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Presentation Presentation on on

India’s Strategy Towards India’s Strategy Towards Energy Development and Energy Development and

Energy Security Energy Security

ByByR.V. SHAHIR.V. SHAHI

Secretary, Ministry of PowerSecretary, Ministry of PowerGovernment of IndiaGovernment of IndiaDecember 12, 2006December 12, 2006

22

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..

33

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..

44

• 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.”

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The ChallengesThe Challenges India needs 8% to 10% economic growth to meets its India needs 8% to 10% economic growth to meets its

economic and human development goal.economic and human development goal.

This requires qualitative/quantitative changes in energy mix.This requires qualitative/quantitative changes in energy mix.

At 439 KgOE per capita consumption of energy in India is At 439 KgOE per capita consumption of energy in India is among the lowest:among the lowest:

- - China 1090China 1090

- USA 7835- USA 7835

-World Average 1688-World Average 1688

Against the word average of 2429 kWh, per capita electricity Against the word average of 2429 kWh, per capita electricity

consumption at 612 kWh is one of the lowest in the World.consumption at 612 kWh is one of the lowest in the World.

Contd..

66

The Challenges contd..The Challenges contd..

Though 85% of villages are considered electrified, 57% Though 85% of villages are considered electrified, 57%

rural households do not have access to electricity.rural households do not have access to electricity.

Non Commercial fuels such as firewood and dung cake Non Commercial fuels such as firewood and dung cake

dominate in the Households Energy Consumption.dominate in the Households Energy Consumption.

Energy intensity at 0.20 is better then the world average– Energy intensity at 0.20 is better then the world average–

yet there is scope to still improve and become comparable yet there is scope to still improve and become comparable

to UK , Japan and Denmark. to UK , Japan and Denmark.

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Integrated Energy PolicyIntegrated Energy Policy

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The VisionThe Vision

““To reliably meet the demand for energy services of all sectors To reliably meet the demand for energy services of all sectors

including the vulnerable households in all parts of the country including the vulnerable households in all parts of the country

with with safe, clean and convenient energysafe, clean and convenient energy at the least cost in at the least cost in

technically efficient, economically viable and ecologically technically efficient, economically viable and ecologically

viable and sustainable ways considering different fuels and viable and sustainable ways considering different fuels and

forms of energy, both conventional and non-conventional as forms of energy, both conventional and non-conventional as

well as new technologies and emerging energy sources.” well as new technologies and emerging energy sources.”

99

The Approach The Approach Till market matures independent regulation across the energy Till market matures independent regulation across the energy

streams is a necessity.streams is a necessity.

Pricing and resource allocation to be determined by market forces Pricing and resource allocation to be determined by market forces

under credible regulatory oversight.under credible regulatory oversight.

Transparent and targeted subsidies.Transparent and targeted subsidies.

Improved efficiency across the energy chain.Improved efficiency across the energy chain.

Incentives/ Disincentives to regulate and consumer behavior.Incentives/ Disincentives to regulate and consumer behavior.

Management reforms to create accountability.Management reforms to create accountability.

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Asymmetries Remain…..Asymmetries Remain….. “ “India’s per capita consumption of energy in its various forms in India’s per capita consumption of energy in its various forms in

2003-04 is well below that of developed countries and the world 2003-04 is well below that of developed countries and the world

average in 2003. average in 2003.

Even in 2032, the per capita consumption in India from various Even in 2032, the per capita consumption in India from various

sources will be well below the 2003 level of per capita sources will be well below the 2003 level of per capita

consumption in respect of developed countries.consumption in respect of developed countries.

In fact, India’s projected level of per capita energy consumption In fact, India’s projected level of per capita energy consumption

in 2032, will be less than 74% of the world average in 2003.”in 2032, will be less than 74% of the world average in 2003.”

1111

Supply OptionsSupply Options India has rather limited natural energy resources.India has rather limited natural energy resources.

Coal is abundant but of low calorie and high ash, negligible Coal is abundant but of low calorie and high ash, negligible

sulphur.sulphur.

Hydro potential is significant , but small compared to our needs.Hydro potential is significant , but small compared to our needs.

Known Reserves of Oil, Gas are limited.Known Reserves of Oil, Gas are limited.

Uranium reserves are meager, but thorium reserves are large.Uranium reserves are meager, but thorium reserves are large.

Reserve/Production Ratio:Reserve/Production Ratio:

--Extractable CoalExtractable Coal : 86: 86

-Extractable Lignite-Extractable Lignite : : 136 136

-Oil-Oil : 23: 23

-Gas-Gas : 38: 38

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Enhancing Supply OptionsEnhancing Supply Options Institute policies to maximise coal production.Institute policies to maximise coal production.

Create coastal infrastructure for import and use of coal.Create coastal infrastructure for import and use of coal.

Alternative coal transportation infrastructure for movement Alternative coal transportation infrastructure for movement

of coal through coasts and rivers.of coal through coasts and rivers.

Promote R&D to make in-situ gasification commercially Promote R&D to make in-situ gasification commercially

viable.viable.

Massive exploration efforts for Oil, Gas and Coal.Massive exploration efforts for Oil, Gas and Coal.

Access to hydrocarbon reserves overseas and gas pipelines to Access to hydrocarbon reserves overseas and gas pipelines to

India.India.

Contd..

1313

Full Development of Hydro Potential.Full Development of Hydro Potential.

Nuclear option to be fully explored.Nuclear option to be fully explored.

Developing thorium based nuclear technologies.Developing thorium based nuclear technologies.

Solar Technology Mission- making solar power economically Solar Technology Mission- making solar power economically

attractive. (Long term option)attractive. (Long term option)

Assess off-shore wind power potential.Assess off-shore wind power potential.

Pilot projects on biomass plantation and bio-fuels.Pilot projects on biomass plantation and bio-fuels.

Encourage blending of Ethanol with Petrol.Encourage blending of Ethanol with Petrol.

Coal to Oil is another option to be pursued.Coal to Oil is another option to be pursued.

R&D for fusion power.R&D for fusion power.

Enhancing Supply Options contd..Enhancing Supply Options contd..

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• 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.

Power Sector PolicyPower Sector Policy

Contd..

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• 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.

Power Sector PolicyPower Sector Policy

Contd..

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• 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.

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Energy Intensity of some countries

Reducing Energy RequirementsReducing Energy Requirements

CountryCountry Energy Intensity Energy Intensity (KgOE/ $ GDP PPP)(KgOE/ $ GDP PPP)

IndiaIndia 0.180.18

World AverageWorld Average 0.210.21

ChinaChina 0.230.23

USUS 0.220.22

OECDOECD 0.190.19

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• 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.

Reducing Energy Requirements-- Reducing Energy Requirements--

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• 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.

Policy for Renewable and Non- Policy for Renewable and Non- Conventional Energy SourcesConventional Energy Sources

2020

Enhancing Energy Security Enhancing Energy Security

Reducing RisksReducing Risks

- Expand domestic energy resource base.Expand domestic energy resource base.

- Reducing the requirement through energy efficiency in Reducing the requirement through energy efficiency in

production and end use.production and end use.

- Reduce import dependence through import substitution.Reduce import dependence through import substitution.

- Diversify fuel choicesDiversify fuel choices

- Diversify fuel supply sources.Diversify fuel supply sources.

- Bilateral economic, social and cultural ties.Bilateral economic, social and cultural ties.

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• 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.

Energy R&DEnergy R&D

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• 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 .

Promoting Household Energy SecurityPromoting Household Energy Security

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• 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.

Promoting Household Energy SecurityPromoting Household Energy Security

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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.

National Electricity Policy National Electricity Policy

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Tariff Policy 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.

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Merchant Power Plants 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.

2727

Rural Electrification PolicyRural Electrification Policy

Objectives:Objectives:

• Access to electricity to all households by 2009.Access to electricity to all households by 2009.

• 24 Hours power supply in rural areas.24 Hours power supply in rural areas.

• Quality and reliable power supply at reasonable rates.Quality and reliable power supply at reasonable rates.

• Minimum lifeline consumption of 1 unit per household Minimum lifeline consumption of 1 unit per household

per day – merit good by 2012.per day – merit good by 2012.

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RE Policy- Salient FeaturesRE Policy- Salient Features State Governments required to prepare and notify RE plans within 6 State Governments required to prepare and notify RE plans within 6

months – indicating delivery mechanisms.months – indicating delivery mechanisms.

Involvement of local community in RE. Adequate representation of Involvement of local community in RE. Adequate representation of

women in District Committees.women in District Committees.

Least cost option for RE – Full life cycle cost and subsidies to be Least cost option for RE – Full life cycle cost and subsidies to be

considered.considered.

Emphasis on development of economic load in convergence with other Emphasis on development of economic load in convergence with other

programmes - making rural supply economically viable.programmes - making rural supply economically viable.

Policy gives essential features of franchisee arrangement. Policy gives essential features of franchisee arrangement.

Contd..

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RE Policy- Salient FeaturesRE Policy- Salient Features

Phased introduction of system of franchisee in areas other than RGGVY Phased introduction of system of franchisee in areas other than RGGVY

projects – ensuring revenue sustainability of rural supply.projects – ensuring revenue sustainability of rural supply.

Benefit of capital subsidy for RE projects to be fully passed on to the consumers.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.Annuity based approach for capital subsidy to decentralised generation systems.

Encouraging energy efficient equipment – irrigation pumpsets.Encouraging energy efficient equipment – irrigation pumpsets.

Encouraging standalone systems up to 1 MW with cost effective proven Encouraging standalone systems up to 1 MW with cost effective proven

technologies and using local resources.technologies and using local resources.

Tariff from standalone systems to be decided by competitive market forces. Tariff from standalone systems to be decided by competitive market forces.

Benefits of subsidy to be fully passed on.Benefits of subsidy to be fully passed on.

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Climate Change Issues - India’s Climate Change Issues - India’s ResponseResponse

India’s Energy Intensity and Per capita CO2 emissions amongst the India’s Energy Intensity and Per capita CO2 emissions amongst the

lowest in the world.lowest in the world.

India committed to follow a low carbon path for development.India committed to follow a low carbon path for development.

Hydro power irrespective of size is renewable. Full development of hydro Hydro power irrespective of size is renewable. Full development of hydro

potential. All hydro projects should be accepted as CDM projects.potential. All hydro projects should be accepted as CDM projects.

Nuclear power a clean option. Development depends upon access and Nuclear power a clean option. Development depends upon access and

availability of nuclear fuel.availability of nuclear fuel.

All alternate sources of energy to be fully developed.All alternate sources of energy to be fully developed.

Significant progress in Energy Efficiency measures. Significant progress in Energy Efficiency measures.

Contd..

3131

Climate Change- India’s Energy Strategy contd..Climate Change- India’s Energy Strategy contd..

High volatility in oil prices.High volatility in oil prices.

Coal a major source of energy - Energy security.Coal a major source of energy - Energy security.

Super Critical Power Generation Technology for better efficiency.Super Critical Power Generation Technology for better efficiency.

Efforts to develop 120 MW pilot project based on IGCC technology.Efforts to develop 120 MW pilot project based on IGCC technology.

Currently available technologies to be modified to adopt high ash Currently available technologies to be modified to adopt high ash

content of Indian coal.content of Indian coal.

India signatory of CSLF Charter .India signatory of CSLF Charter .

India a founder partner in “ Methane to Market Partnership” initiative.India a founder partner in “ Methane to Market Partnership” initiative.

Contd..

3232

Climate Change- India’s Energy Strategy contd..Climate Change- India’s Energy Strategy contd..

India joined Canada, EU, Japan, China and South Korea in “ India joined Canada, EU, Japan, China and South Korea in “

International Partnership for a Hydrogen Economy (IPHE)”.International Partnership for a Hydrogen Economy (IPHE)”.

India first Asian country to join the US Government Steering India first Asian country to join the US Government Steering

Committee for FutureGen Initiative.Committee for FutureGen Initiative.

India a full partner country in cooperative international R&D for “ India a full partner country in cooperative international R&D for “

International Thermonuclear Experimental Reactor (IETR) project.International Thermonuclear Experimental Reactor (IETR) project.

India signed Charter of Asia Pacific Partnership for Clean India signed Charter of Asia Pacific Partnership for Clean

Development and Climate along with US, China, Japan, Australia and Development and Climate along with US, China, Japan, Australia and

South Korea.South Korea.

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Thank YouThank You