Because like you said in your earlier answer, some of these contracts and the actual economics of it are above market rate and yet there's no electricity. So how do you determine the actual market rate for electricity?

Sugandha: Well, basically, if it becomes a very structured market, the goalpost, like, where Nigeria would want to get you is a situation where, for example, every day, you have a bunch of power generators line up and submit bids. Okay. And one of them says, okay, it's going to cost twelve cents per kilowatt hour for me to give you power. Another one will say, okay, I can do it for ten cents. Another one will say, oh, I can do it for two cents. By the way, the two cents will be the solar power, right? Because solar power is cheapest form of electricity because there is no fuel, right? So in terms of submitting your marginal cost, the marginal cost is zero because sunshine is free. Whereas for other things, the marginal cost of gas, et cetera, there's a fuel that you need to combust. So it typically is higher. And then on the supply side, the utility will check, okay, what is going to be the demand in Nigeria today? You know, is it a very hot day? Is everyone going to turn on their air conditioners? And they will basically move up those bids. So they'll start with the cheapest ones and they'll say, okay, okay, you know, you who said you can do it for two cents per kilowatt hour we'll get all of your electricity first. If that's enough to meet demand, good, you're done. But if it's not, then you'll go to the one who can do it for five cents per kilowatt hour. If that's not enough, then you'll go up to the one that does ten cents per kilowatt hour. And in the end, the price that people pay is a weighted average of all of those different generation costs. But remember in the system which repeats, let's say, every day on a daily basis, you work your way upwards towards the most expensive. So you start with the cheapest and then you work towards the top. And sometimes if you have something super expensive that is… you know, this is called the merit order when you rank things from cheapest to most expensive in the electricity system. If you have something like a gas generator that really, really cannot compete because it's offering very expensive gas, then ultimately that will get pushed out of the system because it's consistently the most expensive. Right? Because you order things.

Now this is the opposite of what's happening in power purchase agreements. In power purchase agreements, the price is fixed for thirty years and you're locked in. It's very, very different. So, when people say that electricity is super expensive and I do know enough about Nigeria to know it's very sunny, but there's really not enough solar being installed at the utility scale level. And let's be clear, right, I know there's domestic reasons because there's indigenous resources in Nigeria, but when we consider this kind of merit order ranking, solar can often put a lot of downward pressure on prices. And that's just because of the very, very intuitive reason that with solar, the cost is just about building the solar farm. But once you have paid that, sunshine as a fuel source, quote unquote, as a fuel source is free. It's a God given fuel. Right. And so that means that it is always amongst the most competitive in the merit order and then it puts downward pressure on prices.

I can give you the numbers from India. So India has a lot of domestic coal, you know, it's one of the biggest, it's the second biggest coal combusting country in the entire world after China. And guess what solar in India is three times cheaper than the coal. But the solar in India cannot generate as much as it should be. So India is installing a lot of solar, but if it wasn't for the power purchase agreements, it would be even faster and even bigger in solar because If we had this proper system of the merit order, which covered the entire Indian electricity market, then solar would be beating fossil fuels all the time. The reason the fossil fuels are not being beaten is because they're kind of hiding under their power purchase agreements and they don't want to let go of their power purchase agreements. So, we have a very funny situation in India that even when the utilities like hey it's been twenty-five years, I've been buying your coal, can I please finish my power purchase agreement. The coal generator says, no, no, no, we're going to extend this for another ten years. Right. And these utilities are like, no, please, please let us switch to solar because that's going to reduce costs. Um, so that's my kind of simple answer. So you want a situation which is really driven by plant level economics. It is dynamic and with every day you have this kind of beauty contest. Who can do it for the cheapest? And on the utility side, they're going to work their way up from the cheapest to the most expensive. I think that is, um, yeah, that is where we eventually want to go to.

Obviously, that kind of reform takes time.

Tobi: I mean, speaking of solar, um, in Nigeria, usually when you hear solar or think solar these days, there's really not much happening at scale. It's usually households and solar solutions has almost been stereotyped for rural electrification, which is weird. But you recently published something on Substack about solar in Chile. Tell me what's been happening in the market in Chile, especially on solar and what's the cool thing that we can learn?

Sugandha: Oh, well, um, so Chile had a big problem. So in Chile, um, just for your listeners, you know, Chile is a very skinny, long country. The capital, Santiago, where most people live, is down south. And in the north, you have the Atacama Desert, which is very sunny. It's actually one of the sunniest places in the world. Now, ironically, in Chile and, you know, in the south of the country where most people live, electricity was very expensive. I mean, it cost around $200 per megawatt hour at its highest. These were the types of really severely high prices that were being paid. And it was being generated through coal. Um, there was quite a bit of coal generation. And it was a very odd situation because people kind of just were like, well, there's a desert. There's so much space and it's very, very sunny up there. The problem was there was no way to bring the electricity from the north to the south. There were no power lines that went that way. So the government decided that they're going to invest in a massive power line that will connect the Atacama desert all the way down to cities like Santiago. And the moment the government announced that plan, a lot of private players suddenly started entering into the Atacama Desert and building solar because suddenly they knew they will have a way to sell the electricity to the biggest markets, right? Because before the power line, who cares if you build solar there. There's no way to transport the electrons. So this was super interesting. Suddenly private investment in solar boomed. Now the interesting thing after that is that once the line was completed, and the solar power turned on. And by the way, these are big solar farms. So normally with solar, if you go bigger, you can actually reduce your costs because of economies of scale. These are fairly large [solar farms]. And the moment the solar started generating, you know, your electricity prices went down from a high of $200 per megawatt hour to a low of $20 per megawatt hour. This was basically very, very transformative for the country and many coal power plants went out of business.

Now, the difference in Chile, by the way, is that the power market is competitive. So once a better technology comes on the block, that mechanism that I described before of always prioritising least cost and doing that on a dynamic basis kicked in immediately in Chile. So that's why you saw solar was supplying for all of the daylight hours, right? Solar was winning. Solar was supplying daytime energy. And then at night, yeah, some of these fossil fuels ran at night, but that wasn't enough for them to stick around or for them to make enough of a profit. And so the upshot was that Chile started pivoting to this very interesting mix which became cleaner and cleaner. It was solar. They're doing a bit of batteries now. I think they also have other energy generation sources that help balance. And for the normal person, it has made a big difference to their bills. But the best part is that the cost of building that power line was paid back in eight years because of the savings. The savings were so huge that even though the government had to build this kind of big piece of infrastructure, it was all worth it and eight years is a fairly short amount of time to recover the fixed costs of such a large investment.

So in terms of the takeaways we can learn from this, right, one of them is - there are strategic investments that government can make that can really unlock benefits, and that is something that countries should be doing if there is a place which has lots of solar potential but it's not currently well connected to where people live and where cities are. Building those transmission lines is going to be a critical piece of the puzzle. And then the second is to also fight the narrative that solar doesn't work. I mean, it's a narrative that exists in many places because like any good competition, you kind of want to talk down the other team and you want to kind of play them down and say, no, no, but they actually can't do this. But to be honest, I mean, I don't think we need to believe opinions and narratives, we can just look at the costs and the numbers and then it's a different story. And I think that with Chile, that's what it shows. Like, here's a global south country that reduced electricity prices so significantly because of solar. That's helping firms. It's helping households. And it's a way to combat that narrative with data and statistics, which is why like that. And I have kind of similar stories from India as well, where you really see it has made such a big difference to people's livelihoods. And the bigger picture here is that, look, we care about electricity. We care about electrons. It doesn't matter whether that comes from a lump of coal or from solar, like, the electricity is the same. Ultimately, we want it to be affordable. And so whatever does it in an affordable way, is what we should turn towards and the truth now with the numbers is that that is solar. I mean, it's quite unambiguously solar.

Tobi: I have two more questions for you to go. The first one is that recently, this goes back a few years actually, uh, a lot of developing countries have been pushing back on rich country led climate agenda basically on the reason that it deals developing countries a very poor hand in terms of energy needed for development and prosperity. Some of it I have a problem with. Some of it actually can come up as political signaling and sometimes a way to get generous deals so that some of these leaders can just embezzle money from carbon exchange agreements or whatever. But generally, what do you think? What's your take? Because another problem that I have that makes me uncomfortable is that climate change is indeed a global problem. There's no region of the world that won't be affected and the solutions to it, there's no statute of limitation on its deference. So what do you think? What do you make of all of this?

Sugandha: Yeah, I would say that in some ways the side of climate change that gets the most media attention in popular press is these COP conferences and diplomats and fighting and negotiating and it's like a game of hot potato. It's like, no, I won't do it ,you do it, no and you know, and they just pass around this hot potato. And I think that to me that's a shame because climate change to me is not a diplomatic game. That's the wrong way to frame this. I think it's actually a game of science and technology and engineers and it's not the playground of diplomats and I think the politicisation of it has actually been very, very damaging. Because it's taken something that should have been a technical challenge for innovation and scientists, and they've made a farce and a joke out of it. And I think if we look at this another way, like, if we just reframe it and say: this is the next big industrial revolution. This is the time in human history where we need to pivot towards another mode of production, something that is more efficient, something that utilises renewable resources rather than exhaustible resources, right? Because if you think of fossil fuels, these are very old paradigms, right? The fossil fuel paradigm started with the industrial revolution in Britain, the steam engine. And if you think about it, it's very simple: you dig up something from the ground, you burn it. The burning creates heat. Which boils water, which creates steam, and that steam moves a turbine. It's a very old, basic concept. There's nothing particularly inspiring about it.

But now, look at where we are. We have discovered that actually if the sun shines on certain materials, electrons can jump and that can automatically in a one step process generate electricity that was the discovery of the photovoltaic effect, and now we know how to harness it at scale. And if you look all around us, the entire earth has been using the sun's energy. Everything that's green is a type of solar panel. That should be very inspiring to us because it's taken humanity a long time to figure that out, but now we're aligning with this ultimate source of power. And just to say fossil fuels are ancient solar energy, right? We're just mining biomatter that's been condensed over millions of years. So if we reframe this, it takes it from burden to opportunity because it creates the idea of a green race. You can have winners in this. This is a new industrial paradigm. This is a growth sector. This is something that is advancing the old paradigm because technologically, it is far, far superior. You're not just digging and burning. It is actually a very sophisticated paradigm which connects to smart meters, the internet of things, batteries. So what I would say to your listeners is that the whole miscategorisation of climate in this political domain. Has done a great injustice to the technological side and the technological framing is what I think is much more appropriate for this. Because then suddenly the way any developing country wants to be technologically advanced, well, why not do it for energy, right? Energy is the backbone of your entire economy. Why do you want to be an 18th and 19th century energy paradigm? It's a very weird way to think about it, right? Like, if someone told you, hey, if you want to expand your transport sector, You should go with 18th century horse carriages because that's how Britain did it. You would laugh, right? You would say that's ridiculous. Why would I do a horse carriage? We have much better technologies today. It's the same thing with a lump of coal or gas, like, honestly, there's a new horizon. Why would we go to old centuries technologies? So that's kind of my response to that. I just think it's a whole circus over there and it's distracting. It's missing the point.

Tobi: Yeah. My final question for you, and this is a bit of a tradition on the show. What's the one idea? It could be your idea. It could be something you've read or seen or heard as elsewhere. What's that one idea you like to see spread everywhere? You’ll like to see people believe it. You'll like to see people live it. You'll like to see people be inspired by it. What is that one idea?

Sugandha: Well, I mean, one thing that I find very inspiring is the fact that sunshine and wind are free. When was the last time anyone ever paid for a ray of sunshine or for a beautiful gust of wind? And sure, we need to build wind turbines, we need to build solar panels, but once you do that, the rest is essentially free. You don't need to dig up more of anything. You don't need to drill wells. You don't need to do these kind of very complex ancillary processes. It's kind of a one step process. You build and then you utilise this abundant free fuel. And to me that's so inspiring. I think that the idea that we live in a world that is already solar powered and, you know, we've had millions of years of evolution and the energy source that evolution has prioritised has been the sun's energy. You know, I take a walk outside and I see a green planet and I'm like, well, you know, chlorophyll is green because that's what taps into the sun's rays effectively. And I think that that is just really inspiring because it's already hinting at this kind of bigger, deeper future. And it's something that I think is very aligned. And I do think that that is something where humanity will go. And in some ways, it's almost like there's always been energy around us, right? Every gust of wind is energy. Every ray of sunshine is energy. We just haven't known how to harness it. So yeah, that's kind of the main idea I would want people to take away with, which is that sunshine and wind are free. You know, why don't we use them more because that is the logical next step in my mind.

Tobi: Yeah, that's a fantastic idea. We'll be sure to help you spread it.

Sugandha: Great.

Tobi: So I mean, it's been wonderful and insightful talking to you. Thank you very much.

Sugandha: Yeah, thanks so much for having me. I've had a lot of fun talking to you.

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