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India’s Modernization Case of Energy Sector

India’s Modernization Case of Energy Sector. Presentation at International Conference on Development Models of Modernization Processes, China and the World September 24 – 26, 2005 Liuzhou, Guangxi Zhuang AR P.R. China By T L Sankar Administrative Staff College of India,

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India’s Modernization Case of Energy Sector

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  1. India’s ModernizationCase of Energy Sector Presentation at International Conference on Development Models of Modernization Processes, China and the World September 24 – 26, 2005 Liuzhou, Guangxi Zhuang AR P.R. China By T L Sankar Administrative Staff College of India, Hyderabad, India.

  2. CHINA & INDIA Similarities & Differences • Most Populous Countries. It is No.2. China is 1. • Both has unique history of Political stability and a which has continued for over 50 years. • Both Countries ware very poor when they got Independence and have made commendable progress in many fields. • Achievements of China are greater in different fields and its GDP has grown much faster and for longer periods.

  3. INDIA-Important Achievements. • GDP Low Rate of Growth • Food Crisis • Foreign Exchange Crisis • Emerging Energy Crisis

  4. GDP Growth – Story so far From the dawn of independence, India registered a slow but steady rate of growth of GDP of only 2 to 3 % per year,criticized as the “Hindu-rate” of growth.In the early eighties with some changes in the economic management the growth rate increased to a norm level of 5 to 6%. India is reaching out to a 8% GDP growth in the new millennium.

  5. India – Green Revolution Whenever faced with a Challenge, India bounced back stronger and self reliant. From a food starved country in 1967, India became self sufficient in food-grain by the early eighties. • India was among the most successful countries in ushering in the Green Revolution. Food grain production almost doubled from 72 MT in 1965-66 to 129MT in 1978-79 during the green revolution. Today the production is close to 212 MT.

  6. India – Forex Reserves After Green Revolution, India proved itself again – this time on the Forex Front Source : India Infoline -Economic Survey of India • With less than $ 2 Billion forex reserves in 1991, the reserves have leapfrogged to nearly $130 Billion due to a series of economic reforms and continued focus on economic development

  7. Per Capita Energy Consumption In spite of this growth, the per capita energy consumption of India is far lower than that of the developed nations and some developing nations. Even to reach world average it has to increase five fold. With a population of over a billion, fast moving towards 1.5 billion, this would be a daunting task with some consequences for the world energy market. Source : BP Statistical Review of World Energy 2004 India’s approach towards self-reliance in energy could help India & also other countries

  8. Energy Situation • Major sources of Energy are: • Biomass-used for cooking in rural and poor urban households • Coal – used for heating in industries, power generation and steel-making • Oil -- used in transport,cooking in urban households,in industries and irrigation. • Gas----used in making fertilizer,chemicals, as auto-fuel, as domestic fuel and power generation. • Electricity –used for household lighting,in industries ,in irrigation in transport and all sectors

  9. Item Units 1989-90 1994-95 1999-00 2003-04 Rate of Growth 1989-2003 Traditional Fuels Total Million tons 234 267 305 340 2.7% Commercial Fuels - - - - - - Total Coal Million tons 208 269 324 381 3.5% Total Oil Million tons 57 71 103 124 5.7% Natural Gas Million m3 11172 17339 26885 30900 7.5% Hydroelectric Million kWh 62132 82727 80853 75242 1.4% Nuclear Electricity Million kWh 4625 5648 13249 17980 10.2% Others (Renewable) etc. Million kWh 146 769 5294 16121 Very Low base Total Primary Electricity Supply Million kWh 66903 89144 99396 109343 3.6% Summary Primary Fuel Consumption 1990-2004 (In Primary Units)

  10. Item 1989-90 1994-95 1999-00 2003-04 Traditional Fuels Total 72 83 95 106 Commercial Fuel Total - - - - Coal 95 121 145 171 Oil 57 71 105 124 Gas 10 16 24 44 Hydroelectric 14.4 19.8 19.4 18.0 Nuclear Electricity 1.1 1.4 3.2 4.3 Others (Renewable) etc. 0.04 0.18 1.27 4.2 Total Primary Electricity Supply 15.5 21.4 23.9 26.5 Total Commercial Energy Supply (sum of 2.1 to 2.7) 177.5 229.4 297.9 365.5 Grand Total Energy Supply (1 + 3) 249.5 312.4 392.9 471.5 Energy Consumption in Oil Equivalent Terms (mtoe)

  11. Year Coal & Lignite (mtoe) Oil (mtoe) Natural Gas (mtoe) Hydro-Electric Generation (mtoe) Nuclear & Renewable (mtoe) Available Total supply (mtoe) Imports (mtoe) Import Dependency % 1980-81 58.5 34.0 1.3 10.9 0.8 105.5 23.7 22.5 1989-90 95.0 57.0 10.0 14.4 1.1 177.5 28.4 16.0 1994-95 121.0 71.0 16.0 19.8 1.6 229.4 48.4 21.1 1990-00 145.0 105.0 24.0 19.4 4.5 297.9 84.1 30.0 2001-02 171.0 124.0 44.0 18.0 8.5 365.5 109.0 29.8 India: Commercial Energy Consumption – Import Dependency Total Commercial

  12. India – Energy Needs 1/2 Several forecasts of India’s energy needs have been attempted by different agencies. However, they have used data of different periods and the GDP growth rates and horizons of the forecast vary. For this presentation, using the latest data and based on long-term elasticity's, a new forecast has been attempted. TCPES =Total Primary Commercial Energy Supply. GDP = Gross Domestic Product at constant Factor cost . M Units = Million kWh of electricity mtoe = Metric Tonne Oil Equivalent.

  13. Population Electricity Year Mn Bwh 2004-05 1084 341 680 2009-10 1169 465 981 2014-15 1259 634 1415 2019-20 1356 848 1966 2024-25 1461 1135 2731 2029-30 1573 1490 3700 India – Energy Needs 2/2 Based on Elasticities set out, demand for Total Primary Commercial Energy Supply (TPCES) and Electricity supply have been projected assuming, a GDP Growth of 8% and official population estimates. TPCES A comparison of the rates of increase of supply of energy in the past with the rates required as per the forecast is set out in the table below : The demand forecast suggest that the effort in supplying total primary energy consumption in the next decade would be about 1% higher than in the past it was around 5%. This will call for some concerted effort.

  14. India – Specific Fuel Needs for Non Power uses The important commercial energy sources are Coal Oil ,Gas and Electricity. Power is generated from primary sources namely, nuclear, hydro and renewable and as thermal electricity from fuel sources namely coal and natural gas.The demand for oil,gas and coal for non-power uses and production of electricity from primary sources are first estimated. The coal and natural gas requirements for power generation are added, to derive the total fuel needs including for power generation. Past Rates of Growth of fuel supply Year 1970-80 1980-90 1990-2003 Non-power-Coking Coal 3.62% 2.75% 0 Non power-Non Coking coal 1.96% 2.34% 2.04% Non Power Oil products 5.40% 6.00% 4.90% Non Power Gas 8.90% 23.00% 8.20% Based on these growth rates, and adjusting for a higher 8% GDP growth, the specific fuel needs for non power uses are projected.

  15. Total Electricity Supply Reqd Fuel Based (a) Hydro –(20%) Nuclear - =(a)-(b)-(c)- (b) (c) (d) 2004-05 680 136 15 29 500 2009-10 981 196 25 49 711 2014-15 1415 283 41 70 1021 2019-20 1966 393 66 98 1409 2024-25 2731 546 108 136 1941 2029-30 3700 740 175 185 2600 Power generation-non fuel modes of production • The preferred source for power generation should be non-fuel sources - hydroelectric sources, nuclear wind, solar& other renewables. • Production from non-fuel sources, however, is constrained by a few factors: • Nuclear – Policy constraints, uranium availability, likely date of commercializing fast breeder reactors or • thorium based cycles. • Hydel – Adequate investigations, obtaining environmental clearance, making R&R • arrangements • Renewable – Snags in technology, high costs • The following targets have been adopted by for this exercise: • Nuclear cumulative capacity 25,000 MW by 2030. • Hydel – 20% of total power generation by 2030. • Renewable – 5% of total electricity generated by 2030. The fuel needs or forecast is done by first deriving the electricity likely from Non -fuel sources and then estimating the share of different fuels in power generation Billion kWh. Non- Fuel based Power Generation Non Thermal Thermal Renewable (5%) (d) Year

  16. India Fuel Needs for power • Coal continues to be preferred fuel for power generation. There are additional factors in favour of coal • Predictability of future prices is higher in coal than in gas. • Long term fixed price contracts indexed to labour costs are possible in case of coal. • However, the recent shortages have led to a view that coal will not be available to support the power development fully. Natural Gas will be the alternative. To arrive at total fuel needs of India, two alternative scenarios are developed. Scenario-II Coal production will be constrained to a growth rate of 5% considered as easily achievable and the rest of power requirement would be using gas. Scenario – I Gas based generation would be as at present, 13% of total thermal generation and rest 87% will be from coal.

  17. Energy Demand Scenarios The total energy requirements both primary and secondary are summarized under the two scenarios. if India does not produce coal as required gas imports will have to substitute coal and this will increase the electricity price in both scenarios. Scenario-I Scenario-II MMT = Million Tonnes BCM = Billion Cubic Meters BkWH= Billion Units of Electricity.

  18. Depth Ranges in Meters Assessed Resources Total Proved Indicated Inferred Prognosticated 0-300 63.2 40.8 7.1 2.2 113.3 300-600 5.8 21.5 6.5 13.9 47.7 0-600 (Jharia Only) 13.7 0.3 0.0 0.0 14.0 600-1200 m 1.7 6.4 1.7 19.7 29.5 Total 0-1200 84.4 69 15.3 35.8 204.5 Estimated Assessed Coal Resources (Billion Tons) a

  19. Coal Sector Modernization 1/2 Modernization Efforts So far • India Third largest producer of coal 400 mt/yr. China 1st – 2000 mt/yr. USA 2nd 100 mt/yr. • Deposits are: 8.6 % of the world, China 12 %, USA 25 %. • Mining Coal began in India in 1774 for steam trains. • On date independence around 50 mt/year from over 3000 mines, mostly private. • 1971-73, all coal mines were nationalised and consolidated. • From 1975, coal for railways got reduced to near zero today. But coal for power generation increased.

  20. Coal Sector Modernization 2/2 • Only two major public sector Coal India Limited (CIL) and Singareni Colliery Company Limited. (SCCL) • Production in 2003-04 is around 400 tonnes • Projected demand in 2029-30 in 1242 (Low Coal Scenario) 1812 (High Coal Scenario).

  21. Coal Sector – Strategies for Future • A committee under T L Sankar is examining the following: • * India is the third largest producer of coal with 400 mt/yr. China leads with 2000mt/yr distantly followed by USA as second with 1100mt/yr. All three are planning to increase coal production in the next two decades. If India produce and uses 1800mt in 2029-30, the CO2 emission would be about 5.5 billion tonnes – lower than current US pollution and one third of US in per-capita terms.India should use more coal but produce and use it in a responsible manner, keeping local and global pollution efforts to the minimum. • * Pending the Parliament passing the Coal Mines Nationalization(Amendment) Bill,various measures for liberalizing captive coal mining provisions. • Use of modern technology to augment productivity and quality • Adoption of clean coal technologies, such as IGCC, Carbon sequestration etc. • Create competition among public sector coal companies at the State and Central level. • Rationalization of railway freights • Creating a vibrant coal trade involving imports exports and internal trade through e-auction and commodity trade channels.

  22. Area Crude Oil (Million Tons) Natural Gas (Bullion Cubic Meters On-Shore 308 301 Off-Shore 352 462 Total 660 763 Average annual production 33 29 R/P Ratio 26 20 Oil and Gas Reserves a.

  23. Oil Sector Modernization 1/2 • In Pre-independence days oil was extracted very small quantities in Assam by British owned oil companies. • In 1955, Oil & Natural Gas Commission was established by Legislative sanction. • With mainly USSR assistance oil exploration was done on shore and off-shore. • In early Seventies, Bombay High off-shore discovery increased crude production to over 30 mt/yr. • From 1990, India adopted a liberalised economic policy & private companies were given exploration and development leases under NELP. • Production of oil has stagnated around 30 mt/yr. • Production of Gas has increased as shown in table.

  24. Oil Sector Modernization 2/2 • Oil production were imported and marketed by private oil companies, Burma Shell, Caltex etc. • Indian Oil Company was established in 1959, to import crude and refine it to products. This has expanded its capacity to about 55 million tonnes throughput • Private oil companies were nationalized I 1976 but continued as separate companies to provide a competitive market. • Private agencies can establish refineries and the one fully private refinery is the largest single unit refinery with 20 million tonnes throughput.

  25. Petroleum India is the sixth largest oil consumer in the world with a share of 3.1% of the world consumption. The dependence on import for oil has reached a level of 72%. The crude refining capacity of India today is at 132 MT. India has achieved self sufficiency in refining, at the present demand level.

  26. Oil Pricing& Subsidies • Problem • Crude is imported-products are not imported or exported ,except marginally. Product prices are revised with reference to the average of two price publications.Index of product price has risen faster than crude price.Refiners get windfall gains! • Duties & taxes are ad-valorem and increase retail prices further.! • Diesel & kerosene price difference leads to large scale adulteration. Kero subsidy is not focussed on BPL population.PDS is defunct in many places. • LPG benefits commercial establishments • Possible Actions • Product price should be indexed to crude price allowing a good Gross Refinery Margin. • Duties and taxes should be fixed w,r.t quantity and adjusted on a half-yearly basis to absorb part of the oil price increase shock. • Market retail price of kerosene and diesel should be equal .The BPL families would get Kero-coupons and collect kerosene at a lower price with coupons which could be encased by oil companies. • Misuse of subsidized LPG should be ruthlessly weeded out.

  27. Natural Gas-Strategies for Future Natural Gas production stands at 32 BCM per annum and the reserves at 922 BCM • After a major jump in the production of natural gas in late 90s, the production has stagnated • The new gas finds especially in deep off shore wells have added reserves of another 195 BCM in Reliance and 560 BCM in GSPC Fields.ONGC has not disclosed the reserves . These are yet to be certified by DGH. • The new exploration by all agencies including ONGC is delaying the development of the gas fields in the hope that there will soon be a severe shortage of power and gas at high cost will be purchased by power generators.Even signed agreements are dishonored with impunity !

  28. Natural Gas – Demand Supply-price nexus BCM This demand-supply is on Business-as usual basis. .New finds of gas deposits and promise of more have raised hopes of increased use of gas for power generation. India’s unique location of being close to some of the world’s largest gas deposits in Qatar, Oman, Iran and Central Asia has raised hopes to get piped gas or LNG from these sources. The price of gas defines the sectors and levels of use. At $4 per MMBTU and above gas can be used only in fertilizer, petrochemical and as auto fuel and domestic fuel. If the price of imported gas is about $3 per MMBTU, gas can substitute coal for power generation and its demand can become very large. Market rumours are that oil ministry is keen that gas prices settle at a high level !

  29. CAPACITY MWe 14 reactors at 6 sites under operation2770 2,770 6 PHWRs under construction 1,960 2 LWRs under construction 2,000 PFBR at Kalpakkam500 Projects planned till 202013,900 TOTAL by 2020 21,180 Indian Nuclear Power Programme India plans to have an installed Nuclear power capacity of about 21,180 MW by 2020 India’s Nuclear Power Programme is designed with the long term objective to serve as the source of electricity when other sources get exhausted. It is a key element of the energy self reliance strategy.In is dependent on developing technologies to use fuel breeding fast breeder reactors and Plutonium thorium mix as fuel.For this we may have to use imported fuel in about 7000 Mwe capacity.

  30. Hydro Power India holds a potential to the tune of 150,000 MW of low PLF Installed capacity today is 23,488 MW -just about 17% of the potential. GOI in a recent exercise, Hydro Electricity Initiative, has made a comprehensive l survey of all potential hydroelectric sites for 50000 MW capacity and has identified 7000 MW projects which can deliver power at less than Rs 2.0/Kwhr. India has established mutually beneficial arrangements with Bhutan where projects constructed mostly with Indian capital are handed over to Bhutan Government for management and power is purchased at mutually agreed rates. About 300 MW is being purchased and a new project with over 1000 MW will be ready by 2006 . Further potential is over 10000 MW for imports from Bhutan. Nepal is also likely source for over 20000 MWs The possibilities of developing power generation from multiple sources and the opportunity to import hydel power from neighbouring countries suggest that achievement of the required level of power supply is within reach.

  31. Potential Potential Exploited Solar Energy 5x10 whr/yr 47 MW Biomass-based power 17,000 MW 484 MW Small hydro 15,000 MW 1509 MW Wind Energy 45,000 MW 1870 MW Ocean Thermal 50,000 MW -- Sea Wave Power 20,000 MW -- Tidal Power 9,000 MW -- Renewable Energy Potential & Achievements March (2003) a

  32. Growth of Power Sector * 31.12.2004.

  33. Power Sector - Reform Progress

  34. Power Sector : Current Scenario Generating Capacity (August 2005) Mode-wise breakup: Thermal 80562 MW Hydro 31745 MW Nuclear 3310 MW RES etc. 6158 MW -------------------- Total 121775 MW

  35. Power Sector : Current Scenario (Contd.) Installed Capacity under State, Central and Private Sector Sector wise Generating Capacity (31.01.2005) 12809 38768 70197

  36. Power Sector : Current Scenario (Contd.) • Regional Grids in operation. • Moving towards National Grid. • Regional Transmission Capacity – over 8000 MW. • Demand Supply Gap. Energy – 8%. Peak Demand – 12 to 16%.

  37. Reform Architecture • Regulatory Reforms. New Regulatory Framework: Establishment of CERC & SERCs. • Restructuring Initiatives. Restructuring of the Power Industry especially the State Electricity Boards.

  38. Regulatory Reforms • Electricity Regulatory Commission Act, 1998 and Electricity Act, 2003. Central Electricity Regulatory Commission (CERC). State Electricity Regulatory Commission (SERC). • Independent and autonomous Commission to regulate the electricity sector. • Government role limited to that of a policy maker and a facilitator.

  39. Restructuring Options: Functional Unbundling • Responsible for Power Generation. • Setting up new Generating Stations. Generation Co.(s) • Management of entire Transmission System. • Purchase and bulk supply and wheeling. • Grid operation. Transmission Co. • Management of existing distribution system. • Extension of supply to new consumers. • Bulk purchase and retail sales. Distribution Co.(s) Consumers

  40. Advantages of Unbundling on Functional Basis Individual activities will get proper focus for development. Provides transparency and accountability in the performance of different functions. Promotes Competition or yardstick competition in the functioning of various units.

  41. Electricity Act, 2003 • Generation de-licensed. • Captive generation liberalized. • Distributed generation encouraged. • Open Access on Transmission lines. • Open Access in Distribution. • Trading in power. • Removal of Exclusivity in Distribution license.

  42. Electricity Act, 2003 (Contd.) • State Government shall establish a State Load Despatch Centre (SLDC). • State Load Despatch Centre shall not engage in the business of trading. • State Government may notify the Board or a Government company as the State Transmission Utility (STU). • STU shall not engage in the business of trading.

  43. Power Sector-Continuing Challenges. • CHALLENGES • With theenactment of the Electricity Act 2003 the legal & Institutional problems resolved. • Managerial and governance problems remain: • - Inadequacy of supply • - High T&D losses • -Poor quality of supply • -Total lack of consumer • concerns • -Irrational tariffs • -Metering and billing • inefficiency • POSSIBLE SOLUTIONS • Encouraging Generation investment in all sizes of plants. • Aggressively promoting Captive power generation by clarity in regulation of open access & surcharge. • Enforcing franchisee system at sub-station or feeder level involving consumers, • Introducing total transparency in distribution through publishing a)Feeder level daily energy flows • b).All info on the connected load and total collection of revenue under each feeder and list of customers with pending bills of > 3months • c) Daily feeder-wise interruption report • CAIDI should be published. • Spot billing with instantaneous printing. • * . .

  44. Summing up Today the energy scene in India is admittedly disappointing. A crisis is brewing. The wakeup call has been given India has started responding. We have the material resources. We have a competent technical man-power of adequate quality and quantity. We have the appropriate leadership at the top. India’s Prime Minister is arguably the most erudite and honest leader in the World. He has the reputation for having steered India over the forex crisis. We are acutely aware that managing the emerging Energy Crisis involves: -managing Oil imports – how much would depend on actions taken towards conservation of oil in transport sector, introduction of new mass transport, and development of environment friendly cost effective bio-liquid fuels. - improving efficiency of power sector,in respect of governance, modernization and professionalization and - introducing appropriate reforms in the coal sector including environment policies to accelerate coal production. Achieving these would not be easy. But, The will to overcome the crisis is emerging .

  45. My Vision : India Energy 2050 • There will be adequate power of appropriate quality sold by competing producers, traders and suppliers. Poor householders and agriculturalists will have coupons with a monetary value given to them personally which they can use to purchase from any source. All consumers can have a choice of suppliers. • All renewable energy technologies will be viable. India will produce power from Wind,water and sun in plants of all sizes. Large power plants using hydro electric resources, Coal and safe Nuclear technologies using Thorium will produce huge quantities of power. • Open access will be available on all EHV,HV and even major distribution lines.Transmitting power will be like traveling along Highways with tolls. • Utilities will sell power to groups of consumers under a feeder line.This group can choose to buy from a number of any competing power supplier. • Oil use will be reduced to the maximum by use of fuel efficient and hydrogen based cars and by Bio-fuels which by then could totally replace petrol and diesel. • Energy use will adopt 100% efficient practices in all sectors. • Every drop of water will be used wisely. • Every adult would have a useful employment and public role.

  46. Last Words. I can only end with the hope which keeps me going. We were challenged by Hindu-rate of growth, we have over come ! We were challenged by Food Crisis, We have overcome ! We were challenged by Forex Crisis, We have overcome ! Now, we are being challenged by Energy Crisis, We shall overcome ! THANKS

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