Energy Security and Climate Change

“Earth provides enough to satisfy every man's need, but not every man's greed” Mahatma Gandhi famously said. The ever perplex energy security issue essentially revolves around dilemma of chalking out which wants of mankind  can be put under the ‘Need’ and which  had to be classified as ‘Greed’ for the purpose of ensuring optimum utilization of resources of earth in ways so as to attribute real meaning to often quoted term ‘Sustainable development’. United Nations Framework Convention on Climate Change (UNFCCC) is an effort in precisely this direction but as yet not succeeded in chalking out a road map due to constant wrangling between countries at different stages of development. Durban summit recently concluded under the aegis of UNFCC met the same end as it failed in nailing down an agreement for extension of Kyoto protocol (Kyoto protocol is projected to be a legally binding agreement among nations of the world to reduce carbon foot print from human intervention in nature to a level that can mitigate the harmful climate impact due to excessive Co2 emission). This was despite the uncomfortable fact that the total energy-related CO2 emissions at the global level increased from 22.0 BtCO2 in 1990 to 29.9 BtCO2 in 2007. While total emissions of most countries have grown, the intensities though have been gradually declining. The only country that showed significant reduction was Germany. Emissions of USA have grown despite the UNFCCC and Kyoto protocol. Josep Maria Antentas and Esther Vivas commented on the outcome of Durban Summit in their article titled- An assessment of the failure of the Durban Summit on Climate: No more green Capitalism, “We will save the markets, not the climate. That is how we can summarize the outcome of the 17th Conference of Parties (COP17) to the United Nations Framework on Climate Change (UNFCC) which took place in Durban, South Africa. There is a striking contrast between the rapid response by governments and international institutions at the onset of the economic and financial crisis of 2007-08 in bailing out private banks with public money and the complete immobility they demonstrate in response to climate change. Yet this should not surprise us, because in both cases it is the markets and their accomplices in government who come out as winners.”

 The contentious issue revolves around application of ‘polluter pays’ principle between industrialized and developing countries. Industrialized countries historically account for the bulk of greenhouses gas emissions as it is cleared from the fact that Annexure 1 countries under UNFCC accounts for around 75 percent of global emission. They should thus ideally contribute through ‘Green Fund’ for the cost of technological up gradation required by developing countries like India, Brazil, China, Mexico and Least Developing Countries (LDC) for reducing carbon intensity of their growing economies. Moreover the bulk of developing countries greenhouse gas emission continues to be on account of sustaining livelihood of their population and not on conspicuous consumption as is the case with the major developed countries of the world like US, UK etc. Developing countries thus stand on solid moral grounds when it comes to sharing the burden and responsibility of the global problem in hand. The point was put forward by Union Environment Minister, Jayanthi Natarajan when she emphasized in Durban on the importance of equity in the fight against climate. Contentious issue of climate change is at the core of the debate around energy security at the global level as it would determine the ‘energy mix’ available to the countries. It will signify the limitations with in the framework of which each country had to work out its long term plan for ensuring energy security in sync with responsibility of reducing green house gas emissions as internationally determined.

Energy security and climate change: India’s Position

India too attempted to undertake this exercise by bringing out ‘Integrated Energy Policy’ in 2006 though pending a comprehensive understanding at global level on matter of climate change through an agreement under the aegis of UNFCC. As per the report, “India’s energy security, at its broadest level, is primarily about ensuring the continuous availability of commercial energy at competitive prices to support its economic growth and meet the lifeline energy needs of its households with safe, clean and convenient forms of energy even if that entails directed subsidies.” It continued further to state that, “We are energy secure when we can supply lifeline energy to all our citizens irrespective of their ability to pay for it as well as meet their effective demand for safe and convenient energy to satisfy their various needs at competitive prices, at all times and with a prescribed confidence level considering shocks and disruptions that can be reasonably expected”. Thus the essence of energy security for India is ensuring the availability of energy to all its citizens in an egalitarian way even if that entails providing subsidies. Fuel and power pricing enters the matrix of energy security as an essential perquisite along with availability.

Energy planning in India is taking place in the context of climate change negotiations. While no official goal for stabilizing GHG emissions has been set, India has in international climate negotiation process pledged that its per capita emissions will not exceed those of developed nations and is also willing to reduce the emission intensity of its GDP by 20%–25% till 2020 from 2005 level. At present India’s, energy intensity, which is energy consumption per unit of GDP, is one of the highest in comparison to other developed and developing countries. For example, it is 3.7 times that of Japan, 1.55 times that of the United States, 1.47 times that of Asia and 1.5 times that of the world average. Thus, there is a huge scope for energy conservation in the country.  India accounts for approximately 18 percent of the world population and is the fifth-largest consumer of energy, accounting for around 4 percent of global consumption. India’s total consumption of commercial energy increased from 295 MTOE in the year 2000 to 468.9 MTOE in 2009 with an average annual growth rate of around 5 percent. Currently, India’s emissions are around 1 ton of CO2 per person per year. The global per capita average is 4.2 tons with most industrialized countries emitting 10–20 tons per person per year. Nevertheless, because of its large population, India already contributes around 4% to global emissions. But still, India at present is an energy deficient country. Per capita commercial energy consumption in India is under 5% that of the US, under 26% that of China and under 22% of the world average.

Present Energy Mix

India’s total commercial energy supply is presently dominated by coal and largely-imported oil and natural gas with renewable energy resources contributing only in small proportion. Coal and natural gas also dominates the power generation mix, though renewable resources now account for approximately 10% of installed power capacity. The current power-generating capacity is insufficient to meet current demand, and in 2009–2010, India experienced a generation deficit of approximately 10% (84 TWh) and a corresponding peak load deficit of 12.7% (over 15 GW). According to Oil & Gas Journal (OGJ), India had approximately 5.7 billion barrels of proven oil reserves in 2011, the second-largest amount in the Asia-Pacific region after China. India’s crude oil reserves tend to be light and sweet. India produced roughly 950 thousand barrels per day (bbl/d) of total liquids in 2010, of which 750 bbl/d was crude oil. The country consumed 3.2 million barrels per day (bbl/d) in 2010. The combination of rising oil consumption and relatively flat production has left India increasingly dependent on imports to meet its petroleum demand. In 2010, India was the world’s fifth largest net importer of oil, importing more than 2.2 million bbl/d, or about 70 percent of consumption. Central government continues to hold licensing rounds in an effort to promote exploration activities and boost domestic oil production. Despite major new natural gas discoveries in recent years, India continues to rely on gas imports to meet its needs.

It is estimated that India had approximately 38 trillion cubic feet (Tcf) of proven natural gas reserves in 2011. India produced approximately 1.8 Tcf of natural gas in 2010, a 63 percent increase over 2008 production levels. The bulk of India’s natural gas production comes from the western offshore regions, especially the Mumbai High complex, though fields in the Krishna-Godavari (KG) are increasingly important. In 2010, India consumed roughly 2.3 Tcf of natural gas in 2008. Natural gas demand is expected to grow considerably, largely driven by demand in the power sector. The power and fertilizer sectors account for nearly three-quarters of natural gas consumption in India. Natural gas is expected to be an increasingly important component of energy consumption as the country pursues energy resource diversification and overall energy security. Despite the steady increase in India's natural gas production, demand has outstripped supply and the country has been a net importer of natural gas since 2004. India’s net imports reached an estimated 429 billion cubic feet (Bcf) in 2010.

For the purpose of power generation India had an installed capacity of 185,000 MW as of November 2011, the world's fifth largest. Pattern of energy production is also dominated by coal and natural gas as they account for 54 and 34 percent respectively with natural gas, hydro and nuclear contributing to the balance. Seventy percent of the coal produced every year in India is been used for thermal generation. In case of Hydro power the present installed capacity is approximately 37,360 MW which is 21.53% of total Electricity Generation in India.  Nuclear power only provided 3 percent of the country's total electricity generation in 2011.The distribution of primary commercial energy resources in India is quite skewed, which raises the cost of transmission of energy. Seventy percent of the total hydro potential is located in the Northern and North-eastern regions, whereas the Eastern region accounts for nearly 70 percent of the total coal reserves in the country. The Southern region, which has only 6 percent of the total coal reserves and 10 percent of the total hydro potential, has most of the lignite deposits occurring in the country.

Increasing Energy demand: Projected Scenario

India needs to sustain an economic growth of 9 percent over the next 20 years to eradicate poverty and meet its human development goals. Meeting the energy requirements for growth of this magnitude in a sustainable manner presents a major challenge. In December 2008, Government of India approved an Integrated Energy Policy (IEP) for the country. The IEP estimates that the India’s primary energy supply will need to increase by 4 to 5 times and its electricity generation capacity by 6 to 7 times of its 2003-04 levels to deliver a sustained growth rate of 9 percent by 2031-32. Commercial energy supply would need to grow faster at about 6.8 percent per annum as it will incrementally replace non-commercial energy over this period. The projection for required installed capacity of power generation by 2031-32 as per the policy is 7, 78,000 MW in case economy growth rate is assumed to be 8 percent and its 9, 60,000 MW for assumed growth rate of 9 percent. Projection for demand of commercial energy like coal, natural gas, oil for non-power purposes along with estimation of energy for non-commercial purposes need to be added to power generation figures to arrive at likely energy demand in India in 2031-32. IEP estimates primary energy requirement in India by 2031-32 is likely to be in range of 1836-2043 MTOE under different scenario. To put the requirement in perspective it should be understood that with current low base even with projected increase in 2032, the per capita consumption in India in 2032 from various sources of energy will be well below the 2003 level of per capita consumption of developed countries. India’s projected level of per capita energy consumption in 2032 in fact will be less than 74% of even world average in 2003.   

Traditional Supply alternative

The IEP also dips into exploring the potential of possible supply sources for enormous increase in primary energy requirement by 2031-32. At present as there is no legally binding agreement it tries to project likely energy mix in future by considering potential scenarios that may emerge as the international agreement on climate change fructify. The agreement will decide the responsibility that India may have to take and will consequently have impact on the path that the country will take too in fulfilling its growing energy requirements. Even in a scenario where there is force use of hydro, natural gas, nuclear, renewable source of energy than also coal is projected to play an important role in meeting energy requirements by contributing to the extent of 41.1 percent in 2031-32. In case where country is able to take coal dominant route in its energy planning than its share will be more than 54 percent. Despite talks to the contrary coal will thus continue to be a significant factor in satisfying energy needs in future. The problem with coal persistently remains finding a way to raise the proportion of extractable reserves, ensure adequate production and taking care of the environmental impact of production and use, need to be met by adequate research effort in that direction. Cutting edge technologies like  In-situ coal gasification can significantly increase the extractable energy from India’s vast in-place coal reserves as it can tap energy from coal reserves that cannot be extracted economically based on available open cast/ underground extraction technologies. As of now the country doesn’t have sufficient known reserves of oil and gas though only one third of the potential oil bearing area has been explored so far. Some geologists predict vast amount of undiscovered oil in India. But to tap them, the nation may require effort towards development of technology to overcome geological barriers for deep drilling both aboveground and under sea. In any case India’ supply strategy while stepping up exploration should not rely on the possibility of finding oil domestically. It should seek to work for diversifying its potential suppliers internationally by fostering and deepening relationship with new suppliers in Latin America and Africa. The Directorate General of Hydrocarbons has estimated the country’s resource base for Coal Bed Methane (CBM) to be between 1400 BCM (1260 Mtoe) and 2600 BCM (2340 Mtoe). It is emerging as the new potential source and to give impetus to exploration and production of CBM, the government has formulated the CBM policy.

Nuclear power has been projected as a potential cure for energy security and climate change after historic India-US nuclear deal. The deal has succeeded in altering the prevailing international non proliferation regime to accommodate India and open the avenues of nuclear commerce for it.  India is poorly endowed with Uranium. Further, India is extracting Uranium from extremely low grade ores (as low as 0.1% Uranium) compared to ores with up to 12-14% Uranium in some countries of the world. This makes Indian nuclear fuel 2-3 times costlier than international supplies. The substantial Thorium reserves can be used but that requires that the fertile Thorium be converted to fissile material. In this context, a three-stage nuclear power programme is envisaged domestically. After the deal uranium supply from abroad along with imported nuclear reactors it is said will assist in fast tracking three stage nuclear programme. But the present uncertainties between India and US on nuclear liability regime have generated concerns on its future potential. In the backdrop of recent Fukushima nuclear accident in Japan after earthquake, world wide experts have expressed their reservations on nuclear safety. Germany has even backtracked from its future nuclear programme. India too has witnessed massive protests in Jaitapur (Maharashtra) and Kundukulam (Tamilnadu) by locals against setting up of nuclear power plant. IEP has attempted to project share of the nuclear power in best case scenario for which it estimates it to be around 6.4 percent with installed capacity expanding from present 4000 to 63000 MW in 2031. The recent uncertainties and concerns hovering around nuclear safety make it a daunting task to be achieved. Over reliance on this specific avenue of power thus seems problematic in the long run. Hydropower as a clean power source should be developed on priority basis. Tapping 150000 MW of hydro potential of the country while technically feasible will require timely resolution of issues of water rights, resettlement of project affected people and environmental concerns. The irrigation and flood control benefits of hydropower and its operational flexibility can justify the higher costs of hydel plants to some extent.

Renewable alternatives and energy efficiency

India has implemented a National Action Plan on Climate Change (NAPCC) according to which 15% of energy should come from renewable sources by 2020. The NAPCC has envisaged eight National Missions, one of which is focused specifically on renewable energy- Jawaharlal Nehru National Solar Mission (JNNSM). India is also an active participant in the Clean Development Mechanism (CDM) with the second largest number of projects in world, the majority of which are renewable energy projects. A major stress needs to be on energy efficiency and conservation, with particular emphasis on optimum result in electricity generation, transmission, distribution and end-use. Clearly, over the next 25 years energy efficiency and conservation are the most important virtual energy supply sources that India possesses. The main ways of achieving this reduction are improving fossil fuel power generation through new technologies such as supercritical and ultra-supercritical coal plants and integrated gasification combined cycle (IGCC), reducing aggregate technical and commercial losses, improving public transport, and increasing end-user efficiency. Given the shortage and cost of fossil resources, these measures also make sense from a purely economic perspective. Reducing emissions beyond the capability of these measures will require India to shift to low-carbon technologies that have a much higher initial capital commitment and much lower rate of return. Solar energy has a large potential in the country due to natural availability of sunshine. The average solar insulation in the country is 6 kWh/ meter2/ day. This can be exploited by many direct thermal applications such as for cooking, heating or in photovoltaic cells that directly convert sunlight to electricity. Photovoltaic technology is proven but expensive and the cost of electricity exceeds Rs.20/kWh at present. Potential to reduce costs and increase efficiency exists and a technological effort for this purpose is highly desirable. Hydrogen is also seen as the new energy carrier. Hydrogen Development Board has been set up to promote development of technologies for producing, transporting, storing and distributing hydrogen as well as to explore the field of fuel cells for efficient end-use of hydrogen. Hydrogen can also be burnt directly in internal combustion engines. The technical and financial feasibility of the technologies available have not been established so far. Biomass, Geo-thermal etc are potential source of energy in future which needs to be explored.             

Energy pricing

Economists are fond of saying that inflation is a tax on poor. Inflationary pressure in the economy is persistently strong despite measures taken by RBI by hiking Repo rate thirteen times since March, 2010 to curtail prices. Still, inflation persists near double digit mainly on account of the fact that inflationary situation in India can’t be understood only from the demand side as often articulated. Supply side pressure including cost-push inflation is generally not factored into though it too has its share in explaining the situation in holistic way. Deregulation of petrol prices has resulted in its price being hiked five times in last one year. Similarly, prices of diesel, kerosene and LPG too have been raised few times. Such measure certainly adds to cost push inflationary pressure in the economy.   The hike in prices of universal intermediateries like petrol and diesel has not certainly assisted in controlling price spiral. Hiking in prices of petroleum fuels in India is generally justified in wake of prevailing high levels of crude oil at global level and high under recoveries. At the same time it should be understood that high levels of underecoveries of oil companies on the basis of which argument is built to hike price are not ‘Loss’ as generally understood. Fortnightly statement from the Ministry of Petroleum and Natural Gas brought out on October 18, 2011 puts it, “under recovery is the gap between the desired price and the actual selling price of petrol. The desired price is not calculated on actual costs.” Fuel pricing in India is intrinsically linked with the question of ensuring energy security for more than 50 percent of the population of the country. Energy security on its part is organically linked with the pertinent task of improving human development measure as the access to energy assists in providing other essentials of life.  Any reform in pricing of petroleum products must necessarily address high taxation of petroleum products by rationalising the tax structure.

Concluding remarks

Prime Minister M Man Mohan Singh has said that energy security is very important for the country second only to food security. The issue of energy security requires an integrated approach by exploring all possible alternatives. Energy Diplomacy of the country needs to be sharpen up for developing alternative energy supply sources globally. Foreign Policy of the country will have to be tailored in a way that there is solidarity among developing countries during negotiations under the aegis of UNFCC. The legally binding international agreement that emerges from these talks will have impact on energy security scenario of the nation in long run. In order to make industrialized countries (Annex 1 countries in UNFCC) take their due burden in responding to global challenge of climate change, developing countries should seek to work in tandem to create much required diplomatic pressure on them. A favourable agreement from Indian perspective in near future will give the country leeway in form of time bought for adapting to low emission technological up gradation without impacting the growth prospects in adverse way. It should also be understood that energy security issue worldwide is standing at cross roads due to market and technological risks involved. Scientific research and development in the country should be given top priority for materializing likely future supply sources of energy like Solar, Hydrogen etc by the government through increased funding to specific missions to ensure independence.     

By Saurabh Naruka