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Risk Management in Introducing High-Technologies Into High-Growth Markets

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High-growth markets like India face a range of challenges, and thus present vast opportunities, especially for introducing leap-frogging technologies in the area of energy infrastructure. Just like speedy development of the mobile phone market in India and its allied services now being increasingly offered via mobile phone platform such as m-banking, development of new energy infrastructure will draw a similar parallel in skipping the needs of expensive copper-wire grid that needs to cover the vast landmass of India, multiple times larger than most Asian and European countries. The new energy management platform expands the possibility of providing rural electricity cost-effectively as well as upgrading the existing electricity supply for energy efficiency in India. However, introducing certain high-density power technology and devices require careful steps in a country where numerous court cases found severe corporate liability, and abuse of Indian safety regulation by foreign multinational companies. Pain of the Bhopal accident is still felt to this date by many in India.

Mobile Phone Base Station and its Bottleneck
Though fast growth of telecom coverage was attained in India thanks to leap-frogging wireless technology that negated need of copper and some fiber optic cable, 50% of the country, mostly in rural areas, does not have coverage, impacting the livelihoods of the rural poor who have, in the case of peri-urban settings, willingly paid for mobile phone access for income generating needs. For example, mobile phones for farmers and fishermen in rural India is a critical economic tool, and its function ranges from negotiating price for their agricultural commodities to even fishermen calling in from their canoes to argue bids and plan landing points.

Here, the bottleneck of expanding telecom coverage is electricity supply, and currently heavy dependency on the expensive import, diesel. About 20% of the diesel consumed in India goes to power the mobile towers that comprise the core of India's 21st century infrastructure, central to eGovernance, mobile banking and a host of other applications essential for inclusive growth. Expansion of electricity access has been long awaited, and today it is possible to advance it further along with emerging energy management technology to efficiently power mobile phone coverage. According to the Prime Minister's Planning Commission report, 1% increase in tele-density contributes to 3% increase in GDP.

Powerful Device and Technology Require Ethical Steps Prior to Market Introduction
The approach towards expanding energy supply such as at telecom base stations, buildings, homes, factories has a couple of options. One is device-based and the other system-based.

We have drawn inspiration from my mentor and good friend the late Dr. Saburo Okita who was a prominent development economist and Foreign Minister of Japan and the first co-chair in the 1980s of the Indo-Japan Study Committee (the other co-chair was Dr. Manmohan Singh) and who was famous for working through some 80 entities at the same time in the public and private sectors ranging from government programs to industry committees. A group of us that includes solar and battery engineers and system IT experts have likewise worked through entities in the government and private sectors both in India and Japan for the past two years on the vital importance of key clean energy technologies that can build one platform system to monitor and control multiple power supply sources to assure safety and, at the same time, system efficiencies.

Indian power supply reality is very different from industrial countries. Because of frequent power failure or no power, diesel generator, battery bank, inverter, rectifier, and now increasingly solar PV and associated charge controller are inter-connected with frequent switching from one device to the other to meet electricity supply 24/7, and this leads to special fire risk.

Any entity attempting to bring powerful devices from industrial countries to India needs to be mindful of this risk and challenges, and work out the plan of safety as the first priority. Lithium ion battery, for instance, is one such powerful, high-energy density device, and its large capacity deployment is still limited and therefore a new market. Industrial countries have not accumulated safety data nor industrial standard, testing methodology and safety standard.

The line workers, especially in rural areas, often only have basic training, and have never been accustomed for instance to the risks inherent in deploying brand new technologies in that space, such as Lithium-ion battery which is categorized in all countries as hazardous because of chemically unstable electrolyte inside thus the fire risks. Powerful ability to charge the battery quickly and large storage capacity, but side effect is its thermal instability that leads to thermal runaway events, or fire. Even laptop lithium ion batteries have faced large product recalls because of fire accidents and risk.

The capacity need essential in the case of base station is 100 times larger than the capacity requirement of mobile phone set. For electric vehicle use, it is only about 20-30 times more, thus much smaller capacity requirement than telecom or building use. Battery experts all over the world admit that the fire and accident risk correlates with its capacity.

Global Product Competition: Winning is Multi-Dimensional
Manufacturers of lithium-ion battery in Japan, Korea, China and Taiwan are fiercely competing for global market share, and it is natural to eye on large Indian market as the next frontier, especially given the situation of weak grid electricity supply. Some have government-led plan to conduct research in India on large capacity lithium-ion battery use to create market entry. While India welcomes foreign technology collaboration, utmost care and sensitivity to the Indian environment needs to be taken into careful consideration because of history of fire accidents caused by multinational corporations and, more generally, the struggle against Imperial British colonial exploitation.

Having these backgrounds in lithium-ion battery products, competition of global market share is one thing, but ethical judgment and responsible approach on known hazardous material for large scale use are also tests of market success in India. Therefore, it is wise to have independent safety standard and testing methodology, not those of insiders and industry, worked out first in the country of origin before conducting foreign government-sponsored study on large capacity lithium-ion battery use in India.

Fukushima nuclear power plant disaster is being investigated in Japan now with increased vigor by the Parliamentary Commission led by a vocal international leader, Dr. Kiyoshi Kurokawa. According to Japan's major newspaper, Nikkei, Fukushima nuclear power plant had been operating based on internal safety standard, not of any independent body, thus seriously lacking in its accountability. To make the situation worse, there is apparent seething anger in Japan that Japanese government carries the ultimate liability, unlike the US, thus Japanese tax payers have to bear its huge cost burden. Government-led industrial policy has its hazard in times like this as its risk is not diversified, but concentrated on its tax payers, including other corporations, lowering its global competitiveness.

Former Prime Minister Dr. Yukio Hatoyama and Rep. Tomoyuki Taira have called for nationalization of the TEPCO Fukushima nuclear plant, if only to know what really happened there because they have had difficulty accessing key documents from the company even while being prominent parliamentarians.

Learning from Fukushima, today many Japanese industry leaders express how critical and important it is to put in place an independent entity for safety standard and evaluation methodology for large capacity lithium-ion battery. That is a wise and mature opinion. Surely it creates the most credential of Japanese high technology products that will not only protect against accident claims, but this credential and standard serve as the best national strategy to expand the market share in its fierce market battle of lithium-ion battery.

Case in point is during its product recall of small lithium-ion battery used in laptop computers and mobile phone sets. Japanese market expansion overtook its safety steps, and as a result tens of millions of international products recall occurred, one of the largest in history. Then only, Japanese manufacturers and government had to rush to create product standard known as JIS (Japan Industrial Standard). Japan had been the No.1 producer of lithium-ion battery till last year when Korea replaced its No.1 spot. If you look back at the history of changing market share, around the time of product recall a few years ago was indeed the turning point. Koreans certainly picked up the slack while Japanese had to cope with the huge scale of product liability, belated creation of safety methodology and product standard.

Independent Safety Standard is the Key Risk Management Tool
This is why the priority to introduce lithium-ion battery for large capacity use in India should be, first, work out independent safety standard and its rigorous testing methodology in Japan or its technology-originating countries. If history is the best teacher, it should avoid repeating the same trajectory of accidents, product recall and loss of market share, but rather take the high road and appropriate sequence of market introduction. The needs for safety and vigilance are particularly essential in this post-Fukushima and indeed post-Bhopal era.

Powerful device such as lithium-ion battery is a double-edge sword -- if accident occurs, the detrimental consequence will be inevitable losing to its market competition, but if responsible approach and steps are followed, industry trust will be created and the market potential is huge. Indians are eager to have leap-frogging technology especially emerging energy management technology and system. With multiple 2G, 3G, and 4G innovations of communication platform being built, it will undoubtedly require accelerated energy supply solutions for the telecom sector. It is the key to generate very uniquely Indian mobile phone applications in the area of m-commerce and m-information, the most progressive service platform anywhere. Appropriate risk management, therefore, is the wisest international strategy in deploying powerful devices for high-growth markets.