Possible frameworks for an appropriate energy mix for India AIPSN national workshop Ashok Sreenivas Prayas (Energy Group), Pune 15 th – 16 th December, 2012

Energy and Development (2009) 1 Small increase in consumption correlates with high HDI change Source: UNDP, World Bank

Energy supply in India Historical trend of primary commercial energy supply in India (MTOE) 2 Source: MoPNG Petroleum statistics, CCO provisional coal statistics, various CEA reports Coal most prominent (~53%) Petroleum also significant RE increasing slowly Nuclear insignificant ~24% of energy consumed is ‘non- commercial’ biomass

Sectoral energy use % ( ) 3 -Industry large part -Residential / commercial also very important Source: TEDDY

Energy Use Standard thinking – 8% GDP growth => 6-7% growth in energy use  Exponential growth Key sectors – Electricity generation – Transport – Industry – Agriculture – Cooking 4

Electricity demand projections 5 Power demand likely to double in next 10 years Biggest demand increase from industry and residential / large commercial Source: 18 th EPS by CEA

Electricity demand projections Projected increases seem impractical and require enormous natural resources –Do we have such resources? –Implications of such an increase? Source: CEA, IEP scenario 11

Limited Resources  Increasing Imports Domestic resources limited Projected demands will mean unsustainable imports 7 Source: Working group reports for 12 th five year plan

8 Macro economic impacts of high imports  India’s energy imports as % of GDP much higher than many other countries  Impacts  Increased cost of energy (harder to universalize access)  Increased vulnerability to geo-political changes  Trade deficit  Impact on GDP growth Source: EIA, 12 th plan reports, Prayas calculations

Local environment  Air pollution well beyond threshold  Similarly problems with water resources too – pollution as well as conflicts  Rising resistance to mining, power plants etc. because of environmental damage, weak adherence to expected norms, weak government monitoring 9 Source: MPCB data

Global environment India not responsible for global problem of climate change – 15% of population but has emitted only 2.5% of GHG emissions – Very low per-capita emissions (~ 2 tons / capita / yr against world average of ~4) But highly vulnerable – Long coastline – Very rainfall dependent – Poorest most vulnerable Limited Carbon space remaining Business-As-Usual is impossible 10

India’s energy challenge Balancing three dimensions of – Energy poverty of majority, large numbers – Limited availability of natural resources – Ecological impacts of conventional energy use 11

Development  Growth  Energy  Environment Each of the above links is flexible Policies and structures required to increasingly de-couple the links – Improved developmental policies – Improving efficiency of energy use – Minimizing environmental impacts of energy sources Breaking the nexus 12

Possible framework(s) RIR in Electricity – Reduce ‘luxury’ energy use – Improve efficiency of energy use – Replace fossil fuels with renewable energy ASI in Transport – Avoid travel - Better planning – Shift to better modes – Public and non-motorized passenger transport, rail for freight – Improve efficiency – Better fuel efficiency Low input Sustainable Agriculture, Housing, Clothing Preventive & Social Medicine for Health … 13

Reduce … ‘luxury’ consumption 14 Source: Industry data, Prayas calculations Driving a car for 35 km ≈ running a CFL 5 hrs / day for the whole year Average AC / year = 40+ years CFL usage 5 hrs / day What should India focus on?

Improve … efficiency of energy use 15 Super efficient appliances consuming 40-50% less than the 5-star models, are commercially available in international markets  Assist manufacturers to introduce Super Efficient Appliances (as poor consumers are very cost sensitive)  Link energy tariff to consumption norm for Commercial Buildings  Discourage inefficient new Industry from coming up

Replace: Mainstream renewables … Wind power costs falling rapidly Wind power potential is >> initial estimates Solar potential huge Solar costs reduced from Rs 16  ~ Rs 8/unit 16 Source: CEA, Planning Commission reports

Shifting priorities in India Two official forecasts show Increasing role of -Efficiency and -Renewable Reduced role for nuclear EE potential > Potential of renewable + nuclear 17

Increasing role of renewables RE investment of Rs. 20,000 Cr ( ) in India, growing at 20% p.a % electricity from RE targeted in 2020 Currently 5% 6-fold increase from ~41 BU to ~235 BU Ambitious but achievable Source: National Energy Statistics

Role of Distributed RE – 1 Much discussed option – To improve access, reduce emissions, improve energy security – Has an important role, but is not a silver bullet – Needs careful design with focus on long term sustainability and O&M Urban DRE (Rooftop PV) – Need enabling policy / regulations such as net metering Not FiTs No capital subsidy / RECs – Socially equitable – high end consumers pay higher cost – Economically viable – for such consumers – Environmentally sustainable – solar without battery 19

Role of Distributed RE – 2 Rural DRE – Good adoption rate for basic lighting / home services Cheaper than alternatives such as kerosene / diesel But high per-unit tariffs Suggestions – Cross-subsidize tariffs through utility USO (Aadhaar?!) FOR developing guidelines – Integrate with grid Likely to reach soon, capacity also likely to increase Improve utilization factors and bring down costs Support productive loads – Careful design of institutional / regulatory arrangements 20

But … Huge deficit in access to modern energy 21 Approx. 1 USA (40 Cr) without access to electricity Hours of supply in rural area often as low as 2 hours Approx. 1 Africa (100 Cr) living on less than 100 U/household/month Less than 30% use clean energy for cooking Source: Census 2011, NSSO 66th round, Prayas estimates Household electricity

Energy and infrastructure deficit and inequity 22 Great need to increase energy access But the neediest will not be able to pay high costs Source: Census 2001, 2011, NSSO 66th round

Current electricity cost from different fuels 23

Fossil fuels will have a role to play Coal will remain the primary energy source for the near to medium term – Cheapest available source with reasonable reliability – Grid soon expected to reach almost everywhere – Relative ‘abundance’ of domestic availability (?) – But beset by serious governance problems with economic, social and environmental impacts Few viable alternatives yet to fossil fuels in transport – Not much real traction for ASI framework – Scope for improvement if pursued seriously The shale gas boon or bane 24

Conclusions India’s energy future should focus on – Reducing ‘luxury consumption’ of the affluent – Aggressive promotion of energy efficiency – Shifting to renewable energy – Protecting poor from high cost options – Promoting R&D, and Indian manufacturing of renewable energy Fossil fuels, particularly coal and oil, will remain significant players in the short to medium term Governance issues critical – Fossil fuel sectors suffer from many weaknesses – Environmental regime dysfunctional on the ground – Will be critical for RE, EE too (e.g. land, GBI or feed-in tariffs, M&V etc.) Eventually – an absolute limit on consumption?! 25

THANK YOU Prayas Energy Group 26