Policy Research on Energy Infrastructure of India

1. Policy Research on Energy Infrastructure of India Ramprasad Sengupta Jawaharlal Nehru University (JNU), New Delhi Presentation for IGC-ISI Research Network Meeting 20 – 21 December 2010

2. Energy Related Policy Research focuses mainly on Energy Security and Climate Change related Control of Green House Gas Emissions. Energy Poverty and energy distribution are issues which are relatively neglected in discussions at global level. • The arguments for more time before any commitment to emission bound and also for more carbon space are generally advanced for India and other developing countries for the removal of poverty and development • What time frame is required for removing poverty and committing to any upper bound of CO2 and other GHG emissions? Time and speed are important issues as it is the stock and not the flow of GHG that causes the global warming and the life of CO2 is about 100 years.

3. Role of three kinds of infrastructure deserve special attention for their importance • in faster removal of income poverty, making growth inclusive and supporting • human development. • Water Resource and Water infrastructure. • Roads, Highway and Transport infrastructure. • Energy Resource and Energy Infrastructure. • Comments on the first two and focus on the energy infrastructure in rest of • the presentation. • What has been India’s achievement in making economic growth Low carbon and • energy conserving?

4. Supplies of Total Primary and Final Commercial Energy and CO2 Emissions. 4 4 Source: Based on IEA Data on Energy balances of Non-OECD countries, different volumes.

5. Primary Commercial Energy and CO2 intensity over time 5 5

6. Annual Average Growth Rate in the Pre-reform and Post-reform Periods (%) 6

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8. Models of Future Projection of CO2 Emissions • Macro economic approach : Demand based on income, energy prices 2. Sectoral approach: Alternative Demand Behaviour: (a) Sectoral Income, Real Energy Price and Technology – Energy Intensity. (b) Sectoral Income, Share of Electricity in Final Energy, and Energy Intensity • Alternative Growth Rates: 8%, 6% • Real Energy Prices (a) no change in prices since 2005 (b) Real Energy prices increasing at 3% compound rate per annum. 8

10. China per capita CO2 = 3.9; US per capita CO2 = 20.6 (2004)

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12. CO2 Emission (Dir + Indirect Sectoral Share- %): Sc 1B 12

13. Sectoral Approach- 8% Gr, No Price change

14. Policy Implications • Any reduction in the Growth Rate ? • What should be done about Energy Pricing – What about Carbon tax in GST/VAT Regime • About 70-75% of CO2 arises from power and transport sector. Hence policies of carbon intensity reduction need to focus these sectors. • Major problem of the transport sector because of very limited scope of inter-fuel substitution. Both oil security and carbon and other pollutant emissions from transport operation have made the search for alternative fuel and inter-modal substitution quite important. Findings on rail vs road. 14

15. Oil Reserve to production ratio :21, Reserve to Consumption ratio 5, Share of import : 78% • Issue of energy security due to volatility of oil prices around a path of firm rising trend has led to the India government’s policy initiative for bio-fuel – bio liquids • Bio-diesel from Jatropha • Ethanol Policy – molasses route and also direct from cane juice in a situation of excess production.

16. Source: Authors’ calculation based on data from GOI, 2010 and GOI, 2006

19. HUBBERT’S MODEL FOR PEAK OIL ANALYSIS • Q = K/(1+noe-at), • no = (K - Qo)/Qo • Q is Cumulative oil production in period t • K is ultimate recoverable reserves of crude oil • t denotes the time period • Qo denotes the level of cumulative oil production in the arbitrarily chosen time period To • Note that the first derivative of the logistic function is a bell shaped curve which attains its maximum at the time of peak when half of ultimate recoverable reserves (K) has already been exploited (i.e. Q = K/2) and thus represents the complete cycle of annual crude oil production as hypothesized by Hubbert. • As a result, to model the cycle of crude oil production and determining the peak, he developed the following model: dQ/dt = P = aQ – (aQ 2)/K P/Q = a [1- (Q/K)]

20. India's annual crude oil production from 1970 - 2007, in thousand tonnes and in million barrels

23. Critical Biodiesel Price/High Speed Diesel is the minimum price of HSD/Biodiesel for which returns to a farmer are just sufficient to cover the opportunity cost of diverting land from cultivating a principal crop to jatropha cultivation. These are estimated based on the Techno economic data on bio-refinery prepared by IRADe for Technology Information Forecasting and Assessment Council (TIFAC) and those on jatropha cultivation prepared by the Tamil Nadu Agricultural University. The biorefinery cost of producing biodiesel from jatropha seed oil (excluding the cost of feedstock) is assumed to be Rs 9.50 per kg of biodiesel. The biodiesel yield is assumed to be 1 kilogram from 3.28 kg of jatropha seeds. The critical biodiesel and HSD prices have been calculated considering that 1 kg of biodiesel is equal to 1.2486 litres of biodiesel and 1 litre of biodiesel is equal to 0.93117 litre of High Speed Diesel.

26. Implications: • There is thus a possibility of conflict between energy security and food security. The issue of land use and sustainable livelihood issue would come up which would have deeper welfare significance. How to regulate land use. Search for alternative technology – fuel cell hydrogen driven electric vehicle car or bus. • Residential Sector has also a problem of energy poverty – biomass used in unclean unconverted form. Damaging health externality. Here the desired substitution is to be away from bio mass fuel and in favour of fossil fuel – use of LPG, Kerosene and electricity. Income poverty removal would not ensure energy poverty removal. Additional carbon space required to remove energy poverty of Indian household sector.

28. Alternatively, technology for biomass based clean modern fuel development may be important for energy poverty removal as well as low carbon development.. For example bio-char and its economics. It can capture carbon as well. Such decentralised energy production and distribution would have also benefit of income and employment generation Power Sector: Development of nuclear power is of great importance particularly in view of India’s thorium reserves. Finally : Why not carbon capture? We need to pay some attention to the option of carbon capture than solely emphasising carbon mitigation. Economics of this technology and its economic viability in Indian context needs to be carefully examined. Real challenge is finding the resource use and technology of waste disposal which combines the objectives of low carbon growth with energy security for all - both transport and household sector in particular

29. Fast removal of Poverty Energy Conservation and Supply side efficiency Vulnerability of Transport sector Bio-diesel and Ethanol solution for India Energy poverty – More of hydrocarbon use or new technology for bio-mass use (bio-char) Nuclear power – thorium – uranium cycle. Carbon Capture Real challenge is finding the resource use and technology of waste disposal which combines the objectives of low carbon growth with energy security for all - both transport and household sector in particular

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