Authors: Sanjay Kumar Kar and Prajit Goswami
India is one of the fastest growing economies in the world. It had been growing at a rapid rate of 7 percent for the last 10 years. Further, it is expected to grow over 7% percent in the coming decade. To fuel projected economic growth and cater growing energy needs, India requires a lot of energy.
With an area of 1.26 million square miles with diverse landscape and difficult terrain, India comprises around 1.2 billion people and their ever increasing needs. Currently India imports 70-80% of its oil and 30-40% of its natural gas requirements. Historically India’s energy import dependency rests on Middle East.
Coal is the most important and widely available fossil fuel in India. It supplies 55 percent of the country’s primary energy needs. According to BP Statistical Review, 2016 at the end of 2015, India had 60600 million tons of coal reserves with a global share of 6.8% and R/P ratio of 89 years. Compared to other fossil resources like oil & gas, India is better placed with coal resources for future production and use.
India intends to reduce coal imports by exploiting its own reserves. Import of coal has already decreased, by around 19 percent to 16.38 million tons in the month of May 2016 as compared to around 20.29 million tons in May 2015.
India’s current renewable energy capacity, 45 GW, is just about 14.7% of total installed grid connected electricity generation capacity of 306 GW in the country. Some of the major challenges faced by renewable sector are lower capacity utilization, lack of evacuation infrastructure, and funding for large scale expansions. Coal still the cheapest source for power production with per unit tariff in the range of Rs. 2.3-4.00. However, renewable sources like wind and solar are competing well to achieve grid parity. Current wind tariff is in the range of Rs. 3.39-Rs.5.92/kWh and recently solar tariff reached as low as Rs.4.34/kWh. In the beginning Government encouraged feed-in tariff but now the market is moving towards competitive bidding tariff. Therefore, renewable tariff is moving closer to grid parity.
Despite all kind of limitations the Government targets to achieve renewable installation capacity of 175 GW by 2022. Further, multiple initiatives are being taken by the Government to promote off-grid or captive renewable energy along with decentralized renewable applications. The Government is actively pushing installation and production of renewable energy through schemes like accelerated depreciation, generation based incentives (GBI), and viability gap funding. The Government already funded Rs. 25075 million under the GBI scheme for solar and wind power production.
Decentralized renewable applications are expected improve livelihood of millions of Indians in the rural as well as urban India. Because holds will have access to energy which would be helpful for enhancing scope of economic activity, thereby improve economic productivity and revenue generation. Further, affordable energy accessible to all citizens could improve situation of primary education in the country.
As India needs to diversify its energy mix and reduce dependence on imported fossil fuel nuclear energy could play a very important role in ensuring energy security of the country. Application of nuclear for electricity generation needs to be actively pushed forward. Media reports suggest that nuclear power cost is in the range of Rs.9-12/kWh.
India’s largely indigenous nuclear power program resulted in capacity installation of 5780 MWe. With the support of Russia and many other partnering countries India is expected to achieve 14.6 GWe nuclear capacity by 2024. It is high time for India to intensify strategic measures to address its energy security challenges like: making energy accessible, affordable, and available to all its citizens.
At least, India could aim to manage energy supply security if not complete energy security. One of the important source of energy could be natural gas as a transit fuel for meeting emerging energy needs. Natural gas can gradually reduce: (i) use of diesel and petrol in the transport sector, (ii) use of coal in the power sector, (iii) use of liquefied petroleum gas (LPG) in the domestic cooking, heating, and cooling; and (iv) use of coal and liquid fossil fuel in various industries like ceramic, textile, steel, etc. Further, natural gas could be used to produce hydrogen used in the refineries and in the transport sector.
India’s domestic natural gas production remains a big concern and future addition of new gas reserves provide no better comfort. As a result India’s import dependency continue to grow and we believe that the import trend may very much continue in future too. Unless domestic unconventional sources of gas offer some surprise, import of liquefied natural gas (LNG) would continue to play a critical to bridge the demand-supply gap.
For the time being India’s over dependence on Middle-East for fossil energy is not a concern from supply point of view. However, India should expand its energy sources basket carefully and strategically to avoid any future supply constraints. Considering the current supply glut of fossil fuel, this is the right time to expand the range of sourcing destinations. In the recent past, India actively searched for alternative or complementary destinations for sourcing natural gas. In the process, emerging destinations like the US and Australia were added.
India’s domestic gas production fallen from about 51 billion cubic meter (BCM) in 2010-11 to 31 BCM in 2015-16. As a result the gap between demand and supply has been widening. As results natural import dependency has been increasing which is evident from increase in LNG import from 12.9 BCM in 2010-11 to 21.3 BCM in 2015-16.
Natural gas is certainly tipped as the transition green fuel especially in the transport in sector. It has comparatively lower carbon footprint-thus more environment friendly compared to coal and oil. The uses of gas in cooking, heating and power generation stand to benefit millions of stakeholders. Apart from the above purposes use of natural gas for mobility sector addresses many concerns including the environmental concerns faced by urban cities. So, city gas distribution is poised to offer green energy solution to many struggling cities and upcoming smart cities.
In the present scenario India imports gas only through LNG carrier. It is believed that transporting natural gas through pipelines is found be cost effective over LNG carriers. For example, in 2013 China received pipeline gas imports at an average price of US$ 9.78 per MMBtu compared to average price of LNG import price of US$ 13.8 per MMBtu. LNG is costlier because the gas has to be liquefied to reduce its volume and transported using specially designed cryogenic tanks. Also at the receiving end specialised LNG terminals have to be built to store and re-gasify. Essentially the countries which import natural gas through pipelines enjoy cost advantage over import of LNG.
India has been pushing for transnational pipelines with limited success. However looking at India’s strategic location it would be viable for India to take gas from gas rich Iran, and Turkmenistan through pipelines. India already has agreed upon much talked about Turkmenistan–Afghanistan-Pakistan-India (TAPI) pipeline which starts from Turkmenistan and passes through Afghanistan & Pakistan before reaching India. TAPI pipeline with a length of 1124.68 miles passes through terror affected areas of Kandahar and Herat. Thus this makes it a very risky project to operationalize. Although NATO forces stationed in Afghanistan would ensure to protect the part of the pipeline passing through terror prone territories but future sabotage and attack may not completed ruled out. The project is due to be completed by 2019 and India would receive 1341.78 million cubic feet per day of gas. Operationalization of TAPI would certainly improve gas supply security for India.
Another transnational pipeline project namely Iran-Pakistan-India couldn’t happen due to very many reasons including sanctions on Iran, geopolitical pressure, and security concerns. In a report published in the Indian Express on 22nd April 2016 the Iranian Ambassador was stated saying that this project should be forgotten.
Discussions with Iran is on for a deep sea 868 miles pipeline via the Oman Sea and Indian Ocean. Iran-Oman-India pipeline from Iranian port of Chabahar to India’s Gujarat Coast would transport 1098.141 million standard cubic feet of gas per day. This might compensate for the almost failed IPI project and also there would be no issue of any other transit country conflict.
India has also invested for the development of the Chabahar port and also funding a rail link between Chabahar and Zahedan in Iran. The completion of the rail link would connect Chabahar to North South Transport Corridor (NSTC). These investments are moulding the bilateral ties of India and Iran. This deep sea pipeline will not only connect India to Iran’s Gas fields but Oman is also slated to join the pipeline at a later stage. This would give India a strong foothold to the Gas trade in both Iran and Oman. Also it would boost India’s stand in comparison to China’s One Belt One Road Program (OBOR).
Besides Iran, Oman and Turkmenistan, India also has a potential import source towards its north-eastern side which is Myanmar. The main advantage with Myanmar is its proximity to India and that it shares its borders with North-eastern part of India. Myanmar large untapped reserves. According to BP statistical review report 2016 Myanmar has 18.7 trillion cubic feet of natural gas with an R/P ratio of 27 years. But until now the investments that India has made in Myanmar although substantial are very less in comparison to China. According to a report in Journal Of Energy Security India’s investment in Myanmar Oil and Gas sector is around US $1.6 billion while Chinese investments is around US$ 8 billion. The 1.04 US$ Sino-Myanmar gas pipeline has been functional since 2013 transporting 423.72 billion cubic feet (bcf) gas to China annually. Lack of proper funding and coordination between public and private owned firms has resulted in India loosing important bids to other countries. Therefore, impacting India’s intention to secure long term energy supply.
Further, India failed to bring to table Myanmar-Bangladesh-India transnational pipeline because of Bangladesh’s unwillingness to act as a transit country. Although an alternative to this route was by bypassing Bangladesh and building a pipeline through North-East India that could connect to pipelines of East India. This deal also never came to reality due to multiple reasons including lack of funding. And thus China took advantage of this situation and entered into the gas pipeline market of Myanmar and built a similar transnational pipeline to China’s comparatively less developed Yunnan province.
However, an agreement with Myanmar through North-eastern states may increase the pipeline costs but it would also give India long term gas sourcing from Myanmar. The problems that India faces on its north-western part because of hostile relationships with Pakistan and with issues of pipeline security in both Pakistan and Afghanistan. This however is not the case with Myanmar. Therefore having a gas trade relationship with Myanmar is much secure and mutually beneficial. In-case any problem occurs in the north-western side this may act as a contingency plan. This also has another benefit; the gas pipeline from Myanmar via North-East India can be used to develop the region which otherwise due to its difficult terrain is not easy to develop. Development of North-East provides a major strategic advantage to India in dealing with China in terms of monitoring and also preparing required infrastructure to handle any unforeseen situation.
To ensure long-term energy security for its all citizens India should continue to actively pursue multi-pronged strategies. Currently, the Government is focussing on exploiting domestic fossils fuel and renewable energy resources to address ever increasing demand. Simultaneous, New Delhi’s energy diplomacy with energy resource rich countries like the US, Russia, Qatar, Saudi Arabia, Iran, and Australia has been unfolding. Even Prime Minister Mr. Modi’s look Africa energy policy adds new dimensions to India’s interest in securing energy equity in Africa and enhancing India’s energy security. Further, clean coal technologies are being pushed to improve supply of much greener energy.
So in order to secure India’s energy future it is necessary for India to explore and exploit domestic fossil resources but seriously acquire fossil resources outside India. To improve energy supply security emphasis should be given to energy diplomacy, international collaborations, and efficient trade partnership. Building necessary energy infrastructure like LNG terminal and pipeline should be pursued with utmost priority. India should take advantage of global supply glut to improve accessibility, affordability, and availability of energy for its citizens. Further, creating investment climate for renewable energy should be facilitated at all levels to bring renewable energy revolution at the earliest.
Decontrol of petroleum product pricing especially petrol and diesel prices takes energy pricing toward market determined pricing. Even gas pricing is more market oriented than ever before. Direct cash transfer on use liquefied petroleum gas (LPG) for domestic cooking purpose is a step forward to address energy accessibility and affordability. Judiciary and environment regulatory authorities are seriously pushing use of natural gas or green fuels to improve air quality in metro cities. Within a decade the Government intends to increase city gas distribution to 200 geographical areas from current level of 70 geographical areas.
India is certainly capable of addressing existing and future challenges to improve its energy security in the long-run. Moreover, green and renewable energy would play an important role to improve future energy security in the country.
Global energy investment in 2017 fails to keep up with energy security and sustainability goals
The electricity sector attracted the largest share of energy investments in 2017, sustained by robust spending on grids, exceeding the oil and gas industry for the second year in row, as the energy sector moves toward greater electrification, according to the International Energy Agency’s latest review of global energy spending.
Global energy investment totalled USD 1.8 trillion in 2017, a 2% decline in real terms from the previous year, according to the World Energy Investment 2018 report. More than USD 750 billion went to the electricity sector while USD 715 billion was spent on oil and gas supply globally.
State-backed investments are accounting for a rising share of global energy investment, as state-owned enterprises have remained more resilient in oil and gas and thermal power compared with private actors. The share of global energy investment driven by state-owned enterprises increased over the past five years to over 40% in 2017.
Meanwhile, government policies are playing a growing role in driving private spending. Across all power sector investments, more than 95% of investment is now based on regulation or contracts for remuneration, with a dwindling role for new projects based solely on revenues from variable pricing in competitive wholesale markets. Investment in energy efficiency is particularly linked to government policy, often through energy performance standards.
The report also finds that after several years of growth, combined global investment in renewables and energy efficiency declined by 3% in 2017 and there is a risk that it will slow further this year. For instance, investment in renewable power, which accounted for two-thirds of power generation spending, dropped 7% in 2017. Recent policy changes in China linked to support for the deployment of solar PV raise the risk of a slowdown in investment this year.
As China accounts for more than 40% of global investment in solar PV, its policy changes have global implications. This confirms past IEA reports that have highlighted the critical importance of policies in driving investment in renewable energy.
While energy efficiency showed some of the strongest expansion in 2017, it was not enough to offset the decline in renewables. Moreover, efficiency investment growth has weakened in the past year as policy activity showed signs of slowing down.
“Such a decline in global investment for renewables and energy efficiency combined is worrying,” said Dr Fatih Birol, the IEA’s Executive Director. “This could threaten the expansion of clean energy needed to meet energy security, climate and clean-air goals. While we would need this investment to go up rapidly, it is disappointing to find that it might be falling this year.”
The share of fossil fuels in energy supply investment rose last year for the first time since 2014, as spending in oil and gas increased modestly. Meanwhile, retirements of nuclear power plants exceeded new construction starts as investment in the sector declined to its lowest level in five years in 2017.
The share of national oil companies in total oil and gas upstream investment remained near record highs, a trend expected to persist in 2018. Though still a small part of the market, electric vehicles now account for much of the growth in global passenger vehicle sales, spurred by government purchase incentives. For electric cars, nearly one quarter of the global value of EV sales in 2017 came from the budgets of governments, who are allocating more capital to support the sector each year.
Final investment decisions for coal power plants to be built in the coming years declined for a second straight year, reaching a third of their 2010 level. However, despite declining global capacity additions, and an elevated level of retirements of existing plants, the global coal fleet continued to expand in 2017, mostly due to markets in Asia. And while there was a shift towards more efficient plants, 60% of currently operating capacity uses inefficient subcritical technology.
The report finds that the prospects of the US shale industry are improving. Between 2010 and 2014, companies spent up to USD 1.8 for each dollar of revenue. However, the industry has almost halved its breakeven price, providing a more sustainable basis for future expansion. This underpins a record increase in US light tight oil production of 1.3 million barrels a day in 2018.
“The United States shale industry is at turning point after a long period of operating on a fragile financial basis,” said Dr Birol. “The industry appears on track to achieve positive free cash flow for the first time ever this year, turning into a more mature and financially solid industry while production is growing at its fastest pace ever.”
The improved prospects for the US shale sector contrast with the rest of the upstream oil and gas industry. Investment in conventional oil projects, which are responsible for the bulk of global supply, remains subdued. Investment in new conventional capacity is set to plunge in 2018 to about one-third of the total, a multi-year low raising concerns about the long-term adequacy of supply.
This edition of World Energy Investment, which is being released for free this year, provides a wealth of data and analysis for decision making by governments, the energy industry and financial institutions to set policy frameworks, implement business strategies, finance new projects and develop new technologies.
Off-grid Renewables are Growing, Bringing Socio-economic Benefits to Millions
Off-grid renewable energy has witnessed spectacular growth over the last decade. Since 2008 capacity has trebled and the number of people in rural communities served by the technology has witnessed six-fold growth. Today, up to 133 million people are receiving life-changing access to low-cost, secure renewable energy and benefit from the socioeconomic impact access delivers. Global off-grid investments in 2017 reached USD 284 million.
These findings feature in a new IRENA brief launched during the UN High-Level Political Forum in New York. The paper, entitled: Off-grid Renewable Energy Solutions, Global and Regional Status and Trends, builds on IRENA’s statistical analysis to offer a global picture of the sector’s trajectory and impact. The data highlights the extent to which off-grid renewables are emerging as a mainstream solution to the expansion of electricity services all over the world, contributing to sustainable development goal 7 (SDG 7) by broadening the reach of electricity beyond existing grid infrastructure.
“Off-grid renewable energy is an important contributor to energy access across the developing world having witnessed widespread, rapid growth in deployment over the last few years,” said Dr. Rabia Ferroukhi, Deputy Director of the Knowledge, Policy and Finance at IRENA. “Our analysis captures this momentum whilst shedding light on the need to step-up efforts towards 2030 Sustainable Development Goals.”
Africa has emerged as a dynamic, fast-moving hub for off-grid renewables. The development of solar lighting solutions and innovations in deployment and financing models, such as pay as you go options and mobile payment platforms have contributed to Africa’s rapid advances. The continent’s off-grid industry now serves around 53 million people – the equivalent of the entire population of South Africa – up from just over two million in 2011.
The brief identifies Asia as a global leader in off-grid renewables capacity deployment. Today, up to 76 million people across the continent may now benefit from such power sources.
South America, home to some of the highest rates of electricity access in the developing world, has also witnessed off-grid renewable growth the brief suggests, where the technology is considered key to ‘last mile’ electricity access.
Off-grid renewable energy solutions are being deployed to provide electricity services for a wide range of end-uses, including for powering agriculture, telecommunication infrastructure, healthcare centres, schools, and rural enterprises. The paper emphasises that linking delivery of off-grid solutions to energy service delivery can unlock substantial socio-economic benefits, contributing to multiple SDGs.
While dramatic cost reductions have been the primary driver of this acceleration, it is the multifaceted socioeconomic benefits that provide the greatest incentives for its deployment. Renewable energy’s centrality to the SDG 7 goal on universal access to clean, reliable and affordable energy against a backdrop of a billion people who still live without it, is unquestionable. However, beyond energy itself renewables are a key contributor to sustainable development, generating jobs, stimulating growth, ensuring resource security and improving health.
The paper notes that in Bangladesh, around 133 000 jobs have been created through a Solar Home System programme and an off-grid renewables initiative in Rwanda aims to generate 7 000 jobs whilst delivering energy access to almost 80 000 people. Similarly, incomes in rural households benefit from lower cost solar lanterns, and remote health and educational facilities are enhanced through consistent availability of power.
“Renewables are a central pillar of SDG 7 and represent one of the most effective and economicmeans available in the pursuit of universal energy access,” said Rabia Ferroukhi, Deputy-Director of Knowledge Policy and Finance at IRENA. “Yet beyond this, we are now beginning to truly understand the way in which distributed renewable electricity is transforming the lives of those receiving from it, bringing stability and opportunity to millions of people around the world.”
CPEC and Pakistan-China Energy cooperation
The demands of global energy are substantially rising day by day in the 21st century, whereas the dependency on fossil fuels like coal, oil and natural gas have become a serious concern which is about 80% of the world’s primary source of energy. The concerns about fossil fuels are due to their ever rising prices and their negative impact on the environment due to the harmful emission of greenhouse gases. Therefore, in this context the reliance on nuclear power energy is considered by various countries, including Pakistan, as a good alternative option of energy supply, which is comparatively cheaper also.
Pakistan has great strategic importance in South Asia because of its location, its dynamic young population, its vibrant economic potential, being a nuclear power, and now being a strategic partner of China in the backdrop of the construction of the China-Pakistan Economic Corridor (CPEC).The CPEC is a flagship project of China’s Belt and Road (B&R) initiative and the completion of CPEC is likely to bring major economic advantages to China, Pakistan and South Asian region.
Like many other countries, for its economic development based on enhancing its industrial and agricultural production, energy is very important for Pakistan and it needs to address its current energy crises on an urgent basis. In this context signing of the CPEC agreement with China by Pakistan in 2015 is considered as a milestone achievement, as it includes many electricity generation projects, which will help address energy shortages of Pakistan.
Apart from developing other means of electricity generation in Pakistan, China is already helping Pakistan in nuclear energy production by supplying nuclear power reactors, under IAEA safeguards based on agreements signed in the field of nuclear cooperation. Apart from installing Chashma 1 and Chashma 2 power plants, which are already producing electricity in Pakistan, in 2017 China has signed another deal with Pakistan to also install Chashma 3 and Chashma 4 power plants. Out of these each power plant, after completion, will produce 1000 megawatts of electricity. As part of the CPEC project, China is also building two HUOLONG ONE nuclear reactors in Karachi that will become ready to use by 2021.
After signing the CPEC agreement China is very keen to help Pakistan in the energy production, as energy is required not only for the construction of CPEC projects but also for its subsequent operation. This is because China is also going to get huge trade benefits by trading with the outer world using the CPEC. In other words, apart from helping its friend Pakistan in energy production, this cooperation also serves China’s economic interests in a major way. In this context, the CPEC is a win-win project that serves Pakistan and China’s interest in a similar way.
As China is doing a lot to advance its interests by expanding its economic production by basing on its CPEC related exports, Pakistan should also take the CPEC as a big opportunity to develop its economy to become economically self reliant. In this context, it should focus on completing the construction of the CPEC and its related energy projects on time, so that it addresses its energy shortages and quickly moves on towards its economic development.
In fact, it is more important for Pakistan to work harder for completion of the CPEC related projects and make use of the CPEC to advance its industry and agriculture, increase trade, attract foreign direct investment and increase its revenues. This is important because Pakistan’s economy needs a major boost to recover from its ever increasing budget deficits, inflation, domestic and foreign debt situations,widening gap of balance of payments due to constantly declining exports and falling foreign exchange reserves.
This is also important to repay the domestic debt and foreign debt in order to save Pakistan from becoming a defaulting state in the coming years. Above all it is necessary to avail the opportunity of reaping CPEC related economic advantages to develop Pakistan’s economy in a reasonable time frame to meet its aforementioned obligations and finally to bring prosperity to Pakistan and its people.
In the light of above it is logical to say that Pakistan and China’s cooperation in the energy field is beneficial for both countries and CPEC is a project that helps Pakistan in meeting its energy shortages, and it will be equally beneficial to Pakistan and China to advance their economic interests. Rather CPEC related energy projects and trade will be much more beneficial to Pakistan to meet its above discussed economic challenges.
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