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Explore the interdependence of energy markets, reforms in power sector, natural gas & coal dynamics, and the case for a multi-sector energy regulator in India. Learn about energy indicators, the impact of economic growth, and the importance of fuel sector reforms in the energy market. Understand the challenges and potential development opportunities in the coal sector, natural gas sector, and power sector, along with perspectives on a multi-sector energy regulator. Discover the influence of policy developments, sectoral regulators, and regulatory issues in shaping the future of energy markets in India.
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IITK REACH Symposium 2008 Theme: Future of Energy The Future of Energy Markets in India: Structure and its Regulation Anoop Singh Dept. of Industrial and Management Engineering, Indian Institute of Technology Kanpur Kanpur - 208 016
Outline • Energy and Economic Growth • Interdependence of Energy Markets • Reforms in • Power Sector • Natural Gas • Coal • Case for a Multi-sector Energy Regulator
Energy Indicators So: Report on Integrated Energy Policy
Energy Vs. GDP So: Report on Integrated Energy Policy
Energy and Economic Growth • Economic growth significantly depends on availability of energy inputs at economical prices. • Energy mix is determined by • Resource Availability • Technological Options • Economics • Environmental Considerations • Energy Security
Interdependent Energy Markets • Electricity • Natural Gas • Coal
Interdependent Energy Markets • Policy and Regulatory Environment outline the evolution of the industry structure (towards a competitive outcome). • The structure of energy markets determines the outcome in terms of investment, supply, technology choice, access and price. • Interdependence of energy markets further highlight the need for greater scope for energy sector reforms.
Power Generation Capacity by Mode and Ownership (31st March 2007; in MW) Note: This excludes 14636 MW captive generating capacity (MW) connected to the grid.
Vertically Integrated (erstwhile) SEBs } G Vertically Integrated SEBs T D C C C
Electricity (Amendment) Act 2007 D RS C C C Wholesale Competition - Post Electricity Act 2003 G Captive IPPs Traders T BS
Sector Wise Coal Consumption (2004-05) (million tonnes) Significantly high share by Power Sector.
Ownership Wise Coal Production (1970-71) (Total = 72.95 million tonnes)
Ownership Wise Coal Production (2004-05) (Total = 382.62 million tonnes) Significantly high share of Govt. Sector.
Power Sector Development Depends Significantly on Fuel Sector Reforms • Power sector has been liberalised and is expected to see greater share of private sector activity • Coal sector remains largely within the domains of the government. • Slow Pace of reforms in the coal sector. • Natural Gas market regulator has limited scope. • This influences Supply (Quantity), Price as well as contractual design for fuel supply to power sector. • Fuel Supply Risk Management – Not feasible for power sector for a longer term.
Coal Sector • Largely Unreformed • Gradual Price decontrol • E-auction • Piecemeal Private Sector Investment • Lack of competition • Influence on Power Sector
Coal Sector – Policy Developments • Coal Mines (Nationalization) Act 1973 - only public sector companies can mine coal. • Amendments in 1976 and subsequently in 1993 - captive end-use for steel, power, cement allowed coal mining; and • Permitted exploitation of isolated small patches of agencies approved by the State Governments.
Natural Gas • Increasing Private Participation • Setting up of P & NG Regulatory Board • Sector ‘Regulation’ yet to take shape Issues • Influence of Gas Allocation Policy • Price Control • Gas Pipeline network access and pricing • Transnational Pipelines
Multiple Regulatory Jurisdictions • Sectoral Regulators • Power – CERC and SERCs • Coal – Min. of Coal • Natural Gas – PNGRB • Competition Commission of India • Forward Markets Commission
Inter-linkages of Energy Markets • High and increasing dependence of power sector on coal and natural gas. • Absence of a competitive coal market and entry barriers hampers development of power projects. • In spite of ample coal reserves, the power sector faces a great challenge in securing coal linkages. • The sector is witnessing a rent seeking behaviour through ‘hoarding’ of coal mines. • Cross sector merger and competition issues.
Case for a Multi-Sector Energy Regulator • The inter-linkages of energy sectors make it an appropriate time for a multi-sector Energy Regulator encompassing “Electricity, Gas and Coal Sector”. • International experience suggest that a single energy regulator brings in regulatory harmonization and is able to address bottlenecks.
Proposal for a Multi-sector Energy Regulator • Why a Multi-sector Energy Regulator • Scope of Regulation • Advantages • International Practice • Way Forward
Areas for Collaboration Aspects of energy sources including renewable energy and technologies • Policy • Regulatory • Economics • Financial • Environmental
References • “Power Sector Reform in India: Current Issues and Prospects”, Energy Policy, Elsevier, Vol. 34 No. 16, 2006. • “A Market for Renewable Energy Credits in the Indian Power Sector”, Renewable and Sustainable Energy Review*, Elsevier. • “Economic Policy and Regulatory Initiatives to Address Technical Challenges in the Indian Power Sector”, Directions‘06. • “Economics of Iran-Pakistan-India Natural Gas Pipeline: Implications for Energy Security in India”, Submitted to EPW. • “Policy Environment and Regulatory Reforms for Private and Foreign Investment in Developing Countries: A Case of the Indian Power Sector”, 2007, DP No. 64, ADB Institute, Tokyo. • “Rural Electrification in India: Economic and Institutional Aspects of Renewables”, with J. Cust and K. Neuhoff, Submitted to EPRG WP series, University of Cambridge. • Report of the Working Group on Power for the 11th Five-Year Plan (2007-12), 2007, Sub-group on Policy and Regulatory Issues , Planning Commission.