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

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•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.

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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?

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Supplies of Total Primary and Final Commercial Energy and CO2 Emissions.

TPCES

FNLEN

CO2MT

0

50

100

150

200

250

300

350

400

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

mto

e

0

200

400

600

800

1000

1200

1400

1600

CO2 em

issions (mt)

TPCES FNLEN CO2MT

Source: Based on IEA Data on Energy balances of Non-OECD countries, different volumes. 4

55

0.000

0.020

0.040

0.060

0.080

0.100

0.120

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

TPESCMINT CO2KGINT

Primary Commercial Energy and CO2 intensity over time

5

66

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

Period GDP Growth

rate

Primary Commercial

Energy

Energy Intensity

of GDP

CO2 emission

CO2 intensity of

overall energy

CO2 intensity

of overall GDP

1971-1990 4.4 5.55 1.1 5.96 0.389 1.5

1990-2005 6.39 4.56 -1.72 4.36 -0.191 -1.91

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Decomposition Analysis of growth of CO2 emission intensity of GDP by the Refined Divisia Method for the period 1971 to 1990

0.313

0.683

0.269 0.149

1.42

0

0.5

1

1.5

Energy Int effect Structural Effect Fuel mix effect Residual Total Change

Period 1990 to 2005

-2.27

0.145

-2.37

-0.188-0.06

-2.5

-2

-1.5

-1

-0.5

0

0.5

Energy Int effect Structural Effect Fuel mix effect Residual Total Change

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Models of Future Projection of CO2 Emissions 1. 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

3. Alternative Growth Rates: 8%, 6%

4. Real Energy Prices (a) no change in prices since 2005 (b) Real Energy prices increasing at 3% compound rate per annum.

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  Projection of CO2 emissions (mt)

 8 per cent growth

with no price change

8 per cent growth with 3 per cent

p.a. price rise

6 per cent GDP growth rate and no price change

2005 1083 1083 1083

2021 2726 - 2910 2036 - 2532 2257 - 2442

2031 4920 - 5553 3027 - 4597 3493 - 4016

GDP elasticity

0.733 - 0.831 0.52 - 0.72 0.71 - 0.85

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Projection of CO2 intensity of GDP (gms/Rupee) and Per capita CO2 (tonnes)

 8 % growth with no

price change8% growth with 3 per

cent price rise 6% GDP growth rate

and no price range

2005 41 41 41

2021 30-32 23-28 16 – 24

2031 25.4 - 29 16 – 25.4 27 – 31

% drop 202122 – 27

32 – 44 17 – 24

% drop 2031 29 – 38 41 – 61 24 – 34

Per capita CO2 (tonnes) -

20313.4 – 3.6 2.1 – 3.2 2.4 – 2.8

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

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CO2 Intensity Projections- Reference & Sectoral Approach

25262728293031323334353637383940414243

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

CO2 intensity- sectoral (gm/Rs) CO2 intensity- reference (gm/Rs)

1212

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

2005

Ind49%

Res17%Oth Svs

10%

Trans13%

Agr12%

2021

Agr9%

Trans14%

Oth Svs14%

Res25%

Ind39%

2031

Ind35%

Res30%

Oth Svs15%

Trans14%

Agr8%

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Scenarios Present Study 8% growth

Primary Energy mtoe

2031-32Share

Coal %Share Oil %

Share Gas %

Share Others %

Non commercial

%

Sc1B 1879 54.72 26.16 10.99 8.13 N.A.

Coal Dominant scenario 1702 54.1 25.7 5.5 4.8 9.8

Maximum use of Hydro, Nuclear & Gas potential scenario

1652 45.5 26.4 10.7 7.3 10.1

Simultaneous use of all strategies for sustainable Energy Development

1351 41.1 22.8 9.8 14.2 12

Comparative Projections of Primary Energy Requirements for the 8% GDP growth: Present Study and Planning Commission

IEPC Report, Planning Commission

Sectoral Approach- 8% Gr, No Price change

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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.

• 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.

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

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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)]

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

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Projections for Biodiesel Demand and Land requirement for biodiesel in India

 Authors' Calculations

 Planning Commission

 Year

Diesel (Million Tonnes) 30 %

Biodiesel (Million Tonnes) 20 %

Land requirement for Biodiesel (Million hectares)

 Year

Diesel (Million Tonnes)30 %

Biodiesel 20% (Million Tonnes)

Land requirement for Biodiesel (Million hectares)

2011 42.59 8.52 3.49 2011 48.73 9.75 8.15

2021 78.43 15.69 6.42 2021 81.60 16.32 13.652031 144.31 28.86 11.82 2031 142.66 28.53 23.86

Per hectare yield of biodiesel

2.441 tonnePer hectare yield of biodiesel

1.196 tonne

Per hectare yield of jatropha seeds

10 000 kgPer hectare yield of jatropha seeds

4555kg

Quantity of jatropha seeds required for one litre of biodiesel

3.28 kgQuantity of jatropha seeds required for one litre of biodiesel

3.28 kg

One kg of biodiesel1.2486 litres of

biodieselOne kg of biodiesel

1.2486 litres of biodiesel

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Land use classification and estimates for India (in million hectares)

  1950-51 1990-91 2006-07

Forests 40.48 67.81 69.81

Not available for cultivation 47.52 40.48 42.63

Permanent pastures and other grazing land

6.68 11.4 10.36

Land under miscellaneous tree crops and groves

19.83 3.82 3.45

Culturable waste land 22.94 15 13.24

Fallow lands 28.12 23.37 25.72

Net sown area 118.75 143 140.3

Reporting area for land utilisation statistics

284.32 304.88 305.51

Total Geographical Area 328.73 328.73 328.73Source: Agricultural Statistics at a Glance

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• 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.

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Critical High Speed Diesel Price (HSD), US $ per barrel 2004-05

Andhra Pradesh

Haryana Maharashtra Tamil Nadu Uttar

Pradesh Uttaranchal Karnataka

Sugarcane 81 102 97 83 83 87 106

Wheat 60 54 51

Bajra 49 49 50

Paddy 64 65 52 53 53 55

Rapeseed & Mustard

59 57

Cotton 62 65 51 50 56

Ragi 51 46

Groundnut 55 47 57 51

Urad 57 48 53 52

Jowar 51 49 48 51

Sesamum 54 56

Barley 52

Masur 53

Gram 61 52 59

Tur 58 57 61 53

Maize 52 50 47 54

Moong 54 48

Soyabean 52

Sunflower 52 53 51

Safflower 53

VFC Tobacco 56            

Notes: The exchange rate for 2004-05 is assumed to be Rs 42.25 per US Dollar.

Source: Authors’ estimates based on GOI, 2008

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Critical price of gasoline (in US$ per barrel) for 2005-06

Andhra Pradesh

Haryana Maharashtra Tamil Nadu Uttar Pradesh Uttaranchal

Jowar 129.53 90.50 69.30

Maize 136.26 76.26 54.49 44.00

Gram 141.72 100.60 73.33

Cotton 134.34 136.89 95.50 72.61

Moong 139.18 93.11

Sunflower 131.31 97.62

Urad 157.66 94.38 75.95 57.99

Paddy 142.93 156.00 94.92 73.03 60.79 52.17

VFC Tobacco 143.16

Groundnut 127.61 94.09 74.28

Tur 137.71 66.44

Wheat 145.61 60.79 45.08

Bajra 126.22 92.74 54.88

Rapeseed & Mustard 147.29 66.81

Soyabean 96.28

Safflower 96.10

Ragi 84.91 71.11

Sesamum 76.10

Masur 67.01

Barley 57.80

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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.

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Rural Sector Current TargetIncome Poverty (%) 28.3 4% HHs with access to Electricity for lighting 44 84% HHs with access to Biomass for Cooking 80-84 44-48

Cooking Poverty Ratio (%) 82 46

Urban Sector Current TargetIncome Poverty (%) 25.7 3% HHs with access to Electricity for lighting 88 96

% HHs with access to other fuels, incl. biomass, soft coke,etc. for cooking (Cooking Poverty Ratio) 38 14

Energy Poverty & Emission Control

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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 ofcarbon 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

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• 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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The End