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India's Strategy Towards Energy Security (Part-II), Shri R V Shahi, Former Secretary, Ministry of Power

Gas could provide a significant solution to Energy Security:

Among the petroleum fuels, towards the end of 80's, it appeared that natural gas had a good potential to be discovered within the country and to be used not only for generation of power and manufacturing of fertilizer - the two major consuming sectors for this fuel - but to also mitigate the demands in other industrial sectors as well as City Gas for domestic consumption. Prior to this, a large quantity of gas was being flared up and wasted. Emergence of Gas Authority of India Ltd. out of ONGC provided the right momentum to channelise gas produced domestically and this initiative became responsible for setting up of the gas pipelines along which a number of power plants were also developed.

The process of gas being encouraged in terms of better attention to its discoveries, transportation through pipelines and marketing with different consuming sectors continued. By the middle of 90's not only gas was projected as an environmentally benign fuel for propelling growth in various sectors but the confidence level was so high, not only in India but globally, that people started looking at gas as the fuel of the 21st Century. Many of the energy professionals professed that if the coal was the fuel of the 20th Century, the 21st Century will belong to gas as the most prominent and environmentally acceptable energy resource.

Parallely the policy initiatives were also mounted by the Government of India to supplement the ongoing efforts of Oil and Natural Gas Commission for exploring and discovering, in every area of the country including in the oceans on both the East and West, wherever there is any potential for oil and gas. This initiative met with the desired objective. Response to many NELP Competitive Bidding Schemes has been global and effective. Discoveries both by Indian and foreign players have established huge reserves in Bay of Bengal (KG Basin), besides offshore of the Western Coast.

So far about 10% of the total installed capacity of power is through Combined Cycle Power Plants using natural gas as the primary fuel. This is a development of last about 20 years. Combined Cycle Power Generation process is energy efficient. During the period this technology has evolved in the world, there have been continuous upgradations in the level of energy efficiency. Till mid 80's, the fuel efficiency of gas power plants was around 45%. In the last 20 years the successive efforts on developing this technology have led to achievement of fuel efficiency of the order of about 60% (as we know, in case of coal based power generation, even with super critical technologies it has not been possible to achieve efficiency level of more than 41-42%). Therefore, besides environmental considerations which are highly positive in favour of gas, even the level of efficiency of fuel consumption is comparatively much more.

However, what dampened the enthusiasm of power project developers, upcoming fertilizer factories as also other industrial units is the continually undependable performance of the gas supply sector. Out of about 13,000 MW of capacity, almost one third i.e. about 4,500 MW remains unutilized for want of adequate gas. It needs to be recognized that capacity of the order of 4,000 MW needs an investment of the order of about Rs. 16,000 crores (U.S. dollars 4 billion) which remains stranded. Besides these idle investments, the economy is deprived of the electricity which could have been generated and supplied had there been enough gas. It is precisely these reasons that the Working Group on Power for Eleventh Plan recommended that only a conservative estimate of capacity addition needs to be provided on the basis of gas, and when during the middle of the Plan period if there was greater clarity on availability of gas the capacity addition programme could be revisited. The production and gas supply position during the entire Tenth Plan period, and even during the first two years of the Eleventh Plan, has remained more or less stagnant. It is now expected that the gas production from KG Basin should be available during the later half of 2008-09. From the year 2009-10 the availability of gas from the domestic gas fields is expected to be of the order of 140 million cubic meters per day. This may increase to about 170 million cubic meters per day towards the end of Eleventh Plan. Similarly, the availability from LNG supply system is expected to go upto 80 million cubic meters per day by 2011-12 from the present level of about 30 million cubic meters per day.

As has been brought out in the initial paragraphs of this paper, though the dependence on gas is likely to increase from the present 35 mtoe as in 2006-07 to 150-190 mtoe by 2031-32, the overall proportion of gas in the energy structure is likely to remain at about 8%, compared to 7% now.

Some of the issues, which need to be resolved in short and medium terms to enable gas to become a significant contributor to India's energy security, are as follows:

  1. The regulatory issues have to be settled so that better clarity is brought about. The present role of the Petroleum and Natural Gas Regulatory Board needs to be widened so as to include also the upstream portion in addition to their jurisdiction on the downstream segment.

  2. The Regulator should have the role and authority to determine prices based on the norms which are fixed by them. This approach should continue during the transition to a matured market condition in which the consumers would have the benefit of competition provided by multiple players and at the same time there being a situation of comfortable parity between demand and supply. During the present shortage situation in the petroleum sector, the pricing cannot be left to market forces if we have to protect the interest of consumers.

  3. If there is any disconnect between the above stipulations of managing the market during transition period through regulatory interventions and the provisions as contained in NELP Contract Documents, they need to be harmoniously reconciled.

  4. The petroleum sector needs to demonstrate that the long gestation of stagnation of over 10 years must end and a reasonable growth in domestic production both of oil and gas must be achieved. In last couple of decades the energy sector has seen imports of crude going to almost 75% of the requirement thereby placing an unbearable financial burden on the economy.

  5. Gas production from KG Basin and other fields must be monitored for expeditious project management so that the stranded capacities in the power sector and other industries start getting adequate supply and the new capacities waiting in the pipeline are brought on to the track.

  6. It is recognized that the degree of reliability in respect of availability and price both, from external sources, is comparatively much less. What is, however, not acceptable is the total lack of reliability both for quantity of supply as also for price even for the domestic production. This obviously leads to all investment decisions in power, fertilizer etc. for new projects remaining in a situation of uncertainty and the economy being deprived from the likely outputs from these new capacities.

  7. Acquisition of oil and gas fields abroad must help in increasing the level of energy security for the country. To the extent possible, such acquisitions should help mitigate the problems of supply and also volatile prices.

Nuclear Power : a substantial solution to Energy Security:

At present the nuclear power capacity is just about 3% of the total installed capacity of the country. In the National Electricity Policy (2005), which was notified by the Ministry of Power, it has been stipulated that we must pursue nuclear route for enhancing our power generation capacity. For this purpose the Policy has also provided that in addition to the public sector, private sector should also be brought in for developing nuclear power plants.

The Integrated Energy Policy (2006) has projected that by the year 2032 the nuclear capacity could be of the order of 7% of the total installed capacity which is projected to be of the order of over 800,000 MW. This will be a great contribution by the nuclear energy inasmuchas the capacity would rise from about 4,500 MW as at present to over 60,000 MW by 2032. The process could be accelerated to see that the projected capacity is achieved much earlier.

Therefore, in Indian energy context role of nuclear power is not under debate, not withstanding the issues concerning radiation, safety and other environmental factors. Indian nuclear energy professionals have established their capability and credibility and have demonstrated their expertise to run and operate nuclear power plants with necessary safety and environmental safeguards. The Regulatory mechanism, to particularly address the safety concerns, is firmly in place and has been able to regulate the required activities and compliance to norms properly. Some of the issues that would need to be kept in view, to get the best out of nuclear route, are as follows:

  1. Nuclear fuel has been an area of concern. In the beginning of Tenth Plan (2002-03) when the nuclear capacity was about 3,000 MW, we succeeded in operating these plants at a Plant Load Factor of more than 80%, something similar to operations in conventional coal power plants. However, as the capacity has increased, in view of inadequacies in fuel supplies, the Plant Load Factor now is just about 60%. As a result, while the capacities have increased, commensurate increase in power generation has not happened. It needs to be emphasized that nuclear power plants are high cost investments. Keeping a part of capacity unused is proving highly costly. We need to make all out efforts to see that the domestic sources of nuclear fuel such as Uranium mines are appropriately exploited. Initiative of the Nuclear Power Corporation on Fast Breeder Reactor technology is definitely going to make a significant contribution.

  2. Dependence on global market, for nuclear fuels, is inevitable. Caution required would be for ensuring long term contracts with predictable price movements and assured adequacies of supplies prior to making huge capital investments in nuclear power plants. It is worth mentioning that while the cost of fuel component in the overall cost structure of nuclear electricity is comparatively much less, the proportion of capital cost is very high. As compared to a conventional coal plant for which capital cost may be of the order of about Rs. 4 crores per MW, in the case of a typical nuclear power plant the capital cost may be more than Rs. 10 crores a MW.

  3. It is, therefore, extremely important that the gestation period of construction and commissioning is compressed through improved construction technologies and project management techniques. This will reduce the overall capital cost besides getting power earlier.

  4. In the recent past, the shortfalls in the power plant manufacturing sector have come into sharp focus. Almost all the project developers have been, and continue to be, experiencing the undue delays in manufacturing and supply of power plant equipment followed by similar delays by these agencies in construction and commissioning. When the country embarks upon a massive increase in the nuclear plant capacity, it would be even more imperative that manufacturing capability for these plants is suitably enhanced.

  5. Atomic Energy Act needs to be amended so that private sector participation is made possible. For the ambitious targets of over 60,000 MW in next 20-25 years, efforts and resources of both public and private sector would be essential.

  6. Nuclear power will not only be a substantial contributor to India's power generation profile, but it must also be underscored that it will be a solid answer to the global climate change concerns. India's position in global fora that we are not only increasing our energy production and consumption to provide a suitable lifestyle to our people, but we are equally concerned about the global warming issues, could be appropriately vindicated by our aggressive initiatives on enhancing nuclear power generation capacity.

India demonstrates its commitment to Wind Power:

The Economist (June 21, 2008) in a long write up on Wind Power has reported "Wind power is no illusion. World capacity is growing at 30% a year and will exceed 100 GW this year".

"Wind Power currently provides only 1% of America's electricity, but by 2020 that figure may have risen to 15%".

In several States in India, for example, Gujarat, Rajasthan, Maharashtra, Karnataka, Tamil Nadu etc. the potential to exploit Wind Energy and produce electricity is significant. In last 10 years technological advancements have led to the price of power produced through wind turbines, being more or less in the range of price at which power could be produced by using imported LNG or even at power plants using coal transporting it through a distance of 2,000 Kilometers. India has emerged as one of the four largest wind power producers in the world next to Germany, U.S.A. and Spain. Total potential of wind power in India is of the order of about 47,000 MW and we have been able to tap upto about 9,000 MW. As a matter of fact, of the total installed capacity through non conventional energy sources which accounts for about 12,000 MW, the share of wind turbine is about 9,000 MW (i.e. almost 75% of the total non conventional energy capacity). Some of the issues, which if addressed, can lead to a much speedier development of wind farms, are outlined below:

  1. The process of investigation needs to be taken up on a larger scale and in a more professional and comprehensive manner. Government support to develop reputed investigation agencies and a number of expert groups could lead to expeditious and credible estimates of wind potential in different zones.

  2. The recently notified scheme of the Government of India under which the incentive to the project developers is based on the actual generation of electricity is the right strategy. It does address the usual criticism that sometimes some of the developers have got away with support at the stage of project development but actual generation was far too less than projected. It is also true that the earlier scheme of depreciation based incentive has really enthused a large number of genuine developers and therefore the continuation of the said Policy concurrent with the new Policy is a valid approach.

  3. There are large areas in India such as deserts in Rajasthan, ran of Kutch in Gujarat and coastal belts in Maharashtra, Tamil Nadu, Andhra Pradesh and Orissa, in which there are huge potentials for setting up wind based power generation units, but developers find it difficult because transmission connectivity does not exist. These are not the load centers viz. towns, cities and industrial areas where power can be produced and most of it locally consumed. This power will need to be transmitted outside. Individual developers may not be in a position to develop integrated transmission network. If the wind potentials in these areas have to be converted into electricity generation, coordinated development of transmission systems in these areas have to be either taken up by Government agencies or the Government could facilitate such systems through Public Private Partnership Schemes.

  4. In case of wind power, technologies have been developing fast. As a result in most of the areas where smaller capacity sets were installed, there are good possibilities of relocating larger sets. Administrative and Regulatory Policies should facilitate this.

Sun: the eternal source of energy:

Never before in the past, the discussions on Renewable Energy have been so intense and involved as in the last couple of years in the wake of ever increasing climate change concerns. Particularly after the Fourth Report of the Inter-governmental Panel on Climate Change (IPCC) came out towards the end of 2007, projecting comprehensively the consequences of climate change in next two decades, attention of the top world leaders got focused as to what needs to be done to arrest the ever increasing CO2 emissions.

Successes in some other fields of Renewable Energy, such as hydro electric, wind, bio-mass have been demonstrated in varying degrees in different parts of the world, and power generation through these technologies have come and are coming in the realm of affordable and acceptable cost. However, unfortunately, our efforts on harnessing Solar Energy, in last about four decades, have not met with similar success so far. Even now, the cost of electricity produced through solar systems is almost 5 to 6 times higher than the other conventional electricity generation.

It is not to say that technology improvements have not happened;

"According to Cambridge Energy Research Associates (CERA), an American Consultancy run by Daniel Yergin, a kwhr of photo voltaic electricity cost 50 cents in 1995. That has fallen to 20 cents in 2005 and is still dropping." - Economist June 21, 2008.

A graph presented in a Special Report of Economist (June 21, 2008) presents that in 1980 the price per watt of photo voltaic module was about US $ 20. By 2007 it has come down to less than US $ 5, and it is expected that it may further come down to US $ 2 as per Dr. Emanuel Sachs of MIT.

In most parts of India, we have sun shining for eight to nine months of the year. Even during other periods we have sunlight. We need to pursue the following:

  1. Encourage deployment of technologies already available anywhere in the world. The recent Scheme of the Government to provide incentive on solar power generation is laudable. The total capacity capping in this Scheme must be enhanced.

  2. We need to mount a major research initiative in collaboration with large public and private sector energy companies. Government must come forward to mobilize such integrated efforts.

  3. Large wind farms can be used to set up solar power generation facilities. Hybrid systems of wind and solar energy could emerge to be more efficient power generation from these sources.

  4. The Schemes of solar heating systems being incentivised by a number of States including Delhi need to be publicised to ensure implementation by most of the households, office and commercial buildings and other large establishments.

  5. Large power generating companies of the country may come forward voluntarily, or through mandatory obligations, to produce solar power to the extent of constantly and progressively increasing specified proportions of their overall generating capacities. Regulators may allow pooling of price of such power with low cost conventional power.

Bio-mass based Decentralised Distributed Generation (DDG):

Rural India, particularly in North, East and North Eastern States, has had the worst of power sector. There are States where more than 80% of rural households do not have even access to electricity. Small power generating units with local distribution networks can transform the present pathetic power supply conditions in Indian villages. What has been holding its progress in a big way, and what can be done, are briefly outlined below:

  1. If we compare power generation cost, using local bio-fuels, and compare it with conventional large power plants, the per unit cost of power would appear to be higher. But, if we also take into account the huge transmission and distribution losses which the distribution utilities have to reckon with, the per unit cost will be more or less comparable. Generators and Distribution companies have to come forward and work a way out.

  2. In many cases, CDM benefits though deserved, become difficult to secure in absence of an institutionalized support and facilitation to the small power generating firms. If this support is provided the cost economies will further improve.

  3. Economy of scale is another important factor. Manufacturing of small generation sets could be taken up on a large scale. R&D efforts could be stepped up to further improve the technology. State Governments may initiate a process whereby DDG could be taken up on a large scale through Public Private route on a competitive Bidding basis.

  4. Apart from DDG, bio-mass generation, with large capacity, and grid connected approach, could also be taken up in areas where a lot of waste land is available. In a number of States, we have millions of acres of waste land. Plantations in these areas could generate adequate fuels for power generation.


Some of the efforts which are yielding results in the field of bio-fuels include the following:

  1. Ethanol from sugarcane.

  2. Ethanol from maize.

  3. Ethanol from beet.

  4. Ethanol from wheat.

  5. Bi-diesel from vegetable oils.

With the rising prices of crude, these alternative sources, if properly exploited through research/development efforts, may work out cheaper than traditional petroleum fuels.

Geothermal Energy:

In spite of our good intentions and some efforts, we have not been able to make any visible headway in this field. In Philippines, a substantial portion of electricity (about 25%) is produced from underground heat. The principle of geothermal power is simple. Drilling holes till deep depths where temperature level could be of the order of more than 200oC. Drill a parallel hole until the same depth. Water is poured in one and heated water received back in another, superheated water gives steam which is used for generating power. In the U.S.A., Dr. Jefferson Tester of MIT has done considerable work on this. According to him, "the recoverable heat in rock under the U.S.A. is equivalent of 2,000 years worth of country's current energy consumption".

Similar possibilities exist all over the world including in India, I recall, in the year 2005, Ministry of Non Conventional Energy Sources and Ministry of Power were exploring possibilities of a large project in Ladakh (J&K). NHPC did some initial work. Estimates of capital cost were very high. There were different views and the exercise did not take off. It is true that all such new technologies would require financial support and a good degree of patience. Costs are high primarily because of deep drilling in geologically difficult rocks. According to Dr. Tester demonstration projects requiring not more than 1 billion dollar of expending over next 15 years could change the whole situation and provide enough details to enable almost 100,000 MW of capacity to be developed in U.S.A. by 2050. We need to make at least a visible beginning on this to explore what can be done.

Energy Efficiency and Demand Side Management:

We have described, so far, various supply side issues which will enhance security of energy in our context. It has been articulated that to enhance the level of confidence in the matter of supplying energy to various segments - industry, service sector, agriculture and households - it will be necessary for India to pursue all the possible options. Conventional sources of energy generation and non conventional (renewables) all need to be accorded appropriate priorities. The role of Energy Efficiency (EE) and proper Demand Side Management (DSM) is equally important - in fact, more important in short term - in so far as energy security is concerned. In the Ministry of Power, a few years back, we had conducted a sample study on the basis of which it was established that because of inefficient technologies and inefficient consumption habits and practices, the extent of loss in the system is of the order of about 23%, and, therefore if we could adopt proper energy efficiency measures, the saving potential is of the order of 23%.

Several measures have been taken pursuant to the establishment of Bureau of Energy Efficiency in early 2002 as envisaged under the Energy Efficiency Act 2001. What we need to vigoursly follow to effect required energy efficiency measures are outlined below:

  1. Through National Awards on Energy Conservation a number of large industrial establishments have become very sensitive, and through a number of measures including retrofitting of new technology, in many cases replacing old technologies with modern systems and by disseminating across the organization the energy efficient practices, have reduced the specific consumption of energy. In some cases they have already reached almost the optimum level. In many cases others are adapting these systems. What is required is to enlarge the coverage under the Awards, make more and more industrial establishments conscious of the need for energy efficiency so that nationally, in the large industry segment, we are able to plug all the loose ends and reach the optimum level of energy efficiency.

  2. While success of Bureau of Energy Efficiency has, no doubt, been modest and is progressively scaling up, the small and medium enterprises are virtually untouched. Capacity building in this sector is of utmost importance. Each one of them individually would neither be in a position to engage Energy Managers nor could be fully convinced about the Energy Audit concepts. It would, therefore, be necessary that dissemination of knowledge about energy efficiency, advantages that a SME sector could derive and institutionalized arrangement to provide services both for management of efficient energy usage as well as Energy Audit, are put in place in a coordinated manner. This area requires a lot of efforts.

  3. Electricity generation process also needs efficiency of operations so that minimum amount of fuel and optimal use of power as Auxiliary Consumption are achieved. Dissemination of best practices in regard to fuel consumption, heat rates, auxiliary power consumption, specific oil consumption etc. is essential. To achieve these, the electricity generation industry must adopt, retrofit wherever needed, the best of available technologies and adopt best practices in operation and maintenance.

  4. The Labeling Programme of the Bureau of Energy Efficiency, through which consumers are made aware of the energy efficient equipment and gadgets so that they are in a position to take and informed decision to purchase on the basis of energy efficiency, needs to cover more gadgets. The process needs to be further stepped up in terms of capacity building including testing facilities etc. There should be a method to evaluate quantitatively the outcomes of the Labeling initiative.

  5. Step next to Labeling should be the fixation of Standards and Norms for consumption of energy for different products. After a transition period, energy inefficient products should not be allowed entry into the market. Similar fixation of norms could be attempted for different industries. The factories could be allowed a reasonable transition period during which progressively they must attain these norms.

  6. Agriculture sector is perhaps the worst in so far as inefficient consumption of electricity, diesel etc. is concerned. In most cases, awareness about efficient pumps, motors and other agricultural equipment and gadgets is lacking. Economics of purchasing energy efficient systems is mostly not understood. This sector, therefore, provides the biggest challenge for agencies like Bureau of Energy Efficiency and similar organizations at the State level. What has further compounded the problem in the agricultural sector is the practice of providing free power or very cheap power. This practice is fraught with excessively wasteful consumption of electricity.

  7. Commercial buildings including office complexes, shops and malls, hotels etc. constitute another major segment of energy saving potential. Recently, the Ministry of Power has notified the Building Codes. Existing establishments should attempt Energy Audit and energy efficiency projects and aim at reaching the standards prescribed under Building Codes. The new buildings should, in any case, conform to the norms prescribed.

  8. Domestic sector is another challenge because the spread is so large and extent of inefficiencies so great that making them aware on the principles and practices of energy efficiency is a difficult task. In India lighting load is about 15% of the total electricity supply. Efficient use, through deployment of lighting systems such as CFL and LED, could bring down the lighting load by more than half. Besides other gadgets used in households, if procured following the principles of Labeling Programme, could lead to enormous savings.

Other Issues concerning Energy Security:

Besides the two major aspects of energy security, viz. Supply Side and Demand Side, safety and security of energy producing factories and establishments, of the transmission systems, and of the distribution networks are very important. Disruptions in any of these on account of any reason could lead to disruption in the supply of electricity and other energy products. Similarly dependence on import of petroleum fuels, coal and other items, their handing at the ports and subsequent transportation are all important interlinked ingredients having their own impact on reliability of supply. Each one of them has to be properly attended to so that there is no adverse impact on security of supply.