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Power and Energy

Energy is needed for economic growth, for improving the quality of life and for increasing opportunities for development. Some 600 million Indians do not have access to electricity and about 700 million Indians use biomass as their primary energy resource for cooking. Ensuring life line supply of clean energy to all is essential for nurturing inclusive growth, meeting the millennium development goals and raising India’s human development index that compares poorly with several countries that are currently below India’s level of development. The broad vision behind India’s integrated energy policy is to reliably meet the demand for energy services of all sectors including the lifeline energy needs of vulnerable households in all parts of the country with safe, clean and convenient energy at the least-cost. This must be done in a technically efficient, economically viable and environmentally sustainable manner using different fuels and forms of energy, both conventional and non-conventional, as well as new and emerging energy sources to ensure supply at all times with a prescribed confidence level considering that shocks and disruption can be reasonably expected. In other words, the goal of the energy policy is to provide energy security to all.  

The Power and Energy Division comprises of four units, Power, Coal, Petroleum and Energy Policy. Together these units r eview the energy situation in the country within the context of the global energy balance and rising environmental concerns. The division looks at India’s energy options in an integrated manner and proposes policies that would make the energy sector efficient and would ensure energy security.

Energy security is defined in terms of reasonable assurance of access to energy and relevant technologies at all times with an ability to cope with sudden shocks. Energy security does not mean complete energy independence, it only means an ability to meet reasonable requirements with reasonable assurance of stable supply or an ability to pay for import needs.

Roles and Functions of the Power and Energy Division

  • Servicing the Energy coordination Committee under the Chairmanship of Prime Minister;
  • Evolving an integrated energy policy covering commercial and non-commercial sources of energy;
  • Proposing policies and institutions for the management of supply and demand in different sub-sectors of the energy sector, assessing the availability of different forms of energy and suggesting appropriate arrangements to meet the country's energy needs keeping in view the need to tap all available technology options, improve energy efficiency and conserve energy to lower energy intensity and thereby deliver a suitable growth trajectory;
  • Analysing issues pertaining to the energy security of the country;
  • Suggesting policies to meet lifeline requirements of poorer households and vulnerable households;
  • Examining Plan proposals and finalisation of scheme- wise outlays in respect of Central Ministries and PSU's covering the Energy sector. These include the ministries of Power, Coal, Petroleum and Natural Gas and New and Renewable Energy Sources, the department of Atomic Energy and PSUs under their respective administrative control;
  • Examining all proposals related to Policy, Regulation, CoS / GoM / Cabinet Notes and Acts mooted by various ministries covering the energy sector;
  • Examining / suggesting policy and regulatory frameworks that facilitate competition and private sector participation in the Energy Sector. Restructuring of PSUs in the sector, need for reducing the dominance of the Government through disinvestment;
  • Examining technical, financial and economic viability of investment projects in the energy sector and their appraisal.
  • Crafting, evaluating and monitoring key initiatives such as Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGY), Bharat Nirman, Accelerated Power Development and Restructuring Programme (APDRP), Remote Village Electrification and Village Energy Security;
  • Preparing Annual and Five year plans for the Energy Sector. Monitoring and appraisal of Plan programmes and schemes of respective ministries;
  • Reviewing annual financial performance of State power utilities;
  • Evaluating strategies and policies for promotion of emerging issues in all energy sub-sectors such as for Clean Coal Technologies, In-situ Coal Gasification, extraction of Coal Bed Methane, Coal Liquefaction, Carbon Capture and Sequestration, Low Carbon Growth, LNG import, transmission pipelines, New Exploration Licensing Policy (NELP) etc.
  • Examining and suggesting policies related to pricing of fuels.
  • Promoting growth of industries in the energy in the areas from exploration for natural resources, exploitation, refining and product processing, transportation including pipelines.
  • Promoting energy efficiency through various programmes including education, demand side management, infusing commercially or near commercial technologies, developing new technologies etc.
  • Reviewing progress of R and D in the Energy Sector. Managing the National Energy Fund for R and D.

Energy Policy

The importance of Planning Commission’s role in energy policy arises from the need for an integrated energy policy because the responsibility for different energy sources is distributed over a number of different Ministries, e.g. Petroleum, Coal, Power, Water Resources (in the case of hydroelectricity), Atomic Energy and New and Renewable Energy. Several other Ministries are also involved in determining policies which affect energy demand (Transport, Urban Development, Industry, Steel, etc.) and the Finance Ministry determines tax rates for different fuels. Policies applicable to different energy sources need to be consistent with each other and the overall framework for energy must be consistent with achieving the objective of inclusive growth. In many areas policies relevant for energy are in the hands of State government e.g. urban transport, city planning, building codes, etc. and these policies also need to be made consistent with the overall energy policy. Guiding principles of an Integrated Energy Policy are as follows:

Energy markets should be competitive wherever possible for economic efficiency and for promoting optimal investment in energy. However, competitive markets alone will not ensure efficiency in this area because of negative environmental externalities associated with some fuels, potential supply risks and also the scope for exploitation of temporary shortages. These problems can only be addressed through appropriate fiscal policies to take care of externalities and independent regulation to take care of anti-competitive market behavior.

Given the need to expand supplies of energy public sector investment in energy must be supplemented by private investors. The removal of distortions and impediments that discourage investment in expanding domestic energy capacity is vital, as is the maintenance of an investor friendly environment for energy development.

In general, both the tax structure and regulatory philosophy applied in each energy sector should be consistent with the overall energy policy should provide a level playing field to all players whether public or private. Taxes should be neutral across energy sources except where differentials in taxation across energy sources are specifically intended to counter differential externalities, such as differences in pollution.

Subsidies are relevant but they must be transparent and targeted. Consideration should be given to alternative means of achieving the social objectives sought to be achieved by energy subsidies through different methods, including direct transfers to eligible households. The most efficient method of schemes and the objective should be chosen.

Energy-efficiency is extremely important and can be promoted by setting appropriate prices and this is particularly important where energy prices are rising. However, appropriate prices by themselves may not suffice and non-price incentives/disincentives are therefore also required. This includes standards of energy efficiency that are forward looking, i.e. anticipate future price changes or pollution penalties. These standards should be determined on the basis of rational considerations and must be set in an expanding range of applications, with continuous dynamic adjustment of these standards. The standards should also be effectively enforced. There is scope to use both, mandatory and voluntary standards, the latter being reinforced by public opinion combined with appropriate tax incentives.

Public Sector Undertakings operating in the energy sector must operate with autonomy and also full accountability to ensure incentives for adequate investment through their own resources and improvements in efficiency in energy production and distribution.

Elasticity of Energy Demand

Contrary to other developed and developing countries, total primary commercial energy requirement in India has been falling with respect to the growth in GDP largely because higher energy prices have led to its efficient use. The elasticity for per capita primary commercial energy supply with respect to per capita GDP (i.e. percent increase in per capita energy consumption for one percent increase in per capita GDP) estimated from the time series data of India over 1990-91 to 2003-04 comes to 0.82 which is significantly lower than 1.08 estimated for the period since 1980-81. Similarly the elasticity for per capita electricity generation is only 1.06 for the period from 1990-91 to 2003-04 compared to 1.30 for the period since 1980-81. However, the energy elasticity of GDP growth in India may not fall as much in the future as rising income levels will foster life style changes that are more energy intense.

Comparing India’s energy elasticity with other countries, using cross-country regression based on data of 2003, the elasticity for total primary energy supply (TPES) comes to 0.83 for all countries and to 0.79 for countries with a purchasing power parity (PPP) GDP between $2000 and $8000 (India’s GDP in PPP terms based on 2000 dollars was $2732 in 2003 and by 2031-32 might reach the upper end of the range). India’s energy elasticity for commercial energy is comparable to the elasticity estimates for TPES using cross country data. The elasticity for electricity consumption comes to 1.24 for all countries and to 1.25 for PPP adjusted GDP per capita range of $2000 to $8000. India’s elasticity for electricity generation is comparable to that of countries with per capita GDP exceeding $8000 in PPP terms. Importantly, the trend of falling elasticity with rising income levels is demonstrated even by cross country data.

India ’s primary energy use is projected to expand massively to deliver a sustained GDP growth rate of 9% through 2031-32 even after allowing for substantial reduction in energy intensity. In order to fuel this on sustained basis, the growth of around 5.8% per year in primary energy supply including gathered non-commercial such as wood and dung of would be required. Commercial energy supply would need to grow at about 6.8% per annum as it will replace non-commercial energy, but this too involves a reduction of around 20% in energy use per unit of GDP over a period of ten years. Requirement of India’s dominant fuel Coal including Lignite will expand from around 500 million tonne in 2006-07 to over 2.5 billion tones per annum based on the quality of available domestic coal over a period of 25 years. The primary energy use by 2031-32 will increase by 4 to 5 times and Power generation capacity would increase six-folds from the 2006-07 level of around 1,60,000 MW inclusive of all captive plants.

Putting India’s likely energy demand in 2031-32 in a global perspective, one sees that China’s current energy consumption is 1100-1200 Mtoe and USA’s current consumption is 2400-2500 Mtoe. In comparison, India consumed about 421 Mtoe of commercial energy in 2007-08. With a projected population of just under 1.47 billion in 2031-32, India’s per capita energy consumption will be marginally above China’s current per capita consumption or be about one seventh of the current US per capita consumption. What this means is that India on per capita basis, currently consumes under 6% of what the US consumes and under 41% of what China consumes and will, by 2031-32, consume just under 15% of current US consumption levels and equal China’s current per capita consumption. More importantly, India’s per capita energy consumption that is less than 27% of 2003-04 level of global average energy consumption shall in 2031-32 also remain just about 74% of the current global average.

Supply Scenario and Energy Mix

India ’s energy basket has a mix of all the resources available including renewables. The choice before the country in reference to pursuing for different sources of energy is not choosing among the available ones but to develop them all and to seek what else? The dominance of coal in the energy mix is likely to continue in foreseeable future.

 Primary Energy Consumption Mix in 2007-08

Energy Type

Units

in Original Units

in Mtoe

% share in Primary Commercial Energy

% share in Total Primary Energy Consumption

Coal

Mt

501.52

215.48

53.54

39.50

Lignite

Mt

34.65

9.71

Oil

Mt

139.73

139.73

33.22

24.51

Natural Gas

BCM

32.27

29.07

9.34

6.89

LNG

Mt

8.24

10.21

Nuclear Power

MkWh

16777

4.38

1.04

0.77

Hydro Power

MkWh

128702

11.07

2.63

1.94

Wind Power

MkWh

11410

0.98

0.23

0.17

Primary Commercial Energy

Mtoe

-

420.62

100.00

73.78

Non-Commercial Energy

Mtoe

-

149.50

-

26.22

Total Primary Energy consumption

Mtoe

-

570.12

-

100.00

 

Energy Equivalence

The energy labeled as ‘final energy’ such as electricity, petrol, gas, coal, firewood, etc. is obtained from the sources available in nature, labeled as ‘primary energy’, and includes hydrocarbons (coals, oil, and natural gas), fissile or fertile elements primarily uranium, the kinetic energy of natural elements (wind, water, etc.), and the electromagnetic rays of the sun and the natural heat of the Earth (geothermal energy). As per convention, final energy consumption is generally expressed as weights of fuels burnt, or from kWh consumed if it is electricity. Each fuel, while burning, produces certain amount of energy in the form of heat that can be measured in standard units such as kilocalories or Joules. Fuels are compared using their calorie content with that of oil in tonnes or million tonnes of oil equivalent (Mtoe). One tonne of oil is worth 42 billion Joules or 10 billion calories whereas one tonne of Indian thermal coal has 4.1 billion calories. Thus 1 Mt of Indian thermal coal is 0.41 Mtoe.

Electrical energy measured in kWh is also converted in to the thermal energy kcal or kJ using the definition and finally expressed as Mtoe (1 billion kWh = 0.86 billion calorie or 0.086 Mtoe). Taking the thermal efficiency of the power plant and other losses in the system, the equivalence between electricity and fossil fuels would be 1billion kWh = 0.28 Mtoe (in case of coal-fired boilers) and 0.261 Mtoe (in case of nuclear electricity). 1 billion kWh generated from hydroelectricity or wind power, however, are considered as equivalent to 0.086 Mtoe since there is no intermediate stage of heat production while using these primary energies. It is possible to argue that the efficiency of thermal power plant should be used to convert hydroelectricity and wind power also. In this case, 1 billion kWh of hydroelectricity would be equivalent to 0.28 Mtoe. This has an important bearing when one considers how much of energy is renewable. Thus in 2007- 08, renewable energy was 2.86% or 8.76% of India’s total primary commercial energy depending on the conversion factor used.

Power Sector Performance

Rapid growth of the economy places a heavy demand on electric power. Reforms in the power sector, for making it efficient and more competitive, have been under way for several years and while there has been some progress, shortage of power and lack of access continues to be a major constraint on economic growth. Average peak shortages excluding scheduled load shedding was estimated at 12% and average energy shortages at 11 % in 2008-09. The persistent shortages of electricity both for peak power and energy indicate the need for improving performance of the power sector in the country. Power shortages are an indication of insufficient generating capacity and inadequate transmission and distribution networks. To a great extent this is the outcome of poor financial health of the State Electricity Utilities having high levels of Aggregate Technical and Commercial (AT and C) losses. AT and C losses of most of the State Power Utilities (SPUs) are currently high at above 35 %. This has made them financially sick and unable to invest adequately in additional generating capacity. For the same reason, these utilities have had only limited success in attracting private investors to set up power plants.

Accelerated Power Development and Restructuring Programme (APDRP) was promoted in the year 2003 with the mission of bringing down Accumulated Technical and Commercial (AT and C) losses up to 15% in over five years period but the actual performance in last seven years has not come anywhere close to the targeted level. The scope for further tariff increase is limited since tariffs for paying customers are already among the highest in the world and it may make sense for them to opt out for captive generation. It may be noted that the reported AT and C loss is an underestimate as SEBs’ accounts conceal more than they reveal. There are several incidences of unaccounted ghost billing, manipulated consumer mix and recording of sales accrual and expenditure on cash basis etc.

Viability of State Utilities Not Improving

 

2001–02 (Actual)

2002–03 (Actual)

2003–04 (Actual)

2004–05 (Actual)

2005–06

(Actual)

2006–07

(Actual)

2007-08

(Actual)

2008-09

(Prov.)

Energy sold / available, (in %)

66.02

67.46

67.47

68.75

69.58

71.35

72.42

74.55

Revenue from sale of electricity

68135

76640

85942

91738

101366

117267

123423

154398

Cost of electricity sold

98541

102247

110553

118975

129110

153036

173886

204800

Loss on sale of electricity

30407

25607

24611

27237

27743

35768

41462

50402

Average cost of supply (paise/kWh)

374.57

351.72

(-6.10%)

353.80

(-5.54%)

357.35

(-4.60%)

367.62

(-2.03%)

392.17

(4.07%)

404.66

(8.03%)

436.09

(16.42%)

Average tariff (paise/kWh)

258.99

263.63

(1.79%)

275.04

(6.20%)

275.55

(6.39%)

288.63

(11.44%)

300.51

(16.03%)

308.17

(18.99%)

328.77

(26.94%)

Gap between the cost of supply and tariff (paise)

115.58

88.09

78.76

81.80

79.00

91.66

96.49

107.32

Notes:

Financial Performance of 20 major states excluding Delhi and Orissa—as reported.

Figure in brackets are growth rates over 2001–02.

Approved tariffs hikes exceed average tariff increases estimated above.

Generating Capacity addition during the Tenth Plan (2002-2007) and

Anticipated generating capacity by the end of the Eleventh Plan (2007-2012) (in MW)

 

Hydro

Thermal

Nuclear

Wind and Renewables

Total

Installed capacity as on 31 March 2002

26269

74429

2720

1628

105046

Addition during Tenth Plan

7886

12114

1080

6132

27212

Installed capacity as on 31 March 2007

34654

86015

3900

7760

132329

Proposed Addition during Eleventh Plan

15627

59693

3380

14000

92700

Total capacity anticipated as on 31 March 2012

50281

145708

7280

21760

225029

India’s Emission Efficiency

Fossil fuels are made up of hydrogen and carbon. When fossil fuels are burned, the carbon combines with oxygen to yield carbon dioxide. The amount of carbon dioxide produced depends on the carbon content of the fuel; for example, for each unit of energy used, natural gas emits about half and petroleum fuels about three-quarters of the carbon dioxide by coal. The carbon emission factor of a fuel simply tells us how much carbon will be released per unit energy used.

India is a large, fast growing economy with a very low consumption of energy but with a significant share of coal in its primary energy mix. CO 2 emissions from consumption of fossil fuels constitute more than half (~54% in 2000) of total GHG emissions in India. India’s CO 2 emissions from fossil fuel combustion in the year 2004 were estimated at about 1.1 billion tonne. The CO 2 emissions will continue to grow for some time, because there is a need to increase the currently low per capita levels of energy use to support growth, reach the Millennium Development Goals and eventually provide modern living standards to all her citizens.

Most of the available projections undertaken by reputed independent international organizations indicate that India’s CO2 intensity per unit of GDP is likely to continue to decline through 2030-2050. India is a relatively low carbon economy by global comparison by two measures, CO2 emissions per capita and CO2 emissions per unit of GDP in PPP terms.

Energy Units, Calorific Values of various Fuels and Terminologies:

Energy Units

Unit

Equivalence in Joules

Other equivalence

Joule

 

 

Electron Volt

1.0622 x10 -19

 

Erg (erg)

10 -7

 

Calorie (cal)

4.187

 

British Thermal Unit (BTU)

1.055 x 10 3

 

Kilo calorie (K cal)

4.1868 x 10 3

 

Mega Joule (MJ)

10 6

238.85 k cal

Kilo Watt Hour (kWh)

3.6 x 10 6

3.6 MJ or 1 Unit or 860 k cal

Therm

1.055 x 10 8

10 5 BTU

Giga Joule (GJ)

10 9

278 kWh

Million BTU (MMBTU)

1.055 x 10 9

 

Terajoule (TJ)

10 15

 

Exajoule (EJ)

10 18

 

Quad (Quadrillion BTU)

1.055 x 10 18

~172 million barrels of Oil equivalent

Terawatt-year (TWyr)

3.1536 x 10 19

8760 Billion Units

 

Calorific Value of Various Fuels

Fuel

Unit

Calorific Value in Million tonnes of Oil equivalent (Mtoe)

LNG

Mt

1.23

LPG

Mt

1.13

Motor Spirit (MS)

Mt

1.10

Kerosene

Mt

1.064

Oil (crude)

Mt

1.00

Diesel (HSD)

Mt

0.95

Furnace Oil

Mt

0.904

Natural gas

Bm 3

0.90

Charcoal

Mt

0.693

Soft coke

Mt

0.6292

Biogas

Bm 3

0.4713

Firewood

Mt

0.45

Indian Thermal Coal

Mt

0.41

Coal gas

Bm 3

0.4004

Indian Lignite

Mt

0.2865

Nuclear Electricity

BkWh

0.261

Cow-dung Cakes

Mt

0.21

Electricity

BkWh

0.086

Hydro Electricity

BkWh

0.086

Wind Electricity

BkWh

0.086