Twin problems for India: Energy transition and energy poverty

A recent BP report, “Energy Outlook 2020” suggested a possible path for the world to keep temperature rise due to global warming less than 1.5 degree centigrade above the preindustrial period. While it is easier for developed countries to manage energy transition, developing countries like India face the twin problems of energy transition and energy poverty.

Unlike previous BP reports which were influenced by assumptions regarding economic growth, oil prices, geopolitical factors, etc, this report was developed to avoid the existential crisis of climate change.

BP has developed three scenarios --Business As Usual (BAU), Rapid transition, and Net Zero carbon emission. BP is honest in stating that it does not believe that any of these three scenarios will take place.

However, the report hastens to state that BP’s business plans are influenced by these scenarios. Unlike in the past, the company has paid special attention to India’s critical role in enabling the world to meet the goals of the 2015 Paris agreement.

Carbon emissions from energy in the ‘rapid transition’ scenario will fall by 70% by 2050 to 9 giga tonnes of Carbon dioxide (Gt CO2) to keep temperature rise below 2 degrees and in ‘net zero’, by 95% to 1.5 Gt CO2 by 2050 from the current level of 33 Gt CO2 to keep temperature rise below 1.5 degrees. Under BAU, there is a minimal amount of carbon reduction.

The largest carbon reduction is in the transportation sector where electric vehicles (EV) will replace internal combustion engines, and fossil fuels for power generation will be replaced by solar and wind energy to charge EV batteries.

EVs in the ‘rapid’ and ‘net zero’ scenarios account for between 70-80% of four-wheeled vehicle kilometres (VKM) travelling on roads by 2050, compared to less than 1% in 2018. The corresponding shares in BAU are around 30% in 2050.

The intermittency associated with solar and wind power requires a variety of technologies and solutions to supply power on a 24x7 basis. It is more than likely that many governments will impose a carbon tax to promote faster energy transition.

Renewable energy increases more than tenfold in both the ‘rapid’ and ‘net zero’ scenarios, with its share in primary energy rising from five percent in 2018 to over 40% by 2050 in ‘Rapid’ and almost 60% in ‘net zero’. Hydrocarbons' share of primary energy will decline from close to 85% in 2018 to around 40% by 2050 in the ‘rapid’ and 20% in the ‘Net Zero’ scenario.

The consumption of oil will fall to less than 55 Mb/d and 30 Mb/d in the ‘Rapid’ and ‘Net Zero’ scenarios respectively by 2050. In short, the beginning of the end of the oil era has started.

For India, such a dramatic drop in oil demand will pose a huge problem. BP’s model shows that India’s oil demand is to increase from the current level of 5.1 mmbd to 9.7 mmbd in BAU or is to fall to 2.4 mmbd in 2050 in the ‘Net Zero’ scenario. Gas demand is expected to increase in all three scenarios from 58 billion cubic meters (CBM) in 2018 to between 332 and 215 BCM. Such wide variations will make long-range planning extremely complex.

Should India add to refinery capacity or manage with the existing ones? When there is a huge surplus of refining capacity in the world, it does not make economic or strategic sense to invest in expensive refining capacity in India.

Similarly, when oil reserves are likely to be stranded and oil-producing countries will lose oil power, changing the geopolitical power equation, what impact will this have on India’s foreign policy? Will there be a need for strategic oil reserves in the future?

Since natural gas will play a critical role during and after the energy transition, how should India get ready to meet increasing gas import requirements? Sound plans to invest in terminals to import Liquified Natural Gas and pipelines to transport gas to consuming centres will be needed.

Electricity consumption in India will increase robustly in all three scenarios, growing between 4.0- 4.6% per year over the Outlook, as India’s GDP increases and energy poverty decreases.

The pace and extent of decarbonisation of power is greater in the ‘rapid transition’ scenario, with coal power generation falling by around 40% by 2050. Wind and solar power generation will grow by around 30-fold and 60-fold respectively, and gas over 13-fold. To balance the intermittency of renewables, greater use of natural gas power plants will be required. Intermittency problem can also be solved by using green hydrogen produced by renewables.

While India as a major country should contribute its share to manage the climate change crisis, it needs to give higher priority to eliminate the shocking levels of energy poverty. Even after providing power access to all villages in India, millions do not have electricity connections. Those who have access, do not get quality power.

Thus, there is an urgent need to supply villages with distributed energy generated by renewables.

Smart Power India (SPI), an initiative launched by Rockefeller Foundation in 2015, has been supporting 300 mini-grids, run by a diverse set of private companies, benefiting more than 2.5 lakh customers. Tata Power has formed a partnership with SPI last year, to establish what will become the largest mini-grid company in the world, reaching 10,000 villages and serving over 25 million people. Unfortunately, our planners have not yet considered expanding such mini-grids on a massive scale to help solve energy poverty.

On October 26 at India Energy Forum, PM Modi presented a map of Energy Policy, listing seven drivers of the energy sector. While the PM’s metaphor of seven horses driving the Solar God’s chariot sounds convincing, the two horses of fossil fuels and biofuels are wrong ones. The other five horses, renewables, use of digital technology, EV mobility, hydrogen and gas-based economy are appropriate as discussed in this article. It is high time that India develops an expert-driven integrated energy policy.

(The writer is former governing council member of Manipal Institute of Technology, and an international oil expert)