Meeting India’s Energy needs

Meeting India’s Energy Needs

Executive Summary

Energy is one of the major drivers of a growing economy like India and is an essential building block of economic development. In an effort to meet the demands of a developing nation, the Indian energy sector has witnessed a rapid growth. There is a strong two-way relationship between economic development and energy consumption. On one hand, growth of an economy, with its global competitiveness, hinges on the availability of cost-effective and environmentally benign energy sources, and on the other, the level of economic development has been observed to be reliant on the energy demand.

Rising population, expanding economy and a quest for improved quality of life have resulted in increased energy usage in India. The country's consumption of coal, oil, natural gas, and electricity is projected to rise by nearly 40 percent over the next five years and almost to double by 2020. Already, surging energy demand is outstripping supply, raising questions about how India will cope in the future. Electricity is such a chronic problem that manufacturers endure an average of 17 major power disruptions every month, according to the World Bank. Despite vast coal reserves, domestic production has lagged behind demand for ten years, and the shortfall is growing. India imports 70 percent of its petroleum, exposing it to wild swings in world energy prices and pitting it against China and other countries keen to buy hydrocarbon reserves.

Problems and Challenges

With a projected population of 1.5 billion and GDP of US $ 4 trillion in 2030, the challenges India faces in the energy sector are truly enormous. In addition, the economy growing between 8% and10% levels with the objectives of environmentally sustainable development and inclusive growth, the quantity and quality of energy required will increase substantially.

The question is, would India able to meet this challenge?

The current scenario, however, is not encouraging. The Indian Power sector is witnessing major changes, having made great strides since Independence. However, the demand for power has been outstripping the growth of availability. Substantial peak and energy shortages prevail in the country. This is due to inadequacies in generation, transmission and distribution as well as inefficient use of electricity. High level of technical and commercial losses and lack of commercial approach in management of utilities has led to unsustainable financial operations. Cross-subsidies have only worsened the situation.

1

Meeting India’s Energy needs

Inadequacies in distribution networks have been one of the major reasons for poor quality of supply.

Taking 2004-05 data as the base, long term projections for energy, would be the following:

Primary energy (coal, oil, and gas) supplies to be increased by 3 to 4 times.

Year- on- Year growth of primary energy should be between 4.3 to 5.1%.

Electricity generation capacity and supply should be increased by 5 to 6 times.

Commercial energy supplies needs to grow from 5.2% to 6.1% per annum.

Power generation to be increased to 8,00,000 MW from current 1,60,000 MW.

A 40 fold increase in renewable energy sources. This would account for 5 to 6% energy needs in 2030.

Ensuring continuous availability of commercial energy to support economic growth to meet lifeline needs of households with safe clean energy, reducing carbon emissions in the environment, protection against market risks of imports, and maintaining a buffer against risks in terms of generation and supply, it is critical that we ensure energy security in long term.

The energy policies adopted by India, since independence, primarily to serve the socio-economic development have resulted in inefficiencies in the use and production of energy. This has eroded the competitiveness of the sectors of economy.

With these challenges in front of us, it is imperative that a broad based approach is needed to meet the soaring demand of India’s energy requirements. We have come out with a 10 point agenda to meet the country’s growing energy needs and are explained in detail in the following chapters:

The 10 point agenda listed below aims to address these issues.

1. Eliminate inefficiencies in energy chain and manage demand 2. Augmenting primary energy resources 3. Renewable sources of energy

2

Meeting India’s Energy needs

4. Accelerate capacity addition 5. Public Private partnership 6. Strengthen governance   7. Energy R & D 8. Energy Security 9. Environment and energy sustainability10.Managing opportunities and Risks

1. Eliminate inefficiencies in energy chain and manage demand

Much of the energy content of the available energy sources is wasted by inefficiencies the energy conversion and distribution processes. Considering domestic electric lighting as a typical example, less than 1% of the energy consumed to provide the electricity is ultimately converted into light energy. The other 99% is wasted in the supply chain. Using conventional fossil fuelled generating plant, losses accumulate as follows:

10% of the energy content of the fuel is lost in combustion and only 90% of the calorific content is transferred to the steam

The steam turbine efficiency in converting the energy content of the steam into mechanical energy is limited to about 40%. (Carnot's Efficiency Law)

Transmission of the electrical energy over the distribution grid between the power station and the consumer results in a distribution loss of 10% mainly due to the resistance of the electrical cables.

Further energy is lost due to the energy conversion efficiency of the end user's appliance. Incandescent lighting is particularly inefficient converting only 2% of the electrical energy into light.

Recommendations:

Energy efficiency and demand side management have a large scope toreduce energy requirement. These include the

i. Use of energy efficient appliances and automobiles, hybrid carsii. Use of energy efficient buildings and efficient lighting iii. Cogeneration, distributed generation with Combined Heat and

Power (CHP) use, iv. energy efficient and well-maintained pumps for industrial and

agricultural water pumping

3

Meeting India’s Energy needs

v. improve cooking efficiency e.g. through use of smokeless improved woodstoves

vi. promotion of mass transport as a means of commutingvii. promote waterways

2. Augmenting primary energy resources

Here we look at three primary energy sources, Coal, Oil and Nuclear Energy.

I. Coal

For a developing country like India one of the most important constraints on our economic growth is the availability of energy. Coal is the dominant source of energy in India and accounts for 52.4% of the country’s total energy requirement. India has total coal reserve of 277 billion tonnes and produced around 532 million tonnes of coal in the financial year 2010.

Coal is primarily used in three sectors, power, steel and cement, with the power sector alone consuming around 77% of the non-coking coal produced in India. With expanding capacities, the demand for coal is expected to grow at a compounded annual growth rate (CAGR) of 11% over the next two years, as against the coal production of 6% per annum.

Coal will dominate India’s energy basket in terms of catering to its present and future needs considering the volatility of crude oil both in terms of price and supply disruptions. By the end of the 15th Plan (Year 2032), India’s coal power capacity has to increase to at least 400GW as planned. This would need almost 900 more 500 MW sized plants.

India has 13% of world’s recoverable coal reserves ….

USRussi

aChina

India

Australi

a

South Afric

a

Ukraine

Kazhak

stan

Others0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%

29.8%

19.0%

13.9% 12.8%9.2%

3.7% 4.1% 3.8% 3.7%

But accounts for only 8% of global production

4

Meeting India’s Energy needs

USRussi

aChina

India

Australia

South Afri

ca

Ukraine

Kazhak

stan

Others0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0% 44.0%

15.0%

7.0% 6.0% 4.0% 4.0%1.0% 1.0%

18.0%

Source: Ministry of Coal, BP Statistical Review of World Energy 2010

Recommendations

1. Coal companies must be asked to conform to international practice of preparing/washing coal prior to its sale. Washed coal is efficient, saves transport costs and fetches higher prices in the market.

2. Setting up of a coal regulator who would regulate the coal pricing mechanism, regulate exploitation of coal and develop a mechanism for adequate quantities of coal imports. The regulator must ensure that the mines are planned, developed and designed in a scientific manner maximizing percentage of coal recovery.

3. Increase sale of coal production through e-auction even over the recommended 20%.

4. Allow entry of private sector in coal production for realizing efficiency gains and augmenting domestic coal supply. Only a competitive free market can do an efficient job of price determination.

5. In situ coal gasification (gasification of coal deep underground in its original coal seam) can significantly increase the extractable energy from the vast coal reserves. This allows much higher recovery of coal that can be economically mined by conventional techniques.

6. Rationalize freight rates for coal transport. Alternate means of moving coal through coastal shipping, river/canal movement or through pipelines must be explored and encouraged.

7. Reduce duties on capital goods imported for coal mines8. National Rehabilitation and Resettlement policy affected by coal mining

should be mooted and accepted by all state governments.9. Setting up of dedicated freight corridors which will help in faster and

secure delivery

II. Oil

5

Meeting India’s Energy needs

Oil accounts for about 36 % of India's total energy consumption. India today is one of the top ten oil-guzzling nations in the world and will soon overtake Korea as the third largest consumer of oil in Asia after China and Japan. The country's annual crude oil production is about 34 million tonnes as against the current peak demand of about 110 million tonnes.

Disparity in Production vs Consumption

In 2009, India was the sixth largest net importer of oil in the world, importing nearly 2.1 million barrels per day, or about 70 percent, of its oil needs. Nearly 70 percent of India’s crude oil imports come from the Middle East, primarily from Saudi Arabia, followed by Iran. The quantity of crude oil imported during 2009-10 (up to December 2009) was 109.3 Million Metric Tonnes (MMT), valued at Rs. 2,48,226 crores.

Demand for energy is expected to double by 2025; by then, 90 percent of India’s petroleum will be imported. It is expected that India would become the fourth largest net importer of oil in the world by 2025, behind the United States, China, and Japan.

Recommendations

1. Enhance hydrocarbon reserves and increase domestic production through the following measures:

i. Explorations in new frontier areas like deep water and other geologically and logistically difficult areas.

ii. Creation of a policy environment for developing a vibrant, thriving and world-class exploration and production industry which can mobilize and infuse technology and capital and can stand on its own in the process of globalization for energy security to the country.

iii. Development of new oil fields and additional development of existing oil fields.

6

Meeting India’s Energy needs

iv. Implementation of Improved Oil Recovery (IOR) or Enhanced Oil Recovery (EOR) schemes.

v. Enhancement of strategic oil reserve through accelerated exploration and increased domestic oil supply

vi. Implementation of specialized technologies, continued technology acquisition and absorption along with development of indigenous R&D.

vii. Increased private participation through putting the New Exploration Licensing Policy (NELP) into operation.

viii. Continuation of the supportive role of the government in exploration, particularly for high-risk ventures.

2. Strengthen logistics - India India's domestic energy supply must be supported by a good distribution infrastructure. India must spend an estimated $5 billion in the next ten years to expand the country's domestic network of oil and gas pipelines.

3. Substitution from oil to gas - Natural gas is a cheap, efficient and environmentally clean source of energy.

4. Develop Regional Energy cooperation - South Asian countries need capital and energy to propel economic growth and improve the quality of life in an environmentally responsible manner. The region is endowed with untapped energy resources but their development, efficient distribution and utilization will require cooperation and trade among the countries in this region.

5. Encourage public private partnership in the oil sector6. Reduce / remove government subsidies of oil products - fuel subsidies

distort India’s domestic market by forcing India’s state owned oil companies to accept losses. The International Energy Agency reports that losses from fuel price subsidies for the 2010-11 fiscal year are expected to exceed $23 billion.

7. Focus Technology research in areas to boost our energy security such asi. Recover oil in deep waterii. Turn natural gas into liquid fueliii. Extract methane from coal deposits – Coal Bed Methane (CBM) is an

environment-friendly clean fuel similar to natural gas. CBM gas production in January 2010 was 119742 cubic metres.

III. Nuclear Energy

Nuclear power is the fourth-largest source of electricity in India after thermal, hydro and renewable sources of electricity. As of 2010, India has 19 nuclear power plants in operation generating 4,560 MW while 4 other are under construction and are expected to generate an additional 2,720 MW. India's

7

Meeting India’s Energy needs

nuclear power industry is undergoing rapid expansion with plans to increase nuclear power output to 63,000 MW by 20321.

Importance of Nuclear Energy

Modern science has also helped us discover a new source of clean and renewable energy. India’s indigenous nuclear program was founded to address the challenge of energy security and attain self-reliance and technological independence. Here is a comparison among different energy sources which underlines the need for deployment of nuclear energy2.

If the level of our per capita electricity consumption is raised to the level of a developed country (~5000 kWh/person/year) and only a single energy resource is to be used then:

Srl #

Source of Energy Longevity

1 Domestic extractable Coal reserves ~ 13 years2 Uranium (Open cycle) ~0.5 years3 Uranium (Closed cycle) with Fast Breeder reactors ~73 years4 Known reserves of Thorium in closed cycle with Fast

Breeder Reactors>250 years

5 Entire renewable energy including hydro electric <70 days/year

It is obvious that for long term energy security nuclear energy based on thorium has to be a prominent component of Indian energy mix.

Recommendations

1. Attract private sector participation as joint ventures with the government in construction and operation of nuclear power plants

2. Increasing the economic competitiveness of the nuclear power plants through proper R&D, design standardization, management competence, training and regulatory practices

3. Maintaining the highest standards on safety and environment for nuclear plants - Establishing a watchdog agency independent of the Department of Atomic Energy (DAE)/ Nuclear Power Corporation (NPC) to monitor environmental and safety standards

4. Changes in existing legislation and allow independent power producers in this field

1 Economic times http://economictimes.indiatimes.com/news/news-by-industry/energy/power/India-eyeing-63000-MW-nuclear-power-capacity-by-2032-NPCIL/articleshow/6730724.cms2 India’s energy security – The role of Nuclear Energy, Ratan K Sinha, Director, BARC

8

Meeting India’s Energy needs

5. Competitive pricing mechanism in the energy sector

3. Renewable source of Energy

The most important feature of renewable energy is that it can be harnessed without the release of harmful pollutants into the environment. Renewable energy currently contributes a small fraction of our energy needs, supplementing our total energy needs, and is expected to grow very rapidly especially in areas like wind and solar power.

Renewable Energy Options

Srl #

Source Capital Cost (Cr. of Rs / MW)

Estd cost of Gentn / unit (Rs / Kwh)

Total Instd Capacity (MW)

1 Hydro (Small < 25 MW) 5.00 – 6.00 2.50-3.50 17482 Wind power 4.00-5.00 3.00-4.00 44343 Biomass power 4.00 3.00-4.00 3774 Bagasse cogeneration 3.00-3.50 2.00-3.00 4915 Biomass gasifier 2.50-3.00 3.00-4.00 716 Solar Photovoltaic 25-30 15.00-20.00 37 Energy from waste 5.00-10.00 4.00-7.50 46

Table: Capital Costs and Typical costs of Generated electricity from Renewable options Source: Integrated Energy Policy 2006

Wind Power:Wind power is emerging as a key factor in supplementing our conventional energy sources. India is the fourth largest in the world in terms of wind energy installations, with current installed capacity of renewable energy is around 92204 MW constituting 7.3 percent of India’s total installed capacity3. Indian Wind Turbine Manufacturer’s Association has identified that the wind power generated potential of around 65,000 MW in the country. Wind power accounts for 7230 MW of country’s 10.175 MW of renewable electricity generation capacity4.

Solar Power:With high solar insolation of 6 kw/meter2/day, solar energy has a large potential in the country. As per Ernst and Young Renewable energy Attractiveness index, India is among the top 5 destinations worldwide for Solar Energy development. However, the amount of solar energy produced is a mere 0.4% compared to other energy sources. 35000 square kilometers area of the Thar Desert has been set aside for solar power projects to generate 700 – 2100 Giga watts of power. Photovoltaic technology is proven but expensive and the cost of electricity

3 India Energy Outlook May 20074 www.monsterandcritics.com – Wind Power key to meeting India’s energy needs

9

Meeting India’s Energy needs

exceeds Rs 20/Kwh. However, there is a potential to reduce costs and increase efficiencies.

Biomass: Biomass is a major domestic fuel used for cooking and consists mainly of agricultural by products and gathered wood. Domestic biomass use in 2000 was 80 Million Tonnes of Oil Equivalent (MTOE). This non conventional energy for domestic use is mainly managed by women without technology, or investment, and involves unsustainable practices, backbreaking drudgery, and health problems besides damage to the environment. To make this energy more sustainable, the efficiency and convenience of using biomass needs to be improved through wood gasification or use of biogas plants.

Biodiesel:Biodiesel, from non edible oils such as Jatropha, Karanj, Mahua, is a natural diesel substitute. There are a number of projects currently being undertaken in the cultivation of Jatropha and Karanj, its economic feasibility is still being assessed with relation to the yields one can get from growing other crops.. The process of bio-diesel generation and use can also create significant employment opportunities.

Recommendations:

1. Build awareness of Renewable energya. Vigorous promotion of renewable energy by government agencies,

corporate, public sector, academic institutions etc.b. Establishment of a national body to increase awareness of

renewable energy at grass roots level2. Financial support and incentives

a. Increase fiscal incentives, including accelerated depreciation for setting up renewable projects.

b. Provide tax holidays for power generation projectsc. Provide soft loans for companies involved in renewable energy

sources.3. Exemption in customs and excise duty, low import tariff for raw materials

and components4. Liberalize foreign investment clearance procedures5. Compulsory installation of solar water heating systems for all urban

residential and commercial establishments.6. Encourage R & D in the development of

a. cost effective high efficiency and long lasting photo voltaic cellsb. efficient wind turbines to generate energy even at low intensity

10

Meeting India’s Energy needs

c. small-scale, low maintenance, biomass gasifiers for generation of power in rural areas

7. Cultivation of energy crops on marginal and degraded land.

4. Accelerate capacity addition

It takes five to six years to build a thermal power plant in India in contrast to two to three years taken in China, and less than four years in most other countries. Delays in acquiring sites and obtaining necessary approvals, as well as equipment shortages and other bottlenecks are constraining the pace of capacity addition. To accomplish a step change in the rate of capacity addition, it is imperative to:

Commission around 150 Project sites by 2013 with end-to-end approvals in Place. These project packages must include land with access to water, basic connectivity and site-related approvals.

Create 30 GW per year capacity for equipment manufacturing and related supply chain. This would require augmenting the manufacturing capacity, unshackling PSUs by revamping international approval norms and encouraging participation by local and international players

Train and develop 300,000 skilled and semi-skilled workers. Resolving the severe shortages in manpower will require a host of new training programmes conducted by the Government and the private sector.

Secure Fuel Supplies: In spite of having the world’s fourth-largest reserves of coal, new discoveries of gas, India’s inadequate fuel supplies are constraining the growth of its power sector. In the past few years, India’s fuel imports have increased substantially and are only likely to increase further in the coming years. We would need to accelerate Captive Mine Development and create the requisite infrastructure capacity for 100 MMTPA of coal imports besides launching a vigorous renewable energy programmes to generate 30 GW by 2020

5. Public Private Partnership

In order to build the much needed infrastructure for power generation, oil and gas and transportation of energy from the supply point to the point of demand, will require the mobilization of public and private funds within the desired investment framework. The rising energy demand is putting enormous strain on India’s infrastructure. Public funds will not be sufficient

11

Meeting India’s Energy needs

to support rapidly growing energy demand and to increase energy access. Also some of the world’s biggest banks and private equity funds had announced dedicated infrastructure funds for India. Unfortunately today India’s investment program is struggling to find private investors to participate in expanding infrastructure due to the financial crunch.

Public- Private Partnership in Commercial Civilian Nuclear Energy

Prior to any form of private participation, an amendment to the Atomic EnergyAct, 1962 - which forbids private investments in nuclear power generation – will be necessary. The government is seriously considering the opening up of the non-strategic components of its nuclear programme including opportunities to enter into joint ventures with the private sector in power generation. The conclusion of the civilian agreements is expected to throw up more opportunities. However, the private sector will face challenges in the following areas:

Managing the decommissioning of the nuclear plant Spent fuel storage and subsequent fuel resource management

procedures Unlimited liability in the event of a nuclear accident can cause serious financial implications.

Develop regional energy partnerships

The resource-rich nations of Africa, Asia, and the Middle East are attractive energy partners for India, since they are potential sources of both fuel and investment. These countries, for their part, seek access to large, growing markets like India and need the assurance of long-term demand before they expand oil and gas production. Only recently have the two sides begun to recognize the potential for closer economic cooperation.

Better diplomatic and commercial ties will be needed to make such energy partnerships a reality. India's government should encourage joint ventures and cross-shareholdings between companies in resource-rich nations and India's national oil companies or major energy users. It must also support regional cooperation in areas such as energy security and the creation of Asian markets for oil and gas

6. Strengthen governance  

12

Meeting India’s Energy needs

The regulatory mechanism needs to be improved drastically. Accountability in the energy sector is currently fragmented. The regulator needs to be empowered so as to facilitate restructuring to optimize operations, improve the productivity of the sector on par with international standards and establish standards for undertaking energy efficient and conservation programs in all critical operations.

Recommendations:

a. Strengthen Energy Coordination committee to facilitate decision making on all important matters pertinent to energy

b. Set up a Cabinet Committee on Energy with representations from multiple ministries at the central government such as Power, Oil, Gas, Coal, Foreign Affairs, Shipping, Finance etc and relevant participation from states for policy formulation and resolve any key issues

c. Setting up of an Integrated Energy Ministry as a single point contact for all energy related issues

d. Setting up of a nodal ministry or agency that assumes responsibility for monitoring, reviewing and debottlenecking the sector and unshackling the Public Sector Units.

e. Strengthen the leadership of the companies dealing with energy – with specific tenures for CMDs, assess the effectiveness of boards and review processes to ensure the highest quality.

7. Energy R & D

Energy Technology Research and Development is about researching and developing better ways of energy generation, distribution and transmission in addition to researching alternate energies. It is about the improvement of existing technologies and the invention, development, commercial adoption of emerging ones in an environmentally and socially acceptable manner.

Why Energy Research & Development:

The fossil fuels reserves are depleting day by day and the current reserves will not last long if we continue to use them in the current way.

Fossil Fuel Reserves Reserve-Production (R/P) ratios (at 1999 production rates)

Coal 70 billion tons 212 yearsOil 600 million tons 15.6 years

13

Meeting India’s Energy needs

Natural gas 490 billion cubic meters 22.9 years

India predominantly uses Coal, Oil and Gas for energy needs. To meet the growing energy needs India needs to have research capabilities to explore and utilize the other forms of energy like Nuclear, Solar and Wind effectively. Thermal power plants are operating at a Plan Load Factor of below 45%. Appropriate renovation and modernization using newer technologies will increase the output by 20%.

The estimated Transmission & Distribution energy losses for 1997-98, 1998-99 and 1999-00 were about 24.8%, 25% and 23.7% respectively. India is incurring huge energy losses in the distribution channel because of lack of proper technology. India is the fifth-largest emitter of fossil-fuel-derived CO2, and its total emissions grew at an annual average rate of almost 6% in the 1990s. India as an environmental conscious country needs to reduce the green house gas emissions with research on power generation and energy use in industry and transportation.

Recommendations for Energy Research and Development

1. Increase Energy Research budget: India spends a meager amount on Research & Development compare to some developed countries. During 1996-97, India’s R&D spend was USD 2.34 billion and of this only 7.6% was spent on Energy.

2. Develop new educational resources for Energy Research: To increase the Energy research capabilities India needs to develop new educational resources to support the infrastructure and talent base required.

3. Ensure Multi-Agency coordination across Energy research agencies: Develop a multi-agency strategy to coordinate basic energy research among major government scientific agencies.

4. Ensure Multi-Department coordination across government ministries:Develop a strong coordination framework among government ministries like Ministry of Science & Technology, Department of Atomic Energy, Ministry of Petroleum & Natural Gas, Ministry of Power, Ministry of Coal, Ministry of Nonrenewable Energy Sources and Ministry of Heavy Industries.

5. Encourage private participation in Energy Research: Indian Energy R&D institutions and their activities are characterized by the dominance of the public sector in most areas. Private participation is must to carry out large scale research. The policies should encourage entrepreneurs to participate in Energy research, use of newer technologies subsidized, and special economic zones created for industries that are researching on newer energy models and renewable energy sources.

14

Meeting India’s Energy needs

6. Develop technologies that seek to achieve progressively higher efficiency covering all the different stages and forms of energy conversion.

With India GDP continue to grow at 7-8 percent there is a strong need for sustained energy. Successfully developing and deploying a diverse and sustainable portfolio of energy solutions will require basic research that produces scientific advances that leapfrog current technologies. India’s growth story is limited by its research and development on Energy.

8. Energy Security

India’s energy security is primarily about ensuring the continuous availability of commercial energy at competitive prices to support its economic growth. This would mean

1. Security of supply of oil and natural gas; secure lines of interdependence.

2. Independence from imports, or “oil self-sufficiency,” 3. Going beyond the country’s overall requirements as a whole and

looking at the requirements of individuals. Why Energy Security

With the economy expected to grow between 7-8% over the next 20 years, India is expected to become the third largest consumer of energy by 2030. India’s import dependence has intensified concerns that without reliable, affordable energy it will be unable to sustain high economic growth. India imports its three major sources of energy in varying degrees, and its dependence on imported oil is expected to increase even further. Besides, high oil prices, continuing geopolitical uncertainty stoking fears of a possible supply disruption or volatility in oil prices and hardly any viable energy alternatives have only heightened apprehensions on energy security. Dependence on energy imports has also exposed us to external price shocks. Reducing energy requirements and increasing efficiency are two very important measures to increase energy security.

Recommendations for energy security

1. Reduce energy requirements through energy efficiency and conservations: Major opportunities exist in reducing energy requirements without reducing energy services. Efficiency improvements can be made in energy extraction, conversion, transmission, distribution and end use of energy.

a. improve efficiency in extracting fossil fuels say by 10%

15

Meeting India’s Energy needs

b. use of energy efficient appliances, automobiles, hybrid cars, energy efficient buildings, efficient lighting,

c. encourage use of public transport facilities and impose hefty parking charges to discourage use of private cars

2. Substitute imported energy by domestic alternatives: Energy security can be increased by reducing the need for imported energy and substituting it with other forms of energy.

a. electrification of railways to replace diesel trains, b. use of biodiesel and ethanol as substitutes for diesel and petrol.c. Use of hybrid vehicles and/or electric vehicles to reduce

requirements of petrol3. Diversify supply sources. Nearly 2/3rd of our oil imports are from 4

countries – Saudi Arabia, Nigeria, Kuwait and Iran – though we import oil from 25 different countries. Diversification of supply sources would help increase our energy security. Additionally, India could do with diversifying its energy mix by using different types of fuel such as renewable energy and nuclear power and be less dependent on one particular fuel.

4. Expand Resource base and develop alternative energy sources: Our resource base can be expanded by enhancing recovery from existing resource bases through advanced mining techniques, finding new reserves through exploration and developing new sources of energy through R & D. E.g. R & D should look at increasing the average capacity factor of the wind farms from the current 17% to at least 25 - 30%. Adequate technologies and allocation of funds for energy related R&D needs to be promoted for developing indigenous solutions which are typical to India

5. Increase ability to withstand supply shocks: A strategic reserve of oil, say supplies for a period of 60-90 days, should be maintained as a buffer should there be any disruption in supply through blockade in a situation of conflict. A buffer could also provide a cushion for any price fluctuations

6. Increase ability to import energy and face market risks: A proportion of foreign exchange earnings must be set apart to guard against the market risk of a sudden price increase. Options and Future contracts can also be used to hedge against any price volatility.

7. Increase redundancy to deal with technical risk: Despite having adequate energy resources, technical failures, such as failure of generators, tripping of transmission lines, leaking of gas pipes etc., can disrupt supply of energy to people. The best solution to be secure against such risks is by providing redundancy. E.g. electrical networks minimize probability of loss of load by providing alternate routes.

8. One ministry to manage the Energy sector: Indian energy sector is currently handled by 5 separate ministries – Coal, Petroleum and Natural

16

Meeting India’s Energy needs

Gas, Atomic Energy, Power and Non-Conventional Energy sources). They often work in silos, making independent policies and decisions which are neither optimal nor in the best interests of the country. Since these areas fall under the umbrella of Indian energy, it would be easier to fix accountability and responsibility on one ministry and foster the growth of Indian energy.

To summarize, the following recommendations would help India meet its energy requirements in an efficient, cost effective way and move towards sustainable energy security.

Energy efficiency in all sectors Emphasis on mass transport Active policy on renewable energy Accelerated development of nuclear energy and hydro electricity Technology missions for clean coal technologies Focused R & D on climate friendly technologies and improving

competencies in energy security

9. Environment and energy sustainability

There has been a steady rise in global temperatures all over the world during the last two decades. As per CNN, this "threatens to stress water resources, challenge crops and livestock, raise sea levels and adversely affect human health ... Longer and more intense heat waves; increased heavy downpours likely to cause widespread complications such as flooding and waterborne diseases; reduced summer runoff, creating greater competition for water, especially in the West; rising ocean water temperatures that will threaten coral reefs; an increase in wildfires and insect infestations; and more frequent coastal flooding caused by rising seas."

In order to achieve sustainability in the energy chain, it is important to identify, measure, value and integrate the environmental impacts of activities in the energy sector. Environmental concerns are associated with all forms of energy including fossil fuels, nuclear energy and renewables throughout the energy chain from exploration/mining, transportation and generation to end use. Pollutants associated with the combustion of fossil fuels Suspended Particulate Matter, SO2, NO2 and CO2 pose a major threat to both ecological and man manmade resources. Environmental risks from nuclear power include radioactive seepage, lack of proper disposal of radioactive wastes besides the threat of a nuclear disaster, which could be catastrophic.

17

Meeting India’s Energy needs

Similarly, setting up of hydro electric plants could result in large scale displacement of people of traditional communities besides submergence of land.

Recommendations:

a. Use of advanced mining technologies and better management practices to reduce environmental impacts.

b. Establish environmental taxes and subsidies based on “Polluter pays” principle. This could go a long way in preserving environmental quality.

c. Regular environmental audits of power plants, dams, mines, etc. should be mandated

d. To come out with a Policy framework that provides incentives for energy efficiency. E.g. providing incentives for use of mass transport systems in urban areas, promote R & D in energy efficiency.

e. Build awareness of the benefits Clean Development Mechanism should provide the necessary fillip for energy efficiency measures.

10. Managing opportunities and Risks

In order to ensure substantial nuclear growth the Issues that have to be addressed are the Factors affecting whether governments and utilities want to build power plants:

Achieving a safe, secure, and peaceful nuclear revival will require major institutional innovations

Avoiding major accidents, nuclear terrorism, or cascades of proliferation will be central to nuclear’s ability to grow enough to contribute to mitigating climate change

The “3 S’s” – safety, security, safeguards – are key enablers for large-scale nuclear energy growth

Major new nonproliferation steps are needed, but will not be agreed without major progress toward nuclear disarmament

Hence, if we hope for a world in which the role of nuclear energy gets bigger, we need a world in which the role of nuclear weapons gets far, far smaller.

18

Meeting India’s Energy needs

Methodology / Approach used to prepare the Report

Honorable Prime Minister, We are certainly confident with our recommendation made on the basis of extensive research done by our team using various sources.

The team is qualified to make such recommendation since it has wider representation in terms of professional line / experience we bring but involved certainly at the senior level in terms of growth and opportunity on the products / services we refer or suggest.

We duly considered the various government policies with regard to Energy, apart from the following sources to bring the right insight to your kind attention;

01.Planning Commission 02.Electricity Regulatory Authorities03.Energy Market / Supplier Challenges04.Collective exchange of thoughts05.Browsing various website and collecting information on energy06.Referring books07.Studying the methods of using energy followed by other countries and see

its applicability in India.08.Studying the various five year plans formulated by the government, and

the importance given to the energy sector in the same09.Complete review on the Generation, Transmission and Distribution

Network Policies, challenges and alternate management are carried out by our team and thus the recommendation is given as 10 point agenda for your kind consideration.

Conclusion

We have made an attempt to outline the possible areas of improvement which we believe will help growth and success of the Indian Energy sector. Through the scope of this project, we have been able to develop an overview of the several factors that is inhibiting growth in this section. The Ten Point Agenda lists down key initiatives whose successful implementation will directly result in growth in the sector.

19

Meeting India’s Energy needs

Acknowledgements

01.http://planningcommission.nic.in/sectors/energy.html 02.http://belfercenter.ksg.harvard.edu/files/bunn-goresummit-08.pdf 03.Brokings Foreign Policy Series – Energy Security04.Energy and Sustainable Development – Indian Perspective - Atmanand,

Amit K. Gupta, and Rishabh Raman05.Energy in India’s future – Insights – Edited by Edited by Jacques Lesourne

and William C. Ramsay06.Energy Scenario – Bureau of Energy Efficiency07. Integrated Energy Policy 2006 – Government of India

08.http://in.reuters.com/article/idINLS98869320090528?pageNumber=2 09.http://www.businessweek.com/news/2010-10-08/jsw-energy-plans-to-

double-coal-imports-to-6-million-tons.html10.http://pmindia.nic.in/India%E2%80%99s%20Nuclear%20Energy

%20Programme%20and%20the123%20agreement.pdf11.http://www.contrarianprofits.com/articles/indias-nuclear-sector-ready-to-

explode/1408012.Brokings Foreign Policy Series – Energy Security 13. Integrated Energy Policy – 2006 – Government of India 14.http://en.wikipedia.org/wiki/Anti-nuclear_movement

15.Energy and Sustainable Development-An Indian Perspective - Atmanand, Amit K. Gupta, and Rishabh Raman

16.http://www.eia.doe.gov/cabs/India/Oil.html 17.http://www.ibef.org/artdispview.aspx?

in=50&art_id=26438&cat_id=530&page=118.http://www.ey.com/IN/en/Industries/Oil---Gas 19.http://www.dnb.co.in/IndiasEnergySector/outlook.asp20.Energy Information Administration - Country analysis briefs – India21.http://www.alternative-energy-news.info/future-renewable-energy-India22.http://energybusiness.in/encouraging-policies-renewables 23.http://www.monstersandcritics.com/news/india/news/

article_1371006.php/Wind_power_key_to_meeting_India_s_energy_needs

24.http://www.ecoworld.com/energy-fuels/indias-energy-outlook.html 25.http://www.triplepundit.com/2010/02/rajasthan-desert-solar/ 26.Renewable Energy in India : Opportunities and Challenges – Kuljit Singh,

Ernst and Young27. India Energy Conclave 200828. India Energy Outlook – 200729. Integrated Energy Policy - 200630.Mid term appraisal for Eleventh Five Year Plan 2007-2012

20

Meeting India’s Energy needs

31. India Energy Conclave 200732. India’s Energy and Energy R&D Landscape: A Brief Overview – Ambuj D.

Sagar, Belfer Center for Science and International Affairs, John F. Kennedy School of Government, Harvard University

33.U.S. Energy Research and Development: Declining Investment, Increasing Need, and the Feasibility of Expansion – Gregory F. Nemet, University of California

34.www.teri.com 35. http://planningcommission.nic.in/plans/planrel/fiveyr/welcome.html

21