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World Energy Outlook 2010 and its relevance to India, Shri R V Shahi, Former Secretary, Ministry of Power

International Energy Agency (IEA), an autonomous organization which was established in 1974 by the OECD countries to implement International Energy Programmes, has come out recently with its annual "World Energy Outlook 2010". Over the years, projections and conclusions made by the IEA in its World Energy Outlook, have proved very useful for all those who are engaged in the policy related issues in different countries. It would, therefore, be appropriate to analyse the report and see its relevance in Indian context. However, before the outlook for the year 2010 is discussed, it may be relevant to also analyse the outlook which was presented for the year 2009.

Energy Outlook 2009 came out in the backdrop of financial crises and the issue was how to face the challenge of far reaching consequences in the energy market. It also had in mind the Copenhagen Conference (December 2009). In many ways the Energy Outlook 2009 would be of reference because it started to look at issues with a target emissions level and use the designation of "Reference Scenario". 450 Scenario represents the situation of concentration of Green House Gases in the atmosphere to 450 PPM (parts per million) of CO2 equivalent. It may be relevant to mention that at present the Green House Gases in terms of CO2 equivalent is almost 1000 PPM. Therefore, the 450 Scenario is a goal to be achieved by reducing the emissions of Green House Gases and bringing it down to 450 PPM of CO2 equivalent. It is indeed a formidable challenge.

So far as India is concerned, it has made its position clear in various international fora that per capita CO2 emissions in India is much less than the global average, that India needs to increase the levels of energy production and consumption. Therefore, even though, in a diluted way on its position in Copenhagen Conference, India gave an assurance that carbon intensity of GDP would be maintained, carbon emissions both in terms of absolute value as well as per capita are bound to increase. This will be true for a large number of developing countries which have the challenge of providing access to energy to a large proportion of their population. In most of the developing countries more than 60% of their population do not have access to reasonable level of energy.

In spite of global concerns, as per the Outlook 2009, fossil fuels remain the dominant sources of primary energy worldwide in the reference scenario accounting for more than 75% of the overall increase in energy use between 2007 and 2030. Coal would constitute the biggest increase in demand during this period followed by gas and oil. In Indian context this appears mostly true except for the fact that hydroelectric is also targeted to constitute a major component of Indian energy profile. When the Integrated Energy Policy for the period 2007-32 was being evolved, in spite of best efforts to see that proportion of coal reduces, it was found that even though hydro potential is fully developed, nuclear power proportion increases from less than 3% to about 7%, gas based power generation is given preference, dominance of coal still remains.

Emphasis on other renewable energy generation does improve the overall capacity, but in terms of proportion, particularly proportion of electricity generation, does not become a significant contributor. A few initiatives which have been taken in the recent past would definitely enhance the installed capacity of other renewable power generation plants. Almost all the State Electricity regulators have, prescribed the Renewable Purchase Obligations (RPO) for the distribution companies, according to which distribution utilities shall have to procure the required percentage of electricity from the Renewable Energy category. The National Solar Mission aims at development of solar power to the extent of 20,000 MW by 2022. Renewable Energy Certificates is another initiative aimed at encouraging such States as have already fulfilled the RPO level and would be encouraged to facilitate larger amount of renewable energy power generation to take care of the deficits in other States, which would be able to buy these Renewable Energy Certificates.

The Energy Outlook has emphasized that continuing on today's energy path, without any change in Government Policy, would mean rapidly increasing dependence on fossil fuels, with alarming consequences for climate change and energy security. The developed nations, obviously, should initiate major steps to cut down emissions of green house gases. For countries like India, dependence on fossil fuels, as mentioned earlier is inevitable. In the Indian context, steps that have been initiated include Super Critical Technology for all the large size coal based power plants, increasing dependence on the nuclear power plants, besides extra ordinary emphasis on renewable energy including development of hydro power projects - both run-of-river schemes as well as storage based hydro projects.

One of the observations in the Energy Outlook relates to energy efficiency. It is mentioned that End-Use Efficiency is the largest contributor to CO2 emissions abetment in 2030, accounting for more than half of total savings in the 450 Scenario compared with the Reference Scenario. In Indian context this is an important area of potentials to effect considerable amount of savings in energy. At the national level, by way of implementation of the Energy Conservation Act 2001 and through the Bureau of Energy Efficiency, which was set up in 2002, a number of initiatives have been taken. There have been remarkable achievements in some of the areas. But at the State level, a lot of work is required to be done. We still continue to be one of such countries as are energy starved, but indulge in the luxury of highly inefficient consumption. We still continue to waste more than 20% of energy. It is essential that the consumers have the opportunity to purchase energy efficient gadgets and products. Time has come that such products as do not meet the minimum threshold level of energy consumption are banned to enter into the market. A lot more is required for consumer awareness and education. Building Codes announced need to be enforced for all new construction and retrofit plans for the old buildings need to be formulated and implemented. National Initiatives and Action Plans need committed implementation at the ground level. There are hardly any State Governments which have accorded appropriate importance and priority to this national need.

The gas production and supply market is undergoing a major transformation. The Energy Outlook has brought out that the recent rapid development of unconventional gas resources in the United States and Canada has transformed the Gas Market Outlook in North America and in other parts of the world. Production of Shale gas is making a major difference. In fact, the Energy Outlook has highlighted that "A glut of Gas is Looming". The Energy Outlook 2010 has further reinforced the conclusion "Natural Gas Markets are in the midst of a Revolution - Will it herald a Golden Era for Gas". It has further brought out that gas is not only set to play a key role in meeting the world's energy needs, but also unconventional gas would account for 35% of the increase in global supply to 2035. It says that the gas glut will peak soon and that will keep pressure on gas exporters to move away from oil price indexation. Obviously, lower prices could lead to stronger demand for gas, backing out renewable and coal in power generation. These observations in the World Energy Outlook must be taken seriously in re-orienting the power generation and energy strategy in India. With the United States not putting demands on the international gas market, and similar situations may emerge in many other countries where Shale Gas could be produced to significant measures, price of LNG for power and for other consumption in India might witness a substantially declining trend. Indeed India has its own programmes of production of natural gas, which is likely to increase in coming years, we need to plan reasonably large capacities of power generation linked also to LNG. We were not thinking in these terms, because LNG prices were excessive. The two new developments - (a) production of Shale Gas in large quantities, and (b) likely de-linking all together of the gas price with the crude price, are highly encouraging and we need to avail of the emerging opportunities. Another approach which has already started in a small way, but needs to be intensified, is with reference to exploration for Shale Gas within the country. A facilitative environment and policy framework needs to be quickly evolved, so that both public and private sectors are encouraged to engage extensively in exploration and production of Shale Gas.

The Energy Outlook 2010 has projected the price movements for crude oil over 2035. From the present level of about $ 90 a barrel, the projection suggests that the price could increase to $ 140 a barrel under the situation of current policies, to $ 120 a barrel under the new policy scenario and to remain between $ 80 to $ 90 under 450 Scenario. In none of the situations the projections suggest that the crude oil is likely to be cheaper than $ 80 a barrel. Since India's dependence on import of crude oil is huge, optimum use through various conservation measures is essential. Our policies on transport, types of vehicles that are allowed on Indian roads, usage patterns all need to undergo significant changes, so as to take care of the increasing crude prices.

There are a number of other issues that have been covered in the World Energy Outlook. In this paper, I have attempted to analyse a few of the important conclusions and projections of the International Energy Agency, particularly such projections which have a bearing on how we should formulate our strategy and draw our action plans.