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Web Exclusive | December 2016

The key to achieving India’s energy goals

The Paris Climate Change Agreement came into force this year, marking a defining moment in international history. India emerged at the forefront of this development where it pledged to seek sustainable and smart solutions for the future. As India stands on the threshold of a major transformation, it is important to consider how economic development will span out over the next few years, especially with respect to energy supply in the country.

The Indian economy is at present the world's fastest growing economy with actual growth rates of 7.6 per cent, 7.7 per cent, and 7.3 per cent in Q1, Q2 and Q3 of FY2015-16 respectively. However, efficient and reliable energy supplies are a precondition for accelerating the growth of the Indian economy in the next few years. In this regard, the government has taken several steps to encourage the transition to a low-carbon economy through renewable energy sources.

But renewable energy in its current state has not been able to meet the peaking demands of energy. Solar or wind energy is heavily dependent on weather conditions for its source of power. Such an intermittent and unpredictable supply of energy will not be able to meet the demand during peaking hours. Moreover, it is difficult to generate power as large as those generated by traditional energy sources from renewable energy sources. Therefore, it is important to recognise the role that different fuels can play at different stages, instead of picking one source of energy over another.

One alternative solution is to switch from high carbon emitting fossil fuels to lower ones. In this context, natural gas can be considered as an important fuel option as it results in 60 per cent lesser emissions for CO2 for the same level of energy consumption as compared to coal and can thus, be used to absorb the infirm renewable energy and consequently, provide support during peaking hours. This would not just ensure efficient use of energy from all sources but will also meet the drawbacks of renewable power generation.

Natural gas is also quite versatile and can be used in process industries and transport. Earlier this year, vehicles running on Compressed Natural Gas (CNG) were exempted from the odd-even rule in Delhi. The Supreme Court also ordered the Delhi government to pull 30,000 cabs off the roads as they run on diesel or petrol rather than CNG. All this reiterates the fact that gas is not just cheap but also safer and cleaner, making it a viable source of energy.
The energy sector has also seen an uneven growth in the last year – with the renewable sector growing by 13.7 per cent, along with coal that has grown by 4.8 per cent, and oil which has grown by an astounding 8.1 per cent.
 
On the other hand, natural gas has shrunk and fallen below the previous year consumption. The reason for this uneven growth can be traced down to the lack of a single central body that is responsible for energy policy and regulatory affairs which results in inconsistencies for sub-sectors, i.e., coal, oil, electricity and gas.

It is recommended to bring all these sub-sectors under a single central body for energy policy that encourages the right balance of fuel mix by incentivising the overall fiscal and policy framework.

It is also important to introduce peak generation tariffs and formalising the same through its inclusion in the legislative and policy framework. The government has recognised its importance and is already working on a peaking power policy for gas that will encourage power distribution companies to invite bids from generation utilities for meeting power shortages during peak consumption hours. However, this should be urgently finalised to encourage new capacity additions of peaking stations.

Recently, at the Petrotech conference, Prime Minister Modi outlined a vision for India’s energy future which seeks to reduce import dependence of gas from 77 per cent to 67 per cent by the year 2022. This might be a good time to look at other countries for best practice models in this area. Moreover, gas production also needs strong gas infrastructure to increase accessibility in other parts of the country. Currently, majority of gas is consumed by the country’s northern and western regions.

India is about to face substantial increase in energy demand in the next few years which will translate into higher demand for electricity and presently, the energy sector is going through a phase where investors and financiers are cautious of delays and uncertainties. Thus, there is a need to come up with an effective system for allocation of power projects and devise a methodology for the same which incentivises investments.

Authored by Dr Atul Prasad, Additional General Manager (PMI), NTPC Ltd (Views expressed above are the author's own)
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