Presentation on India’s Strategy Towards Energy Development and Energy Security By R.V. SHAHI Secretary, Ministry of Power Government of India December 12, 2006

The Prime Minister of India has outlined following approach to the Eleventh Five Year Plan (year 2007-12) during the meeting of National Development Council: “ The GDP growth target proposed in the Approach Paper involves accelerating growth rate from 8% likely to be achieved in the base year (2007-08) to 10% in the final year (2011-12) of the Plan, yielding an average of 9% growth in the XI Plan period. This is ambitious but feasible. Growth has averaged 8 per cent over the past three years and is likely to be at this level again this year. This has never happened in the past. If we achieve the target of 9% growth in the 11th Plan, India will be firmly placed in the front ranks of fast growing economies. Most observers believe that we are at a historic cusp when this transition is possible”. Contd..

To achieve this objective there are two schools of thought : To deliver a sustained growth rate of 8% to 9% through next 25 years till 2031-32 and to meet the life line energy needs of all citizens, India needs, at the very least, to increase its primary energy supply by 3 to 4 times and its Electricity generation capacity by about 6 times. To achieve this objective there are two schools of thought : Competitive market is the most efficient way to realise optimal fuel and technological choices . Energy market being managed on competitive principles is bound to minimise market distortions and maximise efficiency gains. Contd..

In absence of a mature market with sufficient number of players in the supply chain, and highly skewed demand supply mismatch, efficiency gains may not follow automatically. Integrated Energy Policy provides more balanced approach and enunciates : “ Wherever possible, energy market should be competitive. However, competition alone has been shown to have its limitation in a number of areas of the energy sector and independent regulation becomes even more critical in such instances.”

The Challenges India needs 8% to 10% economic growth to meets its economic and human development goal. This requires qualitative/quantitative changes in energy mix. At 439 KgOE per capita consumption of energy in India is among the lowest: - China 1090 - USA 7835 -World Average 1688 Against the word average of 2429 kWh, per capita electricity consumption at 612 kWh is one of the lowest in the World. Contd..

The Challenges contd.. Though 85% of villages are considered electrified, 57% rural households do not have access to electricity. Non Commercial fuels such as firewood and dung cake dominate in the Households Energy Consumption. Energy intensity at 0.20 is better then the world average– yet there is scope to still improve and become comparable to UK , Japan and Denmark.

Integrated Energy Policy

The Vision “To reliably meet the demand for energy services of all sectors including the vulnerable households in all parts of the country with safe, clean and convenient energy at the least cost in technically efficient, economically viable and ecologically viable and sustainable ways considering different fuels and forms of energy, both conventional and non-conventional as well as new technologies and emerging energy sources.”

The Approach Till market matures independent regulation across the energy streams is a necessity. Pricing and resource allocation to be determined by market forces under credible regulatory oversight. Transparent and targeted subsidies. Improved efficiency across the energy chain. Incentives/ Disincentives to regulate and consumer behavior. Management reforms to create accountability.

Asymmetries Remain….. “India’s per capita consumption of energy in its various forms in 2003-04 is well below that of developed countries and the world average in 2003. Even in 2032, the per capita consumption in India from various sources will be well below the 2003 level of per capita consumption in respect of developed countries. In fact, India’s projected level of per capita energy consumption in 2032, will be less than 74% of the world average in 2003.”

Supply Options India has rather limited natural energy resources. Coal is abundant but of low calorie and high ash, negligible sulphur. Hydro potential is significant , but small compared to our needs. Known Reserves of Oil, Gas are limited. Uranium reserves are meager, but thorium reserves are large. Reserve/Production Ratio: -Extractable Coal : 86 -Extractable Lignite : 136 -Oil : 23 -Gas : 38

Enhancing Supply Options Institute policies to maximise coal production. Create coastal infrastructure for import and use of coal. Alternative coal transportation infrastructure for movement of coal through coasts and rivers. Promote R&D to make in-situ gasification commercially viable. Massive exploration efforts for Oil, Gas and Coal. Access to hydrocarbon reserves overseas and gas pipelines to India. Contd..

Enhancing Supply Options contd.. Full Development of Hydro Potential. Nuclear option to be fully explored. Developing thorium based nuclear technologies. Solar Technology Mission- making solar power economically attractive. (Long term option) Assess off-shore wind power potential. Pilot projects on biomass plantation and bio-fuels. Encourage blending of Ethanol with Petrol. Coal to Oil is another option to be pursued. R&D for fusion power.

Power Sector Policy Control of huge technical and commercial losses in Distribution. Liberal captive and group captive regime. Separating cost of pure wires business (Carriage ) from the energy business( Content). Open Access in distribution to be implemented. Developing a robust and efficient inter- state and intra- state transmission system. Rehabilitation of old thermal power stations. Contd..

Reducing cost of Power is essential to make it affordable. Power Sector Policy Reducing cost of Power is essential to make it affordable. Tariff based competitive bidding for generation and transmission projects. Encouraging public sector to undertake this process. Funding subsidies by state Government through budget. Availability of long tenor debt to power sector projects specially, hydro. Supercritical technology coal based power. Contd..

Regulation Setting Multi Year Tariffs differentiating by Time of the Day. Rewarding utilities for seeking Distributed generation with waste heat recovery. Demand side management. Energy efficiency. Establishing feed in tariffs for power from renewable energy sources.

Reducing Energy Requirements Energy Intensity of some countries Country Energy Intensity (KgOE/ $ GDP PPP) India 0.18 World Average 0.21 China 0.23 US 0.22 OECD 0.19

Large potential for energy saving exist in India Reducing Energy Requirements-- Large potential for energy saving exist in India At least 25 % of total generation could be potentially saved through DSM. About one-third of total energy is used for domestic cooking therefore efficient cooking process needs high priority. BEE to develop standards for all energy intensive industries and appliances and should develop system of incentives/penalties. Enforcing truthful Labeling. National Building Codes to be revised to encourage energy efficient buildings.

Policy for Renewable and Non- Conventional Energy Sources From long term perspective to maximize domestic supply options and to diversify energy sources, Renewables to play an important role. Share of renewables in the energy mix by 2031-32 only about 5 to 6% despite increase by 40 fold . Development of cost effective technologies hold the key. However, Period and limit to subsidy to be well defined.

Enhancing Energy Security Reducing Risks Expand domestic energy resource base. Reducing the requirement through energy efficiency in production and end use. Reduce import dependence through import substitution. Diversify fuel choices Diversify fuel supply sources. Bilateral economic, social and cultural ties.

Energy R&D Research and development (R&D) in the energy sector is critical to augment our energy resources – also to promote energy efficiency. Energy R&D to raise India’s energy security and delivering energy independence. Energy R&D to be allotted adequate resources . Setting up of a National Energy Fund (NEF) . NEF to finance energy R&D with an initial allocation of about USD 225 million, excluding atomic energy. Developing “Centres of Excellence” in energy research.

Promoting Household Energy Security Providing electricity and clean fuels to all, particularly the rural population one of the toughest challenges. Traditional fuels create smoke and indoor pollution. Eyes and lungs of women and children adversely affected. Easy availability of minimum clean energy to maintain life a basic necessity. Provision of targeted subsidies - not many households able to pay .

Electrification of all households by 2010. Promoting Household Energy Security Electrification of all households by 2010. Providing clean cooking energy such as LPG, NG, biogas or kerosene , all within 10 years. For households not having access and/or not affording even the subsidized fuel, fuel wood plantations within one Km. of all habitations. Entitling targeted households to 30 units of electricity and; LPG, kerosene or bio gas equivalent to 6 kg of LPG pm.

National Electricity Policy Total Village Electrification in 5 years. By Year 2012 : Per capita availability 1000 units. Installed capacity over 200,000 MW. Spinning reserves 5% . Minimum lifeline consumption of one unit per household per day. Inter-regional transmission capacity 37,000 MW. Quality and reliable power supply.

Tariff Policy Tariff of all Generation and Transmission Projects in Private Sector through Competitive route- Public sector to complete transition in five years. Reduction of cross subsidy to (+)(-) 20% in next five years. Emphasis on facilitating Open Access in Distribution; clear formulation on cross subsidy surcharge. Transmission Tariff framework sensitive to distance and direction. Strict Implementation of Performance Standards. Agriculture Tariff to leverage sustainable use of Ground Water Resources. Time bound introduction of MYT.

Merchant Power Plants Development of Merchant power plants with highly competitive tariff- a new electricity market development initiative. To fill the demand supply gap. Facilitated by Open access in transmission and distribution. Full market risk to be absorbed by the developer. Coal linkage to be provided for plants up to 1000 MW size. Captive coal blocks for plants in the range of 500- 1000 MW.

Rural Electrification Policy Objectives: Access to electricity to all households by 2009. 24 Hours power supply in rural areas. Quality and reliable power supply at reasonable rates. Minimum lifeline consumption of 1 unit per household per day – merit good by 2012.

RE Policy- Salient Features State Governments required to prepare and notify RE plans within 6 months – indicating delivery mechanisms. Involvement of local community in RE. Adequate representation of women in District Committees. Least cost option for RE – Full life cycle cost and subsidies to be considered. Emphasis on development of economic load in convergence with other programmes - making rural supply economically viable. Policy gives essential features of franchisee arrangement. Contd..

RE Policy- Salient Features Phased introduction of system of franchisee in areas other than RGGVY projects – ensuring revenue sustainability of rural supply. Benefit of capital subsidy for RE projects to be fully passed on to the consumers. Annuity based approach for capital subsidy to decentralised generation systems. Encouraging energy efficient equipment – irrigation pumpsets. Encouraging standalone systems up to 1 MW with cost effective proven technologies and using local resources. Tariff from standalone systems to be decided by competitive market forces. Benefits of subsidy to be fully passed on.

Climate Change Issues - India’s Response India’s Energy Intensity and Per capita CO2 emissions amongst the lowest in the world. India committed to follow a low carbon path for development. Hydro power irrespective of size is renewable. Full development of hydro potential. All hydro projects should be accepted as CDM projects. Nuclear power a clean option. Development depends upon access and availability of nuclear fuel. All alternate sources of energy to be fully developed. Significant progress in Energy Efficiency measures. Contd..

Climate Change- India’s Energy Strategy contd.. High volatility in oil prices. Coal a major source of energy - Energy security. Super Critical Power Generation Technology for better efficiency. Efforts to develop 120 MW pilot project based on IGCC technology. Currently available technologies to be modified to adopt high ash content of Indian coal. India signatory of CSLF Charter . India a founder partner in “ Methane to Market Partnership” initiative. Contd..

Climate Change- India’s Energy Strategy contd.. India joined Canada, EU, Japan, China and South Korea in “ International Partnership for a Hydrogen Economy (IPHE)”. India first Asian country to join the US Government Steering Committee for FutureGen Initiative. India a full partner country in cooperative international R&D for “ International Thermonuclear Experimental Reactor (IETR) project. India signed Charter of Asia Pacific Partnership for Clean Development and Climate along with US, China, Japan, Australia and South Korea.

Thank You