You are here

IDSA COMMENT

Energy Transition: Strategic Necessity for India

June 26, 2006

After his landmark speech on energy independence on the eve of India's 59th Independence Day, President Abdul Kalam emphasised upon the importance of alternative fuel development to surmount the growing challenges to energy security in his opening address at the Bio-Diesel Conference on June 9, 2006. His emphasis on energy independence places immense importance on India's energy security, as the country is increasingly dependent on imported fuels. Kalam's speech focused on the importance of biofuel development in India as a means to address the challenges to liquid fuel demand against the backdrop of resource degradation of, and supply challenges to, traditional fuels. Today, India's energy mix is dominated by coal, followed by oil and natural gas. As petroleum sources increasingly become dearer and the usage of other traditional sources such as coal and biomass burdens the environment and human health, transition to renewable and alternative sources evince greater prospects in the search for energy independence. Energy transition does not mean a complete shift to non-traditional sources and ignoring the present pattern of fuel dependency, but is largely meant to address the growing demand for generation of heat energy, electricity and liquid fuel.

Despite many technological and economic limitations, experimental and small-scale commercial production of non-traditional sources in India has seen remarkable achievements over the past few years. While renewable energy is expected to contribute a 10 per cent share to total electricity production by 2012, biofuels have already made a promising start by replacing petroleum fuels in many of the experimental transportation operations and in some commercial usages. In this context the President emphasised that since the country has 30 million hectares of usable wasteland out of the total 60 million, our aim should be to produce a minimum of 2 tonnes of bio-diesel per year per hectare, which will result in the production of 60 million tons (mt) per year in full capacity in an optimistic environment.

While traditional approaches seek to define energy security as the supply security of imported petroleum fuels, in a realistic approach, it by and large indicates the supply security of various fuel types at an affordable price in order to run the economic engine of a country. According to the President, our target is to achieve energy security by 2020, leading to energy independence by 2030 and beyond. In other words, energy security will be achieved by a combination of various supply sources and subsequently external supply of fuels can be substantially reduced or replaced by domestic production. But, with a production of 60 mt biodiesel a year by 2030, the plan to achieve energy independence appears unachievable given that demand for liquid fuel is expected to increase from 119 mt in 2004 to above 271 mt in 2030.

Since India's available oil reserves are expected to last only for 18.5 years at the current rate of crude oil production, energy independence cannot be achieved unless the country finds some major new oil reserve or increases the expected production of biodiesel to meet the demand. Moreover, in India, import dependency on oil amounts to above 70 per cent of the total consumption, which would make it difficult to manage without external supply of liquid fuels. If this trend continues, by 2030 India would end up importing almost 100 per cent of liquid fuel demand. Given the above-mentioned challenges, complete energy independence appears to be an ambitious plan for the country, though self-sufficiency in supplying a certain percentage of energy requirements, i.e. the annual growth in demand, can still be considered a possible option.

Be that as it may, according to the British Petroleum Company Limited, India's oil consumption in the year 2005 witnessed a 3.5 per cent fall compared to the consumption in 2004. This decrease is due to growing energy prices worldwide. But in the long term, we cannot expect this trend to continue due to the possible increase in demand from various sectors. Hence, it appears to be the ripe time for development of biofuels in order to supplement demand growth with a certain percentage of supply.

While biofuels might not play an exclusive role in achieving energy independence, transition from traditional sources to a mix of renewable, biodiesel, ethanol, liquefaction of coal, coal bed methane and gas hydrates together would have a strategic role in this regard. According to the Directorate General of Hydrocarbons (DGH), India has enormous potential in coal bed methane and gas hydrates reserves. The total prognosticated gas available from the gas hydrate deposits is placed at 1894 trillion cubic meters, while the current estimated gas reserves in India amount to only 1.10 trillion cubic meters (38.9 trillion cubic feet). Though gas hydrate exploration is at present limited to experimental levels, even a small percentage of commercial extraction could possibly minimise India's concerns about fuel supplies for the transportation sector.

As the crude oil import bill of the country has reached US$38.77 billion (Rs 171,702 crore) in the year 2005-2006, import dependency would place a larger economic burden in coming years. In this context, transition to non-traditional sources would become critical in substantially reducing import dependency and thereby minimising the energy import bill. Achieving energy independence by 2030 can be a pragmatic plan, provided energy transition is encouraged in both commercial and non-commercial sectors and also made economically viable.

Today, the major obstacles to energy transition include the lack of sufficient technology to explore various types of alternative and renewable sources, the lack of sufficient investment, concerns about relatively high capital cost and production cost of energy transition, and lastly optimism about a fall in oil prices in the policy making circles. Despite these factors energy transition is increasingly becoming a strategic necessity as availability, accessibility and affordability of imported fuels have been significantly affected by various external challenges.

Energy transition will not only secure fuel supply but also help the country address another important challenge to development - unemployment. The President also noted that the employment generation potential of biofuels would help empower farmers economically in India's rural areas. Energy transition could be a slower process than expected now, but is a critical step towards energy independence and economic development of our country.