The Search for Self Reliance

1. India’s Energy Future The Search for Self Reliance T L Sankar ADMINISTRATIVE STAFF COLLEGE OF INDIA Bella Vista :: Hyderabad-500 082 28th June 2005

2. Economic Growth calls for increase in supply of energy. While India has registered a commendable rate of economic growth in the recent past, it has failed to meet the required needs of clean, convenient and reliable energy at affordable prices to fuel this economic growth. • Many fear that India’s aspiration to achieve 8% per year GDP Growth in the next decade may be constrained by lack of energy supplies. • This presentation seeks to explore the ways in which India could meet its energy demand to support such a development. India achieved, against all prognostications, self-reliance in food and foreign exchange. Can this be repeated in the case of Fuels? Purpose of the Presentation

3. In this section we present how India responded to other ‘Crisis’ situations. Indian Story Index Energy Needs & Planning Energy Sources Alternative Fuels

4. India has witnessed a GDP increase on the basis of sustained agricultural & industrial outputs, over the last decade. The “Hindu-rate” of growth (2-3%) has been left far behind. GDP Growth – Story so far • To maintain the high GDP growth rate, self reliance in energy holds the key.

5. In spite of this growth, the per capita energy consumption of India is far lower than that of the developed nations. Even to reach world average it has to increase five fold. With a population of over a billion, India’s energy expansion plans will have far reaching consequences for the world energy market. Per Capita Energy Consumption Source : BP Statistical Review of World Energy 2004 Will India’s approach towards self-reliance in energy help?

6. Whenever faced with a Challenge, India bounced back stronger and self reliant. From a food starved country in 1967, India became a food-grain exporting country in 1979 India – Green Revolution • India was the most successful country in implementing the Green Revolution. Food grain production almost doubled from 72 MT in 1965-66 to 129 MT in 1978-79 during the green revolution. Today the production is close to 212 MT.

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

8. In this section we present the energy needs of India in 2030 Discussion on energy futures for only one decade may lead to misleading conclusions. Index Indian Story Energy Needs & Planning Energy Sources Alternative Fuels

9. GDP Growth Agency Rate pa Planning Commission 7% EIA, US 5% IEA, Paris 5% India Vision 2020 (Planning Commission) 8% India Hydrocarbon Vision 7% For this presentation, using the latest data and based on elasticities, a new forecast has been attempted. Several scenarios/projections of India’s energy needs have been attempted by different agencies. The period of the data and the horizons of the forecast vary. India – Energy Needs 1/2 TPES =Total Primary Energy Supply. GDP = Factor cost constant. M Units = Million kWh. MTOE = Metric Tonne Oil Equivalent.

10. Population Electricity Year Mn TPES MTOE Bwh 2004-05 1098 341 587 2009-10 1180 464 862 2014-15 1268 647 1201 2019-20 1362 830 1764 2024-25 1463 1117 2304 2029-30 1573 1404 3385 Based on Elasticities set out, demand for Total Primary Energy Supply (TPES) and Electricity supply have been projected assuming, a GDP Growth of 8% and official population estimates. India – Energy Needs 2/2 These projections are in line with the other estimates when they are corrected for a higher GDP Growth rate. The projections of electricity demand by Ministry of Power, which is upto 2020, is higher, as it has not fully taken into account the decreasing trend of electricity elasticity to GDP over time. The demand forecast suggest that the effort in supplying total primary energy consumption in the next decade would be 1% higher than in the past it was around 5%. This will call for some concerted effort. The electricity supply will have to be increased by about 1% per year over the past rates. This will call this increases investments requirements in power sector. However these rates are achievable, if captive power is encouraged.

11. Non-power use of Coal Oil & Gas are estimated first. Sources of power generation from primary sources like nuclear, hydro and renewable and from fuel sources namely coal and natural gas are estimated next. The coal and natural gas requirements for power generation are added to the demand for non-power use derive the total fuel needs including for power generation. India – Specific Fuel Needs for Non Power uses Past Rates of Growth Year 1970-80 1980-90 1990-2003 Coking Coal 3.62% 2.75% 0 Non Coking for Power 10.76% 12.27% 6.61% Non Coking for Non Power 1.96% 2.34% 2.04% Non Power Oil 5.40% 6.00% 4.90% Based on these growth rates, and adjusting for a higher 8% GDP growth, the specific fuel needs are projected.

12. Total Electricity Supply Reqd Fuel Based (a) Hydro –(20%) Nuclear - =(a)-(b)-(c)- (b) (c) (d) 2004-05 587 117 15 29 425 2009-10 862 172 25 43 622 2014-15 1201 240 41 60 860 2019-20 1764 353 66 88 1257 2024-25 2304 461 108 115 1620 2029-30 3385 677 175 169 2364 • Keeping in view the requirements of long term-sustainability the preferred source for power generation should be renewable non-fuel sources namely hydel, wind, solar and nuclear. As these resources are limited, thermal power from coal, oil and gas are resorted to. • Production from non-fuel sources, however, is constrained by a few factors: • Nuclear – Policy constraints, uranium availability, date of commercialising fast breeder 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 official agencies. • Nuclear cumulative capacity 25,000 MW by 2030. • Hydel – 20% of total power generation by 2030. • Renewable – 5% of total electricity generated by 2030. Fuel Needs for Power generation Non- Fuel based Power Generation All in Billion kWh. Renewable (5%) (d) Year

13. Preference of fuel for power generation at the margin, is based on the costs of alternatives. • Coal is the preferred fuel for power generation. Even at Rs. 1000/ ton, the fuel cost will work out to Rs. 0.70 per unit. If delivered price of Natural gas is $4/MMBTU, the fuel cost would be Rs. 1.40 per unit. Even at distances above 1500 kilometers, coal is likely to emerge as the cheaper fuel. • 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. India Projected Fuel Needs for power 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.

14. Year Year Coal MMT Coal MMT Oil MMT Oil MMT Natural Gas BCM Natural Gas BCM Total Electricity B kWh Total B kWh % which Non fuel based % which Non fuel based Nuclear Nuclear Hydel Hydel Renewable Renewable 2004-05 2004-05 368 368 127 127 32 32 587 587 15 15 117 117 29 29 2009-10 2009-10 509 461 152 152 41 55 862 862 25 25 172 172 43 43 2014-15 2014-15 679 586 181 181 79 52 1201 1201 41 41 240 240 60 60 2019-20 2019-20 951 750 216 216 126 68 1764 1764 66 66 353 353 88 88 2024-25 2024-25 958 1204 259 259 85 157 2304 2304 108 108 461 461 115 115 2029-30 2029-30 1222 1705 309 309 112 250 3385 3385 175 175 677 677 169 169 Energy Demand Scenarios The total energy requirements both primary and secondary are summarized under the two scenarios. Essentially if India does not produce coal as required gas imports will have to substitute coal and this will increase the electricity price. Scenario-I Scenario-II Further discussions in this presentation will be based on Scenario-I.

15. Scenarios are a tool for helping policy makers plan for the future – or rather for different possible futures. They help us focus on critical uncertainties - on the things we don't know about - and on the things we do know about. They help us understand the limitations of our ‘mental maps’ of the world – to think the unthinkable, anticipate the unknowable and utilize both to make better strategic decisions. Energy Planning… • Our approach: • The energy demand has to be met. • Indigenous fuel usage should be optimized. • All futuristic sources of energy supply should be exploited. • This leads to two scenarios: • Coal supply is adequate to meet all needs where it is economical. • Coal supply is constrained. Power Generation has to rely on gas for the residual requirements.

16. In this section we present an analysis of energy options based on resource endowments Index Indian Story Energy Needs & Planning Energy Sources Alternative Fuels

17. Sources of Energy India has all forms of energy resources and they are available in all parts Biomass Oil & Gas • Biomass Potential 3500 MW • Maharashtra 1000 MW • Uttar Pradesh 1000 MW • Karnataka 300 MW • Andhra Pradesh 200 MW • Gujarat 200 MW • Punjab 150 MW • Potential exploited 272 MW • Oil Reserves 732 Mn Tons • Gas Reserves 763 Bn Cu Mtr • Reliance Gas find 198 BCM • Cairn Gas Find 28 BCM • Present gas prod 30 BCM pa Small Hydro Coal • Hydro Potential 15000 MW • Himachal Pradesh 1624 MW • Uttar Pradesh 1472 MW • Arunachal Pradesh 1059 MW • Karnataka 652 MW • Maharashtra 599 MW • Kerala 466 MW • Madhya Pradesh 410 MW • Bihar & Zarkhand 367 MW • Potential exploited 1341 MW • Coal Reserves 246 Bn Tons • Jharkhand 71.14 Bn Tons • Orissa 59.10 Bn Tons • Chattisgarh 38.13 Bn Tons • Total Coal Mines 561 • Present production of Coal & • Lignite in excess of 389 MT pa Wind Waste • Wind Potential 45000 MW • Potential exploited 1267 MW • Tamilnadu 787 MW • Gujarat 166 MW • Andhra Pradesh 89 MW • Karnataka 37 MW • Kerala 2 MW • Madhya Pradesh 22 MW • Maharashtra 155 MW • Municipal Potential 1000 MW • Industrial waste potential 700 MW • Projects implemented 9.5 MW • Projects under const. 5.2 MW • Projects under dev 21 MW

18. Coal Production in India The Coal & Lignite Production in India has leapfrogged more than 10 times from 32 MT in 1950-51 to about 389 MT in 2003-04, i.e. about 4.8% per annum. From 1980-81 to 2003-04 the increases are at 5.5% per annum.

19. 248 Billion Tonnes of Coal Reserves out of which 93 Billion Tonnes are proven. Of these, the coking coal needed for steel production is only a small part. • Present Production Levels – 382MT (2004-05). Reserves can sustain over 100 years of use at this level. • Productivity of Coal mines in India is very low, ranging from 152 tones to 2621 tones per miner per year, compared to 12,000 tons in Australia and US. Huge potential exists to increase the production and productivity. • Industry essentially comprises two large Government owned companies CIL & SCCL. • The production plans as now projected by the Industry, leave a large gap between demand and supply. Coal Reserves & Production Coal Reserves: Coal : demand supply gap MT * CIL / SCCL production plans are under frequent revisions. Source: Coal Vision 2025. Bn tonnes = Billion tonnes.

20. Coal Sector - Concerns • Indian Coal Sector : Concerns • Exploration and mine planning has lagged behind. • Exploration in deep coal deposits has been very slow and indifferent. • Underground mining continues with low technology and very low productivity. • The standards for rehabilitation of mine sites after open cast mining has not been spelt out clearly and leads to disputes. • Land acquisition and environmental clearance lead to delays in new mining projects. • Steps taken so far: • State Governments allowed into coal mining • Public sector companies can mine and sell coal. • Captive Mining allowed in 1993 • Coal placed on Open General License • Import duties reduced dramatically • Coal prices decontrolled in 2000 • A Committee of Experts appointed to prepare a road map for coal sector reforms.

21. Coal Sector – Strategies for Future • Liberalizing captive coal mining provisions. • Use of modern technology to augment productivity and quality • Adoption of clean coal technologies, such as IGCC etc • Allowing Private sector into coal mining and trading • Replacing Coal Linkages with Fuel Supply Agreements • Acquisition of Coal equities abroad • Create competition among public sector coal companies at the State and Central level. • Rationalization of railway freights • Infrastructure status to coal industry • Closing down uneconomic mines after duly compensating the affected stakeholders. The Hope: The coal industry consisting of only two companies has been able to achieve over 5% per annum growth. If more players are allowed into coal mining with adequate safeguard to workers and to coal conservation issues it is possible to step it up to 7%. China achieves an increase of over 100 million tonnes a year and is producing over 2000 million tonnes against India’s 400 million tonnes. Per capita coal consumption in India is slightly to be less than that of USA even in 2030.

22. Natural Gas production stands at close 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 • With the success of 4 rounds of NELP, the gas production is set to rise again. • The new gas finds especially in deep off shore wells have added reserves. Natural Gas • The new exploration licensing policy for gas is attracting private industry from India and abroad in large numbers. The mood in the industry is up beat.

23. Natural Gas – Demand Supply If coal supply is adequate the demand and supply of gas will be as in the table. The supply of gas from domestic sources and as LNG imports and pipeline import of gas is under advanced stage of discussion. New finds of gas deposits and promise of more have raised hopes of increasing the use of gas for power generation in replacement of coal. 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 from these sources. LNG is the next best option. 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 less than $3 per MMBTU, gas can substitute coal for power generation and its demand can become very large.

24. India has stepped up its quest for gas by resorting to NELP. The efforts to source gas from outside the country are also underway. Blocks identified for exploration Natural Gas Source : Directorate General of Hydrocarbons, Govt. of India

25. 2004-05 2009-10 2014-15 2019-20 2024-25 I. Domestic Supply 30 43* 43@ 45@ 45@ II. Coal Bed Methane 0 1 2 2 2 Sub Total (I + II) 30 44 45 47 47 III. Imports A. LNG 1. Dahej Terminal 3 10 10 10 10 2. Hazira Terminal 0 3 3 3 3 3. Dabhol Terminal 0 - 7 7 7 4. Kochi Terminal 0 - 7 7 7 Sub Total (A) 3 13 27 27 27 B. Transnational Pipelines 1. Iran-Pakistan-India Pipeline 0 0 - 22 22 2. Myanmar-Bangladesh-India Pipeline 0 - 11 11 11 Grand Total 33 57 83 105 105 Natural Gas – Supply Options The important initiatives to augment gas supplies to India already finalize and under vigorous pursuit are as follows. * includes 40 MMSCMD from Reliance K-G Basin. @ It is assumed that the additional gas finds will replace only the depleting production from the existing fields. * includes 40 MMSCMD from Reliance K-G Basin. @ It is assumed that the additional gas finds will replace only the depleting production from the existing fields.

26. 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%. Petroleum The crude refining capacity of India today is at 132 MT. India has achieved self sufficiency in refining, at the present demand level.

27. Current Concerns • India has not been able to discover new crude deposits • Private players under NELP are new and are yet to strike oil • High volatility in the price ranging from 10% to 60% in one month will strain economic management • Strategies • Conservation and substitution possibilities to be explored • Long term contracts with price-bands to be secured through bilateral contracts • Acquisition of equity oil from outside the country to be pursued • Measures Taken • Autogas and domestic gas can replace diesel and kerosene • Mass rapid transport systems to reduce oil use • Transport system modernization • More efficient cars leading to hybrid motor vehicles • Biodiesel/ Biofuel (liquid) explored Demand on the Business as usual basis as projected in this study. Petroleum – Demand & Supply Rate of growth The growth rates are within manageable levels.

28. India Power Sector Electricity Projected Demand India’s growth of power demand is among the highest in the world. Indian power system with 115 thousand MW of installed capacity is today among the largest in the world. Installed capacity is projected to become 200 thousand MW by 2014-15 and gross to over 600 thousand MW by 2029-30. Power is generated from every possible source of primary and secondary electricity. Power reforms started in 1991 and are ongoing. Shortages abound and quality is poor. Efforts to attract private capital has been successful partially. Electricity Act,2003 followed by National Electricity Policy, Tariff Policy, Rural Energy Policy and Electricity Rules have opened a new chapter and gives hopes that power sector will become vibrant in the next 10 years. Year Energy Bkwh Required Capacity MW 2004-05 587 117.400 2009-10 862 169.020 2014-15 1201 230.960 2019-20 1764 332.830 2024-25 2304 426.670 2029-30 3385 615.454 Past Growth

29. India Power Sector – Report on Reforms

30. Indian Nuclear Power Program : Current Status • India has at present installed Nuclear Power capacity of 2770 MW which is about 2.4% of the total installed capacity. • Nuclear power corporation owns and operates 14 reactors at 6 locations • There are 8 more reactors under construction with a capacity of 3960 MW The nuclear power program has seen the following transition FIRST STAGE SECOND STAGE THIRD STAGE Established Comprehensive Indigenous Capabilities for Designing, Equipment Manufacturing, Constructing, Commissioning, O&M of 220 MWe PHWRs Experimental reactor with U233 fuel in operation. Thorium Bundles in PHWRs. Fast Breeder Test Reactor (40 MWt ) Set up Design for 500 MWe PFBR developed. Construction to commence in June 2004 . AHWR-300 Mwe being developed in BARC. Technology Demonstration for electricity generation from Thorium. Developed 540 Mwe PHWRs &Construction in progress; Unit size being scaled up to 680 MWe Bridge between the I & III Stages to be Launched in X plan Developed Front End & Back End Technologies of Complete Fuel Cycle

31. Indian Nuclear Power Programme REACTOR TYPE AND CAPACITIES CAPACITY (MWe) 14 reactors at 6 sites under operation 2,770 Tarapur, Rawatbhata, Kalpakkam, Narora, Kakrapar and Kaiga 6 PHWRs under construction at 1,960 Tarapur (2x540 MWe),Kaiga (2x220 MWe), RAPS-5&6(2x220 MWe) 2 LWRs under construction at 2,000 Kudankulam(2x1000 MWe) PFBR at Kalpakkam (1 X 500 MWe) 500 (Pre-project activity in progress) Projects planned till 2020 13,900 PHWRs(8x700 MWe), FBRs(4x500 MWe), LWRs(6x1000 MWe), AHWR(1x300 MWe) TOTAL by 2020 21,180 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 supply to meet our energy needs when other sources get exhausted. It is a key element of the energy self reliance strategy.

32. One of the most abundantly available source for power, though constrained by the vagaries of nature, India holds a potential to the tune of 150,000 MW Installed capacity today is 23,488 MW which is just about 17% of the estimated hydro potential. After the enactment of Electricity Act, 2003, a Hydro Electricity Initiative has taken to conduct a comprehensive total survey of all potential sides for hydro projects upto 50000 MW and to identify projects which can deliver power at less than US cents 5 per kWh. Nearly 7000 MW have been identified, already. 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. Hydro Power 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.

33. In this section we present analysis of renewable energy options for India Indian Story Index Energy Needs & Planning Energy Sources Alternative Fuels

34. In the long long run we have to depend on renewables. India is among the few countries were all possible sources and technologies are under investigation and development. In respect of wind power, small hydro, bio-mass and coal-bed methane commercialization has been achieved. Gas-hydrate is a distant prospect, but the resources are huge. : Alternative Fuels Sources: MNES, NPCIL, BITS-Pilani, Dept. of Ocean Development, Infraline, Indo-US Co-operation Report

35. 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. Coal is abundant enough to meet the thermal power requirements. Hydel resources within India and with the neighbouring countries holds promise of meeting all our needs. The new discoveries by private investors of gas from off-shore deep wells has opened a speculation whether India would need imported gas at all after 5-10 years. Oil will have to be imported – how much would depend on actions taken towards conservation of oil in transport sector introduction of new mass transport, more and development of environment friendly cost effective bio-liquid fuels. We can afford to buy our oil requirements if the current growth rates are kept up. However, we are deeply aware that in the power sector improving governance including modernization and professionalisation and in the coal sector appropriate reforms in the policy environment to accelerate coal production are the key to India’s energy future. Achieving these would not be easy. But, 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 foreign exchange crisis. He has now started looking into energy issues as priority. We have a technical competent manpower of adequate quantity and quality . The will to overcome the crisis is emerging .

36. 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 Thanks !