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How Can India Achieve Energy Security?

The time has come for India to set its energy priorities right. We need a robust policy which can enhance development and supply capabilities in energy production technologies. It should ensure dispersed and reliable supply of useful energy carriers to all citizens at an affordable cost and drastically reduce both local air pollution and greenhouse gas emissions.

How Can India Achieve Energy Security?

The time has come for India to set its energy priorities right. We need a robust policy which can enhance development and supply capabilities in energy production technologies. It should ensure dispersed and reliable supply of useful energy carriers to all citizens at an affordable cost and drastically reduce both local air pollution and greenhouse gas emissions.

RAHUL PANDEY

W
ith rising international oil prices and speculation about depleting oil reserves, the concern for energy security has been on the top of the policy agenda in most countries. This article revisits the notion of “energy security” and assesses India’s energy policy against this backdrop.

Energy security, broadly understood, connotes the capacity of a nation to satisfy the energy needs of current and future generations. Various programmes that a government undertakes with the explicit aim of making useful energy carriers accessible to all citizens in adequate quantity and quality, and at affordable cost over a long period without imposing a heavy burden can be said to enhance that nation’s energy security. It is important to emphasise accessibility to all citizens for the obvious reason that a nation can be said to be energy secure only if all sections of its population are so. Thus, enhancement of energy security demands an appropriate choice not just of technologies and carriers, but also of institutional structures and delivery systems that ensure access to even the poorest sections of the population. Another aspect that needs emphasis is that no heavy burden of any kind must be imposed. A heavy social or environmental burden, even if it is not directly reflected in short-term costs of energy services, is likely to erode the competitiveness of an energy strategy in the long run, and hence, diminish security. Finally, it needs to be realised that in a world with increasing economic interconnectedness, the factors that enhance energy security are different from those in the old world. For instance, the mere domestic availability of a particular fuel may not boost energy security. A nation requires a range of resources – primary energy, financial capital, material and human capabilities for development and manufacture of relevant technological systems, and the infrastructure for delivery

– to make available useful energy carriers to its citizens at affordable cost over a long period of time. In a globalising world, being at the frontier of technological development with energy carriers that have growing markets can give a nation greater energy security than possessing vast domestic reserves of a carrier whose competitiveness is declining globally.

Different Energy Carriers

Let us evaluate the effect of India’s existing policies on energy security. As an example, let us look at the mix of technologies and energy carriers that India has been investing in for its power sector.

Since independence, India’s primary fuel has been coal. It has been used for most of our electricity generation. Globally, however, coal use has declined over the past few decades, due to two reasons:

(i) its serious environmental impact like greenhouse carbon dioxide (CO2) emissions causing global warming and sulphur dioxide (SO2) and other emissions causing local pollution, and (ii) while the cost and efficiency of coal-fired electricity generation has plateaued, several competing technologies like gas turbines and certain renewable energy technologies are witnessing cost reductions thanks to learning effects on account of greater R&D investment, accumulated installed capacity and management experience. Thus, over the period 1980-90, coal-fired technologies’ share in the electricity generation markets of North America, Europe and the former Soviet Union has eroded by 20-40 per cent [Sondreal et al 2001]. Therefore, even though India has significant coal reserves, a policy to continue heavy investments in coal-based technologies may not enhance our

Economic and Political Weekly January 28, 2006 energy security. This is especially so in the era of globalisation that requires a nation’s industry to import and export equipment, components and products at competitive levels of performance for the industry to sustain itself even in domestic markets.

What has happened to coal-fired power has also happened to large hydro and nuclear power. Huge capital costs, irreparable damage to local ecosystems and displacement of economically vulnerable local communities have induced strong protests against big dams everywhere (for a comprehensive assessment of large dams, see McCully 2001). Old dams have been dismantled and very few new ones have been built in recent years. In India, too, big dams have perpetually faced huge time and cost overruns [Roy 1999]. Nor have they delivered what they promised [Singh 1990].

As for the nuclear power, its poor cost competitiveness has been demonstrated in the case of Indian heavy water reactors [Ramana et al 2005]. This is all the more worrisome given the enormous funds that the Indian nuclear energy establishment has gobbled up and yet installed a limited amount of nuclear power capacity over the past five decades. No new nuclear power capacity has been installed in the US for the past three decades, owing mainly to unresolved problems of nuclear waste handling and high costs [Makhijani and Saleska 1999]. This is despite the billions of dollars received as subsidy through domestic legislation, wherein the taxpayers assume most of the insurance liability of nuclear accidents.

Although the share of nuclear energy the world over has not been increasing, its powerful lobby has discovered an opportunity to revive itself by offering it as a solution to the climate change problem [Stoett 2003]. However, given its history of unresolved safety and cost burdens, it is unlikely to survive anywhere without huge governmental subsidies, as it has in a few countries like France and Japan. The Energy Information Administration of US (EIA (2005)) estimates that the share of nuclear energy in world power generation will drop sharply over the next two decades in a reference case scenario. Given the high capital intensity and long life of nuclear power plants, India will be locking itself into huge resource commitments for the future if it pushes ahead with its ongoing nuclear enthusiasm. Needless to say, these commitments will deter us from exploring superior alternatives.

Natural gas is the only other major option for power generation that firms in India have pursued, especially during the past decade of domestic power reforms. This is the only conventional option that is witnessing growth internationally. As the power sector in various countries is being reformed to enable electricity generators become competitive, technologies with a low capital cost, high scheduling flexibility, and less pronounced economy-of-scale effects have acquired greater economic advantage in the marketplace. Under these circumstances, gas turbines have gained an advantage against centralised, large scale and less flexible generation options like those based on coal, large hydro and nuclear. Colpier and Cornland (2002) reported that a 35 per cent decrease in unit capital cost of larger combined cycle gas turbines (CCGT) since the beginning of the 1990s has been the main reason behind it being the technology of choice for the majority of the newly installed power plants in the world. Gas, having much less carbon

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Economic and Political Weekly January 28, 2006

content than coal, is also preferred for reducing greenhouse gas emissions.

Although the capital cost of gas turbines may level off in the future and price forecasts for natural gas remain uncertain as it is a fossil fuel with finite reserves, experts estimate that it will continue to be dominant in the first half of this century. EIA (2005) projects more than two-thirds of new capacity additions for electricity generation worldwide until 2020 to come from gas-fired technologies. Thus, investing in natural gas infrastructure and technologies using natural gas appears to be a robust option for India over the next two to three decades. In this light, jeopardising the gas pipeline deal with Iran in an exchange for the anticipated fruits of nuclear energy cooperation with the US makes for a poor energy strategy.

Renewable Energy Options

An energy policy that enhances energy security of a nation in the real sense has to be centred on a set of renewable energy options. A country can improve its energy security by building domestic capabilities in development, manufacturing, capacity enhancement, operation and storage based on a wide mix of such options. This is because:

(i) the capital costs of several renewable energy technologies are declining internationally thanks to the increases in R&D investments and installed cumulative operational capacity, (ii) several renewable energy resources are available in India

– like solar, solid biomass, liquid biofuels, wind and micro hydel – that offer a wide base on which a robust energy strategy can be built, (iii) technologies like solar PV, solar thermal, biomass gasifier, biogas plant and micro hydel facilitate the decentralised and community-based production of useful energy carriers like electricity and gas, and they cause much less environmental damage than fossil fuel-based options.

There are bright prospects globally for renewable energy as centralised conventional technologies are declining, natural gas faces uncertainty beyond the next two to three decades, and environmental concerns are intensifying. Prominent EU countries and Japan have already begun serious initiatives to move to a low-carbon society by 2050 for which they are providing state support to large-scale development and commercialisation of renewable energy technologies. This is further feeding into declining costs. Let us look at some of the figures confirming these trends.

The International Energy Agency [IEA 2002] reports that commercial biomass, wind, solar and other non-(large) hydropower renewables are expected to be the fastest growing primary energy source in Organisation for Economic Cooperation and Development (OECD) countries. Junginger (2005) estimates rapid ongoing learning for wind farm technology with an average progress ratio of about 80 per cent, implying its unit capital cost reduces by 20 per cent for every doubling of capacity. Other studies, like Kram et al (2000) and McDonald and Schrattenholzer (2001) have estimated wind turbines’ progress ratio at 83-92 per cent. In the EU countries, commercial wood fuel supply and bioenergy technology systems currently display progress ratios of 87 per cent and 90 per cent respectively [Junginger 2005]. Solar PV, still in early stages of commercialisation, is witnessing faster learning, with progress ratio of about 80 per cent reported by Margolis (2003) and McDonald and Schrattenholzer (2001), and 72-85 per cent by Kram et al (2000).

Given their present and expected growth, drastic cost reductions are achievable over the next three to four decades. This in turn is expected to fuel a large-scale expansion of renewable energy sources. For instance, worldwide wind power capacity, which was 32 giga watts (GW) at the end of 2002, is estimated by Greenpeace (2005) to feasibly reach 1250 GW by 2020 to supply 12 per cent of world electricity needs. At an average progress ratio of 80 per cent, this accumulated experience could result in a 70 per cent reduction in unit capital cost of wind power systems. Up to 50 per cent cost reduction could result even if less than half the potential estimated by Greenpeace is realised. While worldwide installed capacity of solar PV was 2,130 MW in 2002, Japan and EU alone have targeted to reach 3,000 MW and 5,000 MW respectively by 2010. Given its high learning rate, the unit capital cost of solar PV could reduce to one-fifth the present level within the next two decades [Lysen 2003]. Some experts in Japan, which is among the leaders in solar PV research, are of the opinion that electricity produced from solar PV could become competitive relative to grid electricity in the next 1015 years.

All these are real global trends that are likely to increase in both scale and spread over the course of this century. This is because the global forces driving them – energy industry structure changes, environmental concerns and technological progress – are steadily reinforcing each other. Technologies that are non-polluting and conducive for small- to medium-scale businesses will become more competitive. A host of renewable energy technologies fit the bill.

Need for a Robust Policy

India must drastically change its energy strategy towards one that places the highest priority on a wide set of renewable energy options. If Indian R&D institutions and companies invest in in-house development of such technologies now, our energy sector and economy will reap huge benefits in the future since we would be at the forefront in those technologies that are increasingly becoming competitive. The government of India must commit huge resources for rapidly upscaling infrastructure for manufacture and supply of technologies for production of electricity, heat and other end-use energy from biomass, solar energy, wind and micro-hydel resources. This strategy would undoubtedly strengthen our energy security.

This new focus will require equally radical changes in our energy sector’s institutional structure. On the one hand, the separate ministry of non-conventional energy sources (MNES) must be wound up and renewable energy must occupy the top most agenda of key energy institutions like ministry of power. The electricity act must be amended to reflect the new focus. Well-performing organisations like BHEL, NTPC and ONGC that are currently focused on fossil fuels must diversify into renewable energy. On the other hand, responsibilities for local delivery and maintenance of decentralised renewable energy systems and their useful outputs must be devolved to the level of the panchayats, rural-based cooperatives, and local entrepreneurs. Local entrepreneurs must be encouraged via technical and financial support mechanisms to take up commercial activities for assembly, supply, operation and maintenance of renewable energy systems and delivery of their outputs. Experiences of SELCO of Karnataka and several smaller field experiments have proved that entrepreneurial activities based on renewable energy have economically viable markets in rural areas, if they are carried out with value adding services like swift delivery, installation, post-installation maintenance and upgrade.

Economic and Political Weekly January 28, 2006

The time has come for India to set its energy priorities straight. A robust policy that enhances our domestic development, manufacture and supply capabilities in the technologies that are sliding down the learning curve globally, ensures dispersed and reliable supply of useful energy carriers to the poor as well as non-poor citizens, and drastically reduces both local air pollution and greenhouse gas emissions, will be the only one that can truly make India energy secure in the long run.

EPW

Email: rahulanjula@gmail.com

[The author is thankful to M V Ramana for providing useful comments and references.]

References

Colpier, U C and D Cornland (2002): ‘TheEconomics of the Combined Cycle Gas Turbine

– An Experience Curve Analysis’, EnergyPolicy, 30, pp 309-16.

EIA (2005): ‘Annual Energy Outlook 2005 withProjections to 2025’, Energy InformationAdministration, US Department of Energy.

Greenpeace (2005): ‘Windforce 12’, A Report,Greenpeace International, www.greenpeace.org/international/press/reports/windforce-12-2005.

IEA (2002): ‘Renewable Energy’, InternationalEnergy Agency, Paris.

Juninger, H M (2005): ‘Learning in RenewableEnergy Technology Development’,Dissertation, University of Utrecht.

Kram, T, A J Seebregts, G J Schaeffer, A J M Bos,S Kypreos, L Barreto, S Messner,L Schrattenholzer (2000): ‘TechnologyDynamics in Energy Systems Models withPerfect Foresight’, International Journal of Global Energy Issues, 14 (1-4), pp 48-64.

Lysen, E H (2003): ‘The Status and Potential ofRenewable Energy Technologies’, Presentationat the conference: Meeting the Climate ChangeChallenge, Sonderborg, September 17-19.

Makhijani, A and S Saleska (1999):Nuclear Power Deception, Apex Press, New York.

Margolis, R M (2003): ‘Photovoltaic TechnologyExperience Curves and Markets’, Presentationat NCPV and Solar Programme ReviewMeeting, Denver, Colorado, March 24.

McCully, P (2001): Silenced Rivers: The Ecologyand Politics of Large Dams, Zed Books, London.

McDonald, A, L Schrattenholzer (2001): ‘LearningRates for Energy Technologies’,Energy Policy, Vol 29, pp 255-61.

Ramana, M V, Antonette D’Sa and AmulyaK N Reddy (2005): ‘Economics of NuclearPower from Heavy Water Reactors’,Economic and Political Weekly, April 23,40(17), pp 1763-73.

Roy, A (1999): ‘The Greater Common Good’,Frontline, June 4, pp 4-29.

Singh, S K (1990): ‘Evaluating Large Dams inIndia’, Economic and Political Weekly, March 17, pp 561-74.

Sondreal, E A, M L Jones, G H Groenewold (2001): ‘Tides and Trends in the World’sElectric Power Industry’, The ElectricityJournal, January/February, pp 61-79.

Stoett, P (2003): ‘Toward Renewed Legitimacy?Nuclear Power, Global Warming, andSecurity’, Global Environmental Politics, 3 (1), February 2003, pp 99-116.

Economic and Political Weekly January 28, 2006

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