India’s energy scenario poses the challenge of investing adequately to narrow the demand-supply gap and reducing import dependence.
A popularly held scientific theory traces the origin of coal and all forms of hydrocarbons to the buried rainforests which lay under the earth’s surface for centuries. The biomass converted into coal and other forms of energy. It is ironical that when the greens now talk of using up this energy source, it is with much contempt, since the same biomass that turned into carbon or hydrocarbons is the cause of environment destruction, both in its production and usage.
The use of energy, though, is closely linked to the level of economic development a country achieves and, without a well-entrenched and evenly distributed energy consumption profile, society can boast of little progress. According to a 2007 estimate by the government, India’s per capita energy consumption is still low at 500 kilogrammes of oil equivalent (kgoe) compared to the global average of nearly 1,800 kgoe.
According to the IEA World Energy Outlook 2009, though global energy use in 2009 is set to fall for the first time since 1981 due to the economic downturn, non-OECD countries collectively account for over 90 per cent of the increase in energy demand, which will be 40 per cent higher than that in 2007. The Organisation for Economic Cooperation and Development (OECD) represents the 30 most developed countries of the world, which were also the worst hit during the slowdown. China and India, which are not part of the OECD and have shown resilience in growth numbers, represent over 53 per cent of incremental demand to 2030 and are projected to be in first and third places, respectively, by 2025 and 2020 in the list of biggest spenders on oil and gas imports.
According to the report, fossil fuels will remain the dominant source of energy worldwide, accounting for 77 per cent of the demand increase in 2007-2030. Although the demand for oil is expected to drop by 2.2 per cent in 2009, following a drop of 0.2 per cent in 2008, it is projected to recover from 2010 as the world economy pulls out of recession, rising from around 85 million barrels a day (mbd) in 2008 to 105 mbd in 2030, an increase of 24 per cent. Between 2007 and 2030, demand for coal will grow by 53 per cent and that for natural gas by 42 per cent.
Electricity demand will grow by 76 per cent in 2007-30, requiring 4,800 Gw of capacity addition - almost five times the existing capacity of the US. Coal, which is considered the most polluting of energy sources, will remain the dominant fuel for the power sector, its share of the global power generation mix rising by two percentage points to 44 per cent in 2030. “But higher fuel prices as well as increasing concerns over energy security and climate change will boost the share of renewable-based electricity generation from 18 per cent in 2007 to 22 per cent in 2030,” says IEA in its report. India, which witnessed a peak demand shortage of 12 per cent in electricity during 2008-09, has been pushing for renewable power generation for its rural areas while following a strategy of mega projects for meeting the overall demand surge.
With a target of returning to the high growth path of 9 per cent in 2012-13, India’s energy consumption is set to rise. The country is import-dependent in crude oil to the extent of 70 per cent. Nuclear energy is largely import-dependent in terms of both fuel and technology. Endowed with coal reserves, India’s dependence on coal imports poses no major challenge. Similarly, though the country is importing natural gas under long-term contracts as well as from the spot market at present, its dependence on the global market has reduced substantially, with the domestic gas fields going into production. About 40 million standard cubic metres a day (mscmd) of gas production from Reliance Industries Ltd’s D6 field, which will shortly be scaled up to 60 mscmd and then 80 mscmd, has already changed India’s hydrocarbon profile, with gas overtaking oil production in oil equivalent terms.
Biofuels and other renewable sources of energy still constitute a very small portion of India’s energy basket, though the government has come out with various programmes for the promotion of petrol and diesel blending with ethanol and biodiesel, solar and wind power plants and biomass-based power generation.
Looking ahead, the challenge for India in the energy sector is two-fold — investing adequately to narrow the demand-supply gap, especially in the power sector, and reducing import dependence. Import dependence becomes even more worrisome given the spike in international oil prices like that witnessed last year. “In the long run, the only viable policy to deal with high international oil prices is to rationalise the tax burden on oil products over time; remove the anomaly, if any, in the existing pricing mechanism; realise efficiency gains through competition at the refinery gate and retail prices of petroleum products; and pass on the rest of the international oil price increase to consumers, while compensating targeted groups below the poverty line as much as possible,” the Planning Commission has said in a report. Halfway through the Eleventh Plan, the country is still far from realising the objective of making consumers pay the full price.
The second challenge before the country is to give priority to global concerns on climate change even as it meets the surge in demand that accompanies a high-growth path. This could be done through the efficient use of energy and promotion of environment-friendly technologies.
Representing the energy sector view before the crucial Copenhagen meeting in December, IEA has said that without a change in policy, the world is headed for a rise in global temperature of up to 6 degrees C. To avoid the most severe weather and sea-level rise and limit the temperature increase to about 2 degree C, the greenhouse gas concentration, IEA says, needs to be stabilised around 450 ppm CO2 equivalent. “To realise the 450 scenario, additional investment of $10.5 trillion is needed globally in the energy sector during 2010-30,” it said.
India’s per capita carbon emissions are estimated to rise to the equivalent of between 2.77 and 5 tonnes of carbon dioxide in 2031 from the current 1.2 tonnes, according to the estimates of the Ministry of Environment and Forests. In contrast, average global per capita emissions were already 4.22 tonnes in 2005.
India has so far maintained its opposition to legally binding caps on carbon emissions, stating that it will affect its growth, especially since it has one of the lowest per capita carbon emissions in the world and is responsible for 4 per cent of the total, while the US accounts for 20 per cent. This should not be reason for complacency, though, since India is one of the worst affected by the challenges of global warming.
