India is on the cusp of emerging as a fairly developed nation within the next decade and a half, and this means that the energy requirement for an energy starved nation is going to jump significantly. For India to ensure that it has a suitable mix of energy sources to meet the expected demand, the government has to initiate long-term strategic planning and investment, in consultation and co-ordination with the private sector.
On its part, the government has taken steps towards planning to meet the emerging energy needs but the current energy crisis on account of lack of coal supply only brings to focus the burning question of energy security or the lack of it.
A Look Back at the Energy Crisis
In the 60s and 70s, developed nations like the US, UK, Germany, France and Japan were racing ahead by developing newer technologies and consumer products that were change lifestyles leading to a shift from conservative to indulgent energy consumption.
Everything seemed fine until leading oil producing nations, grouped under OPEC and led by the largest oil producer of the time, Saudi Arabia, abruptly decided in 1973-74, to increase the price of crude oil. This sudden increase in oil price triggered a global crisis, whose impact was felt across all nations but the brunt of it was taken by those nations that were highly dependent on oil to power their respective economies.
As a result of this sharp increase in the price of oil, India experienced a runaway inflation that touched 28% in subsequent years, triggering an economic and political crisis. The same was true for several other oil-dependent nations.
Another energy crisis was seen in subsequent years caused by political and economic isolation of Iran, another major oil producing nation. This too, led to a major crisis globally. India had been a major importer of oil from Iran and has had a tough time trying to maintain a balance between the international sanctions and preserving good relations with Iran.
Naturally, India was impacted on both critical phases. The problem for contemporary India is that our economy is on the verge of take-off and we desperately need energy to power the growth and unless India addresses this vital issue well ahead of time, we will be increasingly vulnerable to global events beyond our control, and that is certainly not reassuring for an emerging India, not by a long shot.
India’s Strategic and Economic Dilemma
India’s current mix of energy sources includes Coal (40%), Biomass (26%), Oil (22%), Natural Gas (8%), Hydro-power (2%), Nuclear (1%) and Renewable energy (1%).
It is obvious that India will continue to depend on fossil fuels like coal, oil and gas for the next several decades, which means that a large quantum of our requirement would have to come from overseas sources. And that is where India’s strategic position becomes vulnerable.
Coal: A Polluting Fossil
The problem with India has been the fact that India’s need to import coal has been rising significantly. During 2013-14, India imported 171 million tonnes of coal, an increase of 17.9% over the previous year. It is estimated that by 2030, India will need to import close to 900 million tonnes of coal to meet its energy needs.
This alone, poses a significant challenge to India. On one hand, the nation needs coal to power its growing energy requirement, on the other hand, there is growing international pressure to reduce carbon emissions. Both contrary but imperative.
China faces a similar dilemma. Through the late 80s, it took a conscious decision to significantly increase thermal power generation. As a result, it invested heavily in setting up thermal power plants that used coal as its raw material. The need for coal outgrew domestic production and soon China emerged as the world’s largest importer of coal.
Today, China faces an environmental crisis resulting from excess pollution on account of its large number of thermal energy generating units that are both inefficient and excessively polluting. In addition, China is facing severe international pressure to reduce carbon emissions while its need for energy continues to grow.
Both countries are now investing heavily, and in many cases competing with each other, to buy/lease coal mines in other countries. Both countries realize that the supply of coal is imperative to their respective economies and both are busy trying to vie for whatever sources of coal that are available.
The challenge, for India especially, is how to balance its strategic need for coal yet comply with the demands from the international community for greener norms of energy production and consumption.
Oil: An Expensive Option
Another fossil fuel that is giving sleepless nights to rapidly developing nations like China and India is crude oil. The need for oil too has been rising. While the current low levels of oil price is providing relief to oil-dependent economies, the same is not likely to sustain for long, as any international crisis can once again trigger an unpredictable price rise, causing economic chaos.
The crisis in countries like Libya, Iraq and now Russia, all major oil producers, is a good example of the associated risks of depending on international oil supply and India’s share of oil in its energy mix stands at 22%. That exposes India to risks on account of global events which are beyond its control.
Natural Gas: A Cheaper and Cleaner Option
To mitigate its dependency on crude oil, India has been increasing investment in exploration and production of natural gas from sources within the country. To further meet the demand-supply gap in energy, India has been sourcing natural gas from overseas and continues to look for more sources to tie-up regular supply. Natural gas is seen as less polluting when compared to coal and oil, and is also cheaper.
India is looking to import natural gas through pipelines from Iran and other Central Asian countries. The lines are expected to pass through countries like Pakistan and Afghanistan. While the proposed pipelines are likely to prove economically favourable in the long term, the political and military risks associated with this is still to be sorted out by the government.
Shale Gas: An Emerging Alternate
In the meantime, another possible source that can be a game changer for countries like India and China is the emergence of shale gas as a cheaper and easily available alternate to oil. The United States is currently the largest producer of shale gas, while India too is known to have significant shale gas reserves.
The problem is that the long-term environmental impact is still being debated, as is the risk involved with fracking, a method of retrieving gas from the earth crust.
Renewal Energy: The Way Forward
Renewable energy, which includes solar and wind, contribute 1% to our energy mix. Both are clean, sustainable and abundant sources of energy. The problem for both not becoming very popular has been the high cost of power. With technological improvements it has now reached levels where it is commercially viable to generate power. In times to come, the per capita cost of power is likely to come down further, making it even more viable and an environmentally favourable alternate to traditional fossil fuels.
Fortunately, the new government has taken up renewable energy as a major area for investment. However, this is not going to be sufficient to meet India’s growing demand for energy.
Strategic Vision Backed by Pragmatic Policies is the Need
India has been slow off the blocks in developing a long-term strategic vision that covers the next three to five decades. Future energy demand projections have been the purview of the government and have been mainly restricted to five-year plans.
The private sector has been mostly excluded in preparing a long-term strategic plan, keeping in view future sources, raw material acquisition and technological developments and aligning these with India’s overall strategic objectives, over the long-term.
The reality is that fossil fuel will continue to remain a dominant source of energy for India, at least for the next two to three decades, and it is for India to take initiative in significantly increasing investment in clean technology, for coal and oil processing, as also in making aggressive diplomatic and economic efforts in tying up future sources of supply.
Any slack in preparing a clear and long-term goal, backed with a pragmatic policy, will have serious consequences for the next generation. Mr Modi, are you listening?
