Vivek Karandikar and Ashish Rana1 Reliance Industries Ltd., Mumbai, India

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Future of Energy Options for India in an Interdependent World

Abstract With the economic growth of India set to take off, the energy demand is forecast to rapidly mount in next 25 to 50 years. This paper probes deeper, as to what such growing demand would mean for energy supply. A new bottom-up integrated energy system model has been indigenously developed. The detailed nature of the model and its unique feature of including both the transformation sectors - electricity generation and refining - allow a wide variety of scenario studies. The model is calibrated to year 2000 and runs simulations to 2050. The paper presents an outline of the model structure and describes methodology of demand projections for each sector given the exogenous key drivers - GDP and demographics. It presents the simulation results of future energy mix, electricity mix, transport sector, and Commissions under a reference and three alternate scenarios - exploring full potential of domestic energy resources for electricity, efficiency improvement in transport and combined transport scenarios. Lastly, the paper makes three assertions on topical issues about future of India ’s energy options. One, the role of nuclear in India ’s electricity sector could be quite meaningful. Second, energy efficiency needs major thrust by reinforcing conservation policies and gaining access to advanced technology. Third, even without considering policies to explicitly target carbon emission reduction, a well-designed energy policy could define the future low emissions trajectory for India.

L'avenir d'Options d'Energie pour Inde dans un Monde Interdependant

Avec la croissance economique d'Inde est sur le point de commencer, la demande d'energie est prevue pour etre rapidement d'augmenter dans a cote de 25 a 50 annees. Ce papier de la recherche sonde plus profond, quant a ce que telle demande croissante signifierait pour la provision d'energie. Un nouveau modele fundamental a ete indigenement developpe. La nature detaillee du modele et sa caracteristique unique y compris les deux les secteurs de transformation - la generation d'electricite et raffinage - permet une grande variete d'etudes de scenario. Le modele est calibre a l'annee 2000 et court des simulations a 2050. Ce papier de la recherche decrit la structure et la methodologie de modele de projections de demande pour chaque secteur quand on a donne les criterions fondamental exogenes- PIB et demographique. Il presente les resultats de melange d'energie, le melange d'electricite, le secteur de transport, et emissions de CO2 sous une niveau de la base et trois scenarios - explorant le potentiel plein de ressources d'energie domestiques pour l'electricite, Amelioration d'efficacite dans le transport et les options de transport combinees. Dernierement, le papier de la recherche fait trois affirmations sur les problemes d'actualite. L'un, le role de nucleaire dans le secteur d'electricite d'Inde pourrait etre tout a fait significatif. La seconde, efficacite d'energie a besoin de la poussee specialisent en renforcant les politiques de conservation et l'acces a la technologie avancee. Le tiers, meme sans considerer des politiques de carbone explicites, une politique d'energie de puits-congu pourrait definir la trajectoire d'emissions basse future pour Inde.

1 Corresponding Author ([email protected]). Contributions of other members of modeling team, Prasanna K. Dani, Ravikumar P., and Sanjay U. Kumar are duly acknowledged. Future of Energy Options for India in an Interdependent World

Vivek Karandikar and Ashish Rana Reliance Industries Ltd., Mumbai, India

1. Introduction

Strong macroeconomic performance of India in the recent years is a result of the economic reforms, which started in India in 1991 (Srinivasan and Tendulkar, 2003). While some experts assert that the structural break from the past economic growth pattern began much earlier in 1980 rather than 1991 (Nayyar, 2006), the 1991 crisis resulted in a greater focus and a medium-term approach in search of a durable solution to the problems of slow growth and inflation and vulnerability on the balance of payments (Lahiri, 2006). The non-recurrence of a balance of payments crisis, a fiscal crisis or high inflation volatility, has helped create an enabling environment for a far-reaching transformation of the economy of the last 15 years. Recent studies show that growth of India ’s services sector can be attributed to the reforms carried out in the 1990s besides the structural changes that have led to increase in usage of services by other sectors and lower tariff and non-tariff barriers to trade (Banga, 2005).

The importance of energy sector for economic growth is well established. A recent report from the Planning Commission of India mentions that in order to achieve a growth of between 8 and 9%, one of the major challenges is provision of infrastructure and electricity. It aptly points out that universal recognition of shortage of electric power and unreliability of power supply are a drag on the pace of India ’s development (Planning Commission, 2006).

In view of the demand for energy set to grow due to greater pull from the economic development needs, the options for primary energy supply from the domestic resources can pose constraint. The evidence and expert opinion, however, suggest that there are plentiful resources, although there are several obstacles in realizing the full potential. This paper investigates some of the implications of fully realizing the domestic energy resource potential for the energy supply and demand situation.

2. Methodology

Given the complex nature of the energy sector, a quantitative model of the integrated energy sector, with primary supply options linked to the various end use sectors through energy transformation sectors as a single system, is an extremely useful tool to study a variety of scenarios. The most attractive features of such tools is that by depicting the systems under study, these tools can quantify the effects of certain variables on a range of other variables at the same time. The strength of large-scale simulation models lies in the fact that these can accommodate a wide variety of variables, ranging from technology,

1 policy to behavioral variables required to capture the dynamics of the societal and economic systems.

Integrated Energy System Model is a bottom-up cost optimization model built for this study. Cost, defined as total discounted system cost, includes the investment cost, variable O&M cost as well as resource cost, is minimized subject to several constraints, depicting the system behaviour. The basic constraint is equilibrium condition under which the supply of a fuel equals its total end-use demand. In other words, the total end- use demand must be met and requisite investment for creating supply is done. Therefore, different levels of demand have different cost implications.

In this model energy demand comes from 6 end-use sectors as Agriculture, Industry, Transport, Residential, Commercial and Others. Among the end-use sectors, transport sector is represented in detail and fuel selection for vehicles is endogenous. The final energy demand is in the form of electricity, coal, various petroleum products, and natural gas. The transformation sectors - electricity and refinery - which convert the primary fuels into usable energy forms, are modeled in detail.

In electricity sector, 20 technologies representing all major technologies - Coal (Conventional/Supercritical; Domestic/ Imported); IGCC (Domestic / Imported Coal/Petcoke); Hydro; Pumped Hydro; Natural Gas (Domestic / Imported / Coal Bed Methane / Underground Coal Gasification-based Gas); Nuclear; Wind (Onshore/ Offshore); Solar; Integrated Solar Combined Cycle; Biomass Gasification/Combustion - and their various characteristics such as plant load factor (PLF), auxiliary consumption, capital cost are considered.

Refinery module is built with considerable detail of the refinery process. It is for the first time that in the framework of system-wide optimization detailed modeling of refinery sector is undertaken.

Five marker crudes are taken to represent the entire spectrum of crudes available in the market. Existing capacities of various refinery units such as Crude distillation, Catalytic cracking, Hydro cracking, Thermal cracking, Visbreaking, Coking, Hydrogen Unit, Reformer, etc. in India in 2000 are estimated from industry sources. Other technologies considered in the model for the future years along with the existing ones are Solid Deasphalting, Alkylation Unit, and Flexicoking Unit. Each crude type produces streams in different proportions, based on its assay, and of different quality attributes of sulfur content etc. Similarly, yield patterns of individual refinery units is also defined as per the industry standards. The streams produced through the various units are blended to make the final products as per the quality specification, where defined. In addition, purchased additives, ethanol in case of Motor Spirit (MS) and Gas-to-liquids (GTL) and Biodiesel in case of High Speed Diesel (HSD), are also considered for blending to meet the quality specs. Among the final products, MS and HSD have to meet the quality specifications for sulfur.

2 3. Demand projection

End-use sector demand is the primary input requirement to the bottom-up optimization models. There are two steps in finding the energy demand in each sector. In the first step, the demand in physical units, say passenger transport demand or million tons of steel is projected. Sectoral GDP, or overall GDP depending on the case, determines end-use sector demand of the first step through intensity and autonomous energy efficiency improvement parameters.

In the second step, based on the input-output structure of a given sector, the demand for energy in its various forms coal, oil, gas, electricity, etc. is determined. For industries, this can be formulated in a complex way by mapping all the relevant processes of the concerned industry. However, since in this study we are focusing on the technology selection for electricity, transport, and refining sector, we adopt a simpler approach of determining the energy demands for different industrial sectors based on their energy intensity for the benchmark year, year 2000, and an autonomous energy efficiency improvement parameter.

The key drivers for demand projections are economic growth and population, and their respective dynamics. a. Key driver - economic growth

Between 2000 and 2005, average yearly growth has increased to 6.3%. During this period a clear break from the historic low rate of growth has been experienced.

Over the years there has also been a structural change in the composition of the GDP. The share of agriculture has steadily fallen from around 46% in 1970-71 to 20% in 2004 05, while the share of industry has increased from around 22% to 27% during the same period. The share of services has increased from around 32% to 52% during the same period.

During the successive plan periods the Per capita Income, at constant 1993-94 prices, has increased from an average of Rs 3,909 per capita in first five-year plan to Rs. 10,207 in 1999-2000. The average per capita income in constant terms was Rs 5,367 during the 1978-80 annual plans. Thus it has roughly doubled in the last 20 years.

Projecting over the long-term, a growth rate of 6% per year results in 20 times higher GDP in 2050 over 2000. At higher growth rates of 7% and 8%, it would grow 32 times and 51 times respectively in the same period (Fig. 1).

Per capita GDP is projected to increase from Rs. 11,762 ($375) in 2000, growing at a rate steadily increasing from 4.6% in 2005-2006 to 6% by 2050, to reach Rs. 1,73,210 ($5,522) in 2050. Higher per capita GDP will increase demand for cars, 2-wheelers and consumer durables such as air conditioners, televisions, washing machines, refrigerators, computers etc., resulting in higher energy demand.

3 25000

20000

15000

“ 10000

2030

Figure 1. GDP Projection under different growth rates

The per capita GDP in 2050 would still be far below the 2004 level in developed countries such as US ($41,400), Japan ($37,180), and Germany ($30,120). This projection implies that India would not classify as a High Income Group country. According to the currently prevalent classification of World Bank, countries in the High Income Group have their per capita income of more than $10,066.

In the reference scenario, GDP growth has been considered constant at 6.5% for whole period of 2000-2050 in all scenarios. Agriculture growth rate declines from 3.2 % in 2000-05 to 1.5 % in 2025-30 and maintains at that level after that in all scenarios. Reference scenario is mainly Services led growth. Services GDP reduces slightly from 8% at current level to 7.1% in 2045-50. While Industry GDP growth reduces from 6% at current level to 5% in 2050. In reference scenario, share of Agriculture reduces from 24% in 2000 to 5% in 2050 while share of services increases to 77% in 2050 from 49% in 2000. Share of Industry reduces to 17% in 2050 from 27% in 2000 (Fig. 2).

In recent years, the growth of software and knowledge industry has been very impressive. India has become a leading nation to provide outsourcing (BPO) services, biotechnology, pharmaceuticals, industrial design, tertiary health-care, etc (Planning Commission, 2005). Income elasticity of demand for services is generally greater than unity. Thus as real per capita GDP grows, the demand for services increases more than proportionally, and this in turn, reinforces GDP growth.

4 □ Agricultural ■ Manufactuirng □ Services

Figure 2. Projected share of components of GDP in reference case b. Key driver - demographics

India ’s population, which at the turn of the 20th century was only 238 million, has increased by more than four times in a period of hundred years, to reach 1,027 million in 2000. The annual average growth in population has been declining since 1971. It was 2.26% in the period 1971-1981, 2.13% during 1981-1991 and has declined to 1.95% during 1991-2001 and further to 1.7% in 2000-05.

The long-term objective of National Population Policy (NPP), adopted by the Government of India in 2000, is to achieve a stable population by 2045. It was envisaged that if the NPP is fully implemented, the population of India should be 1,013 million by 2002 and 1,107 million by 2010. However by 2001, India had already exceeded the estimated population for the year 2002 by about 14 million. Thus it is going to be a great challenge to stabilize India ’s population at a level consistent with the requirements of sustainable economic growth, social development and environment protection.

According to UN, India ’s population will be around 1.4 billion in 2025 and it will reach 1.6 billion by 2050 (UN, 2005). Table 1 shows the Govt, of India ’s projection of future population growth till 2026, which is in line with the UN projection.

Table 1. Population projection (Government of India, 2006) Population Urban Share Million Persons % 2001 1,029 27.8 2011 1,193 30.0 2016 1,269 31.1 2021 1,340 32.3 2026 1,400 38.2

5 In keeping with the above projections, for purpose of the reference scenario, population growth rate is assumed to reduce from 1.7% in current period to nil in 2045. Hence the population is projected to be around 1.5 times that in 2000 at 1,589 million in 2050.

Figure 3. Indian Population Projection in this study

The urban population has increased from about 17% in 1950 to about 28% by the end of century. Compared with world, where the urban share increased from 29% in 1950 to 47% in 2001, and the more developed regions, where it increased from 52% to 74% in last 50 years, the growth in urban share in India has been slow.

In India, urban population leads a highly energy intensive lifestyle characterized with high usage of modem and sophisticated items, such as refrigerators, washing machines, geysers, cooking appliances etc. As opposed to this, rural households in India even today use cow dung and wood as fuel for cooking with very little use of modern appliances due to lack of electricity. Therefore, the main implication of growing urbanization for energy is that a switch occurs away from non-commercial source to the use of commercial energy. Further, for commuting, people in cities have a preference for cars, which consume more energy in per capita terms than the public transport, the preferred means in rural areas.

While Govt, of India assumes 38% urbanization by 2026 (Table 1), UN projection of urban share goes to 41% by 2030 (UN, 2006). We have extrapolated the same trend to 2050 and assume that share of urban population would increase to 50% by 2050.

Average household size in urban population is projected to reduce from 5 persons per household in 2000 to 4 persons per household in 2050 while in rural population, it is projected to reduce from 5.5 persons per household in 2000 to 4.5 persons per household in 2050. As a result, number of urban households are projected accordingly to increase from 57 million in 2000 to 151 million in 2050 while number of rural households increase from 133 million in 2000 to 219 million in 2050. In all, 190 million households in 2000 would increase to 370 million in 2050.

6 c. Sector-wise demand projections

i. Transport

For transport sector, we have determined the first step of finding the passenger and freight transport demand. Demand for petroleum products and other energy needs, say electricity for railways, is calculated inside the model given the various assumptions about the structural and intensity parameters.

Planning Commission (2004) estimates freight traffic to grow to 5,490 BTKM and passenger traffic to 11,763 BPKM by 2020. Estimates of Planning Commission mean five fold increase in just 20 years. This appears extremely difficult to achieve. In our reference case, demand growth for passenger transport is linked to the overall GDP growth. By this method, passenger demand of 2649 BPKM in 2000 increases to 7,727 BPKM by 2020. Freight transport demand is linked to Manufacturing GDP and assumed to be growing at the 0.8 times the rate of Manufacturing GDP. Freight traffic demand works out to 1,870 BTKM by 2020. Both projections are much conservative compared to Planning Commissions projections (Table 2). Projections for the year 2050 for freight and passenger traffic are 3,968 BTKM and 51,111 BPKM respectively.

Table 2. Comparison of projection to year 2020 Transport demand Planning Commission This study Vision 2020 Passenger Transport (BPKM) 11,763 7,727 Freight Transport (BTKM) 5,490 1,870

ii. Agriculture

Electricity is used in the agricultural sector mainly for pumping ground water for irrigation. The number of electricity driven pump sets has increased from just 21,000 in 1950 to about 14 million in 2004. Electricity demand from agriculture is projected based on the electricity intensity. Electricity intensity of agriculture for year 2000 is calculated as the electricity consumed to produce a unit Gross Value Added of Agriculture. In the second step, the electricity intensity assumption for future years, whether it improves or remains same, is taken and applied to the projected GVA. iii. Industry

Although the share of industrial sector has declined from 63% in 1950 to about 34% during 2000-01, this sector still remains the largest consumer of electricity in India.

Electricity demand from industry is projected based on the electricity intensities of major energy-intensive industries. Electricity intensity of an industry for year 2000 is calculated as the electricity consumed to produce a unit Gross Value Added of that industry. In the

7 second step, the electricity intensity assumption for future years, whether it improves or remains same, is taken and applied to the projected GVA.

Industrial demand for Kerosene is assumed at its current levels of intensity to GDP and the same is maintained constant through out the model horizon. Petrochemical, Fertilizer and Power are the current segments of demand for naphtha. Power and Fertilizers are fast replacing naphtha with other fuels hence the naphtha demand from these segments was phased out by 2010. Natural Gas replaces naphtha in Petrochemical slowly starting at 5% replacement by 2010 and increasing to 30% replacement by 2050. Unlike other petroleum products FO and LSHS find a vide variety of uses in various sectors of industry hence the demand for the products is envisaged at their current intensities to GDP growth. iv. Residential

There is a clear trend of increasing penetration of television, computers, Air conditioners, washing machines, microwave oven and other white goods, which require quality electricity. Decreasing number average household size, resulting in higher growth of number of households than the population growth, further reinforces the white goods penetration trend. Detailed analysis has been carried out to assess the electricity demand in the residential sector, by forecasting demand and consumption in each of such appliances.

Electricity demand in residential sector is based on the projected penetration of white goods in households. Projection of white goods in households is obtained from the logistic function based on the maximum penetration that can be achieved over a defined period.

As for other fuels, domestic LPG demand has been derived as factor of penetration of LPG into households in both urban as well as rural. It is assumed that urban switches to 100% to LPG as domestic fuel in coming 10-15 years. On the other hand, penetration of LPG in rural households will rise from current 14% to 55% by the year 2050. Demand for Kerosene in India will be on decline side as urban as well rural households will be shifting from kerosene to LPG. Current level of 30% penetration in urban was bought down to zero by 2025 and 87% of rural penetration was brought down to 45% by 2050. v. Commercial and others

Commercial demand for LPG also has been derived as a dependent of the GDP. The intensity of Commercial LPG consumption to GDP growth has been taken and the same has been applied to the future years. Similar method of demand calculation has been applied for LPG demand from others. Also a portion of the demand comes endogenously from the transport model where option to switch from current fuels to LPG base was provided. From the summation of three demand segments of LPG, LPG generated from fractionators is netted of arrive at the country’s final LPG demand which then goes as an

8 exogenous input to the refinery model. Electricity for ‘Others’ sector is also based on the electricity intensities for the year 2000, in a similar fashion as for industry.

4. Energy supply options from domestic resources a. Coal Coal is the mainstay of Indian energy system with vast indigenous reserves. Geological estimates place India ’s coal estimates in 2005 at 248 billion tons. Of these only about 93 billion tons are proved reserves. The rest are indicative or inferred. According to the Expert Committee report, only 52 billion tons of the proven coal reserves are extractable (Ministry of Coal, 2005; Table 3).

Table 3. Total Coal Resource in India (Billion tons) as on 1.1.2005 Proven Indicated Inferred Total 93 117 38 248 Source: Ministry of Coal, 2005

The domestic reserves of coal are geographically not evenly spread. Coal needs to be transported over different distances from the pithead to the consumption centers. Cost of coal also depends on the mine characteristics and the mining technology employed. Therefore the coal cost can be considered to be composed of two independent variables, extraction cost and transportation cost. Imported coal is competitive in coastal locations, at large distances away from the pithead. Non-availability of high quality coal also necessitates coal imports by companies on present day. b. Oil As of April 2005, India had crude oil reserves of 739 million tons. Crude oil reserves have been on a declining trend after having reached a peak of 806 million tons in 1990 91, but they have improved from a low of 660 million tons in 1998-99 (CMIE, 2005). c. Gas India has very limited reserves of domestic natural gas and will have to be increasingly dependent on imported natural gas for meeting energy and non-energy demand requirements. In the power sector, coal based generation is facing competition from natural gas at locations away from the mines. The economically exploitable domestic reserves had peaked at 735 BCM at 1992 and fell steadily till 2000. In recent years new discoveries of gas have been reported resulting in new highs in overall natural gas reserves reaching 923 BCM in 2003 and the life of reserves is renewed to 29 years (CMIE, 2005). d. Hydro-electricity The Central Electricity Authority (CEA) has worked out the theoretical hydro potential of the Indian rivers as also the economic hydroelectric potential. The assessment of hydroelectric potential is based on water availability corresponding to a 90% dependable year. 90% dependable year is a year in which the annual energy generation has the probability of being equal to or in excess of 90% of the expected period of operation of

9 the scheme. On this basis the total theoretical potential of the river systems in India at 60% load factor was assessed as 3,01,117 MW, and the economic potential as 84,044 MW. The firm potential works out to be 50,426 MW.

A “50,000 MW Hydro-electric Initiative” has been launched in 2003 by the Prime Minister, under which preparation of Preliminary Feasibility Reports for 162 hydroelectric projects in 16 states has already been completed (CEA, 2006). e. Nuclear electricity Nuclear power has an increasingly important role to play both globally and in India for electricity generation and in providing energy security while ensuring sustainable development, given that the resources of fossil fuels are finite.

India is one of the few countries in the world and the only one among the developing countries to have achieved self reliance in all aspects of nuclear power generation, starting from the prospecting and mining of uranium, the fabrication of fuel assemblies and the production of heavy water, to fuel reprocessing as well as plutonium recycling.

India is endowed with limited uranium resources. But its thorium resources are vast. India ’s nuclear power development program takes into account this. f. Renewables Though the present contribution of renewable energy is small, existing capabilities offer the flexibility to respond to emerging environmental and sustainable development needs. Renewable energy technologies (RETs) have significant untapped potential and have the advantage of being environmentally sustainable.

Small Hydro Power: Estimates place the small-hydro potential in India at 15,000 MW. Since a large potential of this technology exists in remote hilly areas, development of small hydropower for decentralized power generation leads to rural electrification and local area development. The gestation period of the technology is low and the indigenous manufacturing base is strong.

Wind Power: Wind energy is one of the clean, renewable energy sources that hold out the promise of meeting energy demand in the direct, grid-connected modes as well as stand alone and remote ‘niche’ applications (for instance water pumping, desalination, and telecommunications) in developing countries like India. Estimates place the economical wind energy potential in India at 45,000 MW (MNES 2006).

Biomass-based Power Generation/Cogeneration: The aggregate biomass combustion based power and sugar-cogeneration capacity by the end of December 2005 was 863 MW, with 491 MW of cogeneration and the rest biomass power. In the area of small- scale biomass gasification, a total capacity of 70 MW has so far been installed, mainly for stand-alone applications (MNES 2006).

10 Biomass based power generation offers environmental benefits such as reclamation of degraded land and improvements in land productivity, lower level of emissions of GHGs as well as local pollutants. Organized production of wood fuels (through commercial or co-operative sector) and modernized conversion has potential to make wood fuels a competitive commercial fuel vis-a-vis the fossil fuels. Power projects based on biomass plantations have the potential to offer new avenues of employment through collection, storage, handling and utilization of biomass materials especially in rural areas, promote rural industries and generate rural employment. Besides, energy plantations can become means to restore deforested and degraded lands in tropical and subtropical regions.

Solar Technologies: Solar Photovoltaic (SPV) at present contributes a tinytwo and a half percent of the power generation based on renewable energy technology in India, with an aggregate capacity of 47 MWp deployed for different applications (MNES 2006). Solar thermal technologies have a very high potential for applications in solar water heating systems for industrial and domestic applications and for solar cooking in the domestic sector. Solar Thermal Power Generation potential in India is about 35 MW per Sq. Km Dissemination of SPV technology has been undertaken by a technology-push approach adopted by the government. g. Unconventional oil and gas resources in India Coalbed methane: Due to limited exploration activities till a few years ago, the estimates of Coal bed methane (CBM) potential in India made by various agencies vary widely, from about 800 BCM to as high as 8,000 BCM. However, the shear magnitude of these estimates makes CBM a potentially large source of energy in India in the coming years.

Shale oil: Oil India and others have shown that shale rocks are still preserved at the upper Assam, Arunachal Pradesh and Nagaland over the area covered by the Naga and Patkai hill ranges. The rock volume is around 7500 cubic km, equivalent to a rock weight of 150 billion tons, translating into shale oil reserves greater than 15 billion tons (The Financial Express, 2006). Currently Estonia, Brazil and China have ongoing shale production.

Gas hydrates: India has a total offshore gas hydrate resources of 1894 trillion cubic meters, which are 1900 times the country’s current gas reserves. Even if the country is able to tap 1% of the estimated gas hydrate reserves, our energy requirement for the coming decades can be met.

Geyser power: A hot spring is a continuous source of heated water with temperatures ranging from 50 deg C to 120 deg C (essentially, a mixture of water and steam). This can be used in two ways: one, the heat can be transferred to warm homes and for other small industry uses, and two, the water can be heated to produce steam to run turbines and generate electricity. Such projects are successful in the US, the Philippines, Italy, Japan, China and Guatemala. Given that 400 hot springs dot India from the west Himalayas to Sikkim, Bombay to Udipi, Cambay to Bangladesh, Godavari basin, Mahanadi basin, and Gujarat, the potential for geothermal energy is huge but it remains to be seen how much of it becomes commercial.

11 5. Future of the energy supply options a. Energy mix For a growth rate of GDP at 6.5%, the primary energy in the reference case would increase more than nine-fold from 332 MTOE to 3103 MTOE by 2050, as shown in Table 4. This implies a growth rate of 4.6% per year. Coal continues to have the majority share among all sources. Crude oil and gas also increase in absolute terms nine-times and 17-times the levels of 2000 over the 50-year horizon. Contribution of hydro remains low as also that of nuclear and renewables.

In terms of per capita consumption, the situation is likely to improve although the much talked about target of 1000 kgoe/person will not be reached prior to 2035 (Table 5). By 2050 the nation would be consuming more than 1950 kgoe/person. While the overall energy consumption increased nearly 9 times the energy intensity falls from 0.87 kgoe/US$ to 0.42 kgoe/US$ by 2050.

Table 4. Primary Energy Consumption (MTOE): Reference Case______2000 2010 2020 2030 2040 2050 Crude Oil 105 159 243 375 604 965 Natural Gas 25 70 115 185 295 441 Coal 181 311 519 810 1,187 1,675 Hydro + Renewables 18 18 18 18 18 18 Nuclear 3 3 3 3 3 3 Total 332 560 897 1,3922,106 3,103

Table 5. Energy Indicators: Reference Case 2000 2010 2020 2030 2040 2050 Per capita energy consumption, kgoe 325 458 647 922 1,332 1,963 Primary Energy Index 1 1.69 2.71 4.20 6.35 9.36 Energy Intensity, kgoe/US$ 0.87 0.79 0.71 0.61 0.50 0.42 b. Import dependence Table 6 and Table 7 show the supply of primary energy from domestic production and imports respectively in the reference case. Coal supplies are robust, with production reaching 485 MTOE by 2050 from the currently prevailing levels of around 172 MTOE. Still this is not sufficient to meet the entire demand of coal and necessitates imports to the tune of 1,190 MTOE in 2050. Coal imports are steadily increasing from 8 MTOE in 2000.

Natural gas production will also improve considering exploitation of the new finds, coal bed methane and underground coal gasification potential. However, large amounts of natural gas will have to be imported in order to meet the increased demand for natural gas. While natural gas production reaches 89 mtoe (98 bcm) the imports are of the order of 353 mtoe (392 bcm) in 2050.

12 Table 6. Primary Energy Domestic Production (MTOE): Reference Case 2000 2010 2020 2030 2040 2050 Crude Oil 33 31 25 0 0 0 Natural Gas 25 42 62 77 84 89 Coal 172 234 296 359 422 485 Hydro + Renewables 18 18 18 18 18 18 Nuclear 3 3 3 3 3 3 Total 251 329 405 457 527 595

Table 7. Net Imports (MTOE): Reference Case 2000 2010 2020 2030 2040 2050 Crude Oil 72 128 218 375 604 965 Natural Gas 0 27 53 107 211 353 Coal 8 77 222 452 765 1,190 Total 80 232 492 934 1,580 2,508

Domestic crude oil production remains flat and beyond 2030 every drop of oil consumed in the country is envisaged to be imported. This is very alarming and rapidly India would be rising in the ranks of largest oil importers in the world. c. Electricity demand and electricity mix Electricity demand in reference scenario grows from 541 TWh in 2000 to 5385 TWh by 2050 at 4.6% CAGR (Table 8). Since in this model the market is assumed to be in equilibrium, an equal amount of supply is generated by electricity sector. Per capita consumption grows from 531 KWh in 2000 to 3400 KWh by 2050. The projected per capita consumption is far lesser as compared to the current level of per capita consumption in leading economies in the world (e.g., for 2001, per capita consumption in Canada was 18,212 KWH and in US it was 13,241 KWh). Even comparing with current levels in some developing countries such as Malaysia (3,039 KWh) and Mexico (2,228 KWh) gives the same picture (OSH, 2005).

The challenge of meeting this demand would be to build the requisite capacity, which is projected to increase almost 10 fold over the 50-year horizon. From about 102 GW in 2000 the total capacity required would be 1,186 GW in 2050 (Table 9). In reference scenario, share of coal-based capacity would increase from current 60% to 65% of the total installed capacity. Gas-based capacity increases from 371 GW by 2050.

Table 8. Electricity Sector Indicators: Reference Case 2000 2010 2020 2030 2040 2050 Electricity Generation TWh 541 982 1,764 2,834 4,028 5,385 Per Capita kWh 531 803 1,273 1,8772,548 3,406 Per Capita Consumption Index 1 1.5 2.4 3.5 4.8 6.4

13 Table 9. Electricity Generation Installed Capacity (GW): Reference Case 2000 2010 2020 2030 2040 2050 Coal 61 121 237 394 570 775 Natural Gas 10 81 133 203 282 371 Hydro 25 25 25 25 25 25 Nuclear 3 3 3 3 3 3 Renewables 2 2 2 2 2 2 Petcoke 0 1 3 6 10 10 Total 102 233 402 634 892 1,186 d. Transport sector In the reference case, as GDP growth continues to be 6.5% there is an explosion of vehicles required by year 2050. At present, two-wheeler stock is 36 million. By 2050 its requirement increases to 321 million. Similarly for car, present stock is 5 million, by year 2050 it increases by 18 times to around 93 million. Number of cars per thousand persons is increasing from 5 at present to 14 by 2025 and 59 by year 2050. Overall passenger vehicle stock is increasing from 44 million to 470 million, which is more than 10 times the present stock. This is by no means a small task at hand. Kind of roads and highways required to support this sort of traffic will be enormous. Unless there is de-bottlenecking of existing infrastructure soon, the dream of achieving high growth will not fructify.

Overall freight vehicle stock increases from 2 million to more than 6 million. This appears to be less compared to passenger vehicle stock growth. This is because the reference case is service sector-led growth case and freight transport is linked to manufacturing activity.

Diesel and Petrol demand in transport sector increases to 330 and 180 MT by 2050 from present level of 36 and 7 MT respectively. e. CO2 emissions CO2 Emissions from all energy sources increase more than 4 times by 2030 and by more than a factor of 10 by 2050 in the reference scenario. Again, as in the case of energy consumption, this is very large increase but inevitable if there are no major changes in the energy mix. Among the sectors, the share of CO2 emissions from electricity is about 45% at present and increases to nearly 55%. On absolute level, electricity CO2 increases 6 times by 2030 and nearly 15 times by 2050. The level of CO2 emissions from road transport also grow very sharply from 95 Mt-CO2 in 2000 to 1694 Mt-CO2 by 2050. Industry sector emissions grow nearly 10 times in the 50-year horizon. The emissions from domestic and agriculture sector grow by 2 times and 4 times in 50 years respectively.

14 14000

12000

10000

o 8000 o 2 6000

4000

2000

2000 2010 2020 2030 2040 2050

Figure 5. C02 Emissions in Reference scenario

□ Commercial ■ Residential □ Agriculture □ Industry ■ Transport □ Electricity

2000 2010 2020 2030 2040 2050

Figure 6. Share of sectors in C02 emissions in Reference scenario f. Scenarios The baseline in this study is the fossil-dominant scenario and is built in a way that apart from coal-based and gas-based electricity generation capacity, no other new capacity is installed. While this result may look completely impractical, several hindrances in the way of nuclear, hydro and renewables-based electricity could come in way of greater use of these resources, making our baseline close to what could be one of the cases.

As mentioned earlier, the objective of this paper is to analyze the implications of fully realizing the domestic resource potential for energy supply and demand situation in India. Several scenarios were built to this end. For electricity generation, realizing full potential of hydroelectricity and nuclear power, reasonable penetration of gas and renewables, and increased energy efficiency of coal-based thermal power plants were considered. For transport and transport fuels, diffusion of alternate fuel vehicles, introduction of suburban rail mass transport in mega cities and introduction of new vehicles with increased fuel efficiency were considered. These are named Scenario 1 through 3 and described in Table 10. The main results for these three scenarios are given in Table 11.

15 Table 10. Scenario description Scenario Description Scenario 1 Full potential of Hydro, Nuclear and Renewables for electricity generation Scenario 2 Efficiency Improvement transport vehicles in addition to Scenario 1 Scenario 3 Combining demand side scenarios for transport (Introduction of alternate fuel vehicles, Increasing mass transport, Increasing railways share) with Scenario 2

Table 11. Key results from scenarios 2030 2050 Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3 Primary Energy Consumption (MTOE) Crude Oil 375 277 247 965 678 553 Natural Gas 199 199 201 472 472 482 Coal 647 652 655 1 ,229 1,229 1,240 Hydro + Renewables 96 96 96 128 128 128 Nuclear 87 87 87 371 371 371 Total 1,404 1,311 1,285 3,165 2,878 2,774 Indicators Per capita energy consumption, kgoe 930 868 851 2,002 1,821 1,755 Primary Energy Index 4.2 4.0 3.9 9.5 8.7 8.4 Energy Intensity, kgoe/US$ 0.61 0.57 0.56 0.42 0.39 0.37 Imports (MTOE) Crude Oil 375 277 247 965 678 553 Natural Gas 122 122 123 383 383 393 Coal 288 293 296 744 744 754 Installed Capacity (GW) Coal 257 261 263 393 393 402 Natural Gas 180 180 180 310 310 310 Hydro 156 156 156 240 240 240 Nuclear 65 65 65 275 275 275 Renewables 98 98 98 169 169 169 Petcoke 6 2 0 10 10 3 Total 761 761 762 1397 1397 1 400

CO2 (Mt-CO2) 4244 3965 3894 8978 8072 7856

6. Analysis of results

We analyze the results obtained through our modeling study in light of on-going debates on the topical issues of important facets of India ’s energy policy with respect to its future in an interdependent world. We make three broad assertions. One, the role of nuclear in India ’s electricity sector could be quite meaningful. Second, energy efficiency is the corner stone of achieving any sense of energy security. And third, India ’s development policies are sufficient to make India a low carbon economy for many years to come.

16 a. Role of nuclear power generation

It is seen from the results of our study that even at a conservative GDP growth of 6.5%, the installed capacity requirement by 2030 would be around 634 GW. Planning Commission in its recent Integrated Energy Policy has assumed installed capacity requirements by 2032 of 627 GW in 7% growth scenario and 778 GW under 8% growth scenario. This means additional capacity of 400-600 GW by 2030 under varying set of assumptions.

Even after full exploitation of India's additional hydro potential, there would be a massive gap to be filled up by fossil fuels, if no thrust is placed on nuclear.

Gas-based capacity realization of 310 GW by 2050 (203 GW by 2030) in our scenarios is under price assumption of $3-4 /MMBTU. Gas prices are now prevailing at $ 7-8 / MMBTU. Iran-India gas pipeline is a big question mark due to geopolitical complexities. Planning Commission in its Integrated Energy Policy report assumes gas based power capacity addition of almost 100 GW by 2030. Given the high gas prices in the international market, plentiful LNG supplies nowhere in sight, and end use power prices tightly capped, it is highly likely that even such gas-based capacity additions will not materialize, requiring alternative technologies.

As for coal, as mentioned earlier, the proven reserves are only about 93 billion tons, and they are not expected to last beyond 2045 or so. There is a big uncertainty on the 248 billion ton figure, which includes indicated and inferred estimates, and could be speculative, without proper assessment. Further, out of 93 billion tons of proven reserves, only 52 billion tons are extractable.

Planning Commission in its Integrated Energy Policy report assumes domestic coal based power capacity addition of 250-300 GW, but then the coal requirement would be at least 1,100 million tons / annum or nearly three fold jump from current levels of production. The domestic coal resource is expected to be fully exhausted by 2045 and will need replacement on gigantic scale in a short period if advance action on setting up nuclear power is not taken.

While it may be true that large scale nuclear capacity may not come up by 2015, but unless the Stage 1 and Stage 2 of the nuclear power generation program are not completed as planned, the Stage 3 program based on thorium can not be effective, which is crucially required for later part of the planning horizon.

Several countries like US, UK, France, China and Japan are admitting that nuclear is the only way for large-scale capacity addition, which achieves several objectives - energy security / low emission technology and sustainable source for not just decades but possibly for centuries. To this end, the Global Nuclear Energy Partnership (GNEP) of US government seeks to develop worldwide consensus on enabling expanded use of

17 economical, carbon-free nuclear energy to meet growing electricity demand (http ://ww w .gnep.energy.gov/).

The recent passing of “Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006 ”, or the Hyde Bill, in the US, paving way for cooperation between India and US on civil nuclear energy had resentment from some quarters. In India, a major opposition of the nuclear deal between India and US is that it would lead India to import expensive technology from US. Contrary to this, we consider, not only India does not have to import any technology it can take a position in exporting technology. India has developed the necessary technology at much lesser cost compared to the US. The fact that no nuclear capacity has been set up in advanced countries for decades, is a clear advantage for India for exporting technologies, in which India has attained self sufficiency.

While it is not correct to say that nuclear power ‘alone ’ is necessary for India ’s energy security, without nuclear power the burden on other means would be insurmountable. Energy infrastructure has a large inertia and requires long lead times for development, and if properly done, then becomes a national asset for decades and more. One has to therefore essentially look at long-term trends and that is where nuclear scores over all other resources for power generation. b. Role of energy efficiency

Energy intensity, measured by energy consumption for a unit of GDP, in 2000 was 0.69 kgoe/2000US$ GDP (0.87 kgoe/1993US$ GDP as mentioned in Table 5). This was way above the world average of 0.3. The energy intensity in developed countries was further below the world average in the range of 0.1 for Japan to 0.23 for the USA (Fig. 7).

The developed countries have experienced decline in energy intensity since 1970s as a result of their energy efficiency efforts immediately after the first oil shock. The decline in energy intensity for China has been very rapid in the 1980s and 1990s. In comparison, India ’s energy intensity has seen a slower rate of decline in energy intensity.

‘X - -X - -X - .y ■ -y ■ .y ■ -X - -X - "X - -X - -X - -X - -X - -X - -X - -X - -X - »y

USA —B—France —&—Germany------UK —x—Japan

Figure 7. Energy intensity (kgoe/2000 US$ of GDP)

18 Examining various sectors in some details reveals the following trends and potential of energy efficiency.

Industry Sector. The industrial sector is the largest consumer of commercial energy in India and accounts for about half the total. Energy intensive industries like fertilizers, aluminium, textiles, cement, iron and steel, pulp and paper and alkalis consume about 65 per cent of industrial energy. In most sectors, India compares poorly with other developed countries primarily due to low quality of raw materials (e.g., iron & coal), small scale of operation, inadequate operational practices and the use obsolete technologies. The Asian Development Bank reports that the Indian industrial sector has energy saving potential of 49,000 GWh by efficiency measures (ADB, 2006).

Agriculture: The agricultural sector consumes about 9 per cent of total commercial energy but is said to account for about 27 per cent of power consumption in India. Prayas (1996) suggests that implementation of better efficiency standards in irrigation pump sets (IPS) alone can save USD 115 million per annum.

Commercial, Residential and Service Sectors: The household sector is responsible for about 25 per cent of total primary energy consumption of which non-commercial sources form a large part. As per 10th Five-year Plan document, in lighting alone (for domestic, commercial and industrial sector) there is a scope for potential energy saving of 10,000 Million KWh. Bureau of Energy Efficiency (BEE) of India, by its pilot audit of government buildings in Delhi, concluded that there is potential for saving 30 percent of power in most buildings.

Past efforts in India, by the way of policy, strongly suggest that India has not been far behind in introducing energy efficiency initiatives compared to other countries. But the efforts of the Government have so far been fragmented. Setting up of Petroleum Conservation Research Association (PCRA) in 1978 to conserve petroleum products was the first effort by Indian government towards energy efficiency. PCRA covers a broad range of activities such as conducting energy audits, educational campaigns, award programs, R&D support by field trials etc., training and development and so on. In electricity sector, Demand Side Management (DSM) campaigns, floated by several state electricity boards, had mixed results of success.

Comparing past efforts of India with those in China shows that since 1950s plans of neither of these countries featured energy in general or energy efficiency in particular as a plan subject until the early 1980s. Between 1980 and 1990, several efforts in China included establishing over 200 energy management offices at all levels of the government to manage, monitor, implement and enforce rules and standards for energy conservation. Predominant strategy was to control energy intensity and energy supply through quotas and providing fiscal incentives and low cost loans for investment in energy efficiency through the new China Energy Conservation Investment Corporation (CECIC). In recent years, China has introduced annual conservation plans for end use efficiency and productivity improvement, development of supporting regulations from the Energy

19 Conservation Law at the local and sectoral level, and targets for specific energy consumption levels for key energy intensive industries.

It is no doubt that energy efficiency efforts have net benefits to reap and therefore must be pursued in any case. These low hanging fruits can be plucked to make the leaps towards meeting the objectives of energy security as well as improving economic productivity.

As shown by our results, by incorporating only energy efficiency in transport and electricity generation alone, substantial reduction of energy consumption and CO2 emission of 7% and 31% respectively can be achieved by 2050. A study on benefits of efficiency in electrical systems in India (Lawrence Berkley National Laboratory, 2005) indicates that substitution of baseline equipment in India with high-efficiency models that minimize consumer costs over the lifetime of the equipment would result in an average per-unit relative savings of 45% for domestic refrigerators, 6% for room air conditioners, 20 - 39% for industrial motors (percent reduction in losses), 12% for agricultural motors (percent reduction in losses), and 56%-62% for distribution transformers, translating into NPV benefits of around US$ 5.5 billion to the consumers.

In order to achieve the goal of becoming an energy efficient economy, a multi-pronged approach is required across the sectors and the present efforts should be stepped-up and further strengthened as follows.

Planning Commission estimates that, as of 2002, over 13 million irrigation pump sets were energized throughout India. The same report estimates the total potential for pump- sets at around 20 million by 2020. Energy consumption in Agriculture sector can be reduced by introduction of more efficient pumps.

The major thrust in residential sector should be on improved energy efficiency of appliances, supported by standards and labeling schemes and increasing consumer awareness about the benefits of saving energy, apart from continuation of the DSM measures.

The construction of new commercial buildings should incorporate state-of-the-art technologies for reducing the overall energy load of the building. This includes improved architecture and design of the building, giving importance to measures that maximize the daylight use. This is to be supported by use of compact fluorescent lamps (CFL) and electronic ballasts. In addition, the new building materials should be employed to decrease the cooling/heating load of the building.

The industrial electrical systems, such as motors, transformers, switchgears, need to be more efficient to reduce the electricity consumption. At corporate or plant level, the strategies can include conducting energy audits, formulizing an energy management policy statement, preparing a detailed project implementation plan, implementing a staff awareness and training program, and conducting annual reviews.

20 In transport sector three key elements to achieve energy efficiency are - improving vehicle efficiency, employing public transport systems, and modal shift from road to rail. The new vehicles being introduced in India have nearly as high efficiency as elsewhere in the world, but the overall average efficiency of the vehicle stock in the country is low due to older vehicles not being rolled over. Urban mass transit systems, whether bus or metro, are considered superior choices to move people in cities with million plus population. Only Delhi and Kolkata have Metro Rail system, while Mumbai and Chennai have the rail based urban transport system. Shifting the mobility load away from personal vehicles can reduce the energy consumption in transport sector. India has more freight moving by road as compared to rail, therefore the consumption of petroleum products in transport sector is very high with few substitutes. This can be reversed if share of rail in freight is high.

Finally, Standards and Labeling (S&L) measures, which cut across the sectors are a must for carrying forward the energy efficiency efforts. S&L for industrial motors, electrical household appliances, and other electrical systems should be put in place without any delay. c. India - a low carbon economy

Governments around the world are increasingly implementing policies and measures intended to make their nations a ‘low carbon economy’. The countries leading in this front are mainly UK, European nations and Japan. The UK government’s Energy White Paper of 2003 was the first to set the tone for engaging wide public debates within UK on the subject. Recently the chief executive of Carbon Trust set up by UK government said that moving to a low carbon economy not only addresses an environmental imperative, it makes business sense. Nippon Keidanren (Japan Business Federation) has announced the goal of striving to decrease CO2 emissions in FY2010 from the industrial sector and the energy transformation sector at least to the FY1990 level. Analysts and think tanks in other countries, including the US, too have put forth their ideas for low carbon future for their respective countries.

“Low carbon future” is a relative term. It means moving from a “high carbon ” business- as-usual level to a policy-induced lower one. Our own projections show that even for a more carbon-intensive scenario, per capita emissions in 2050 would be 7.4 tons of CO2 in India. This is lower than present levels in the developed countries (OECD), which averaged 11.3 tons of CO2 in 2003 (EIA, 2006). Still this is not a reason to be complacent about the emission levels, which even with a moderate economic growth of 6.5% may grow 10-fold in absolute terms in next half century.

Future level of emissions would ultimately be the outcome of a number of factors. However, certain key drivers such as overall economic growth and population growth rates play key role in determining the future emission trajectory. There is a consensus among analysts and economists across agencies that India ’s population is likely to stabilize at around 1.6 billion by 2050. Therefore, the key question is whether the current prospects of more than 7% GDP growth would be sustained or would the country grow at

21 higher or lower rates than that. At 6.5% GDP growth, CO2 emissions from energy use would increase nearly 10-fold and the same at 8% would be nearly 18-fold over a period of 50 years. Composition of growth, that is, which sector would lead the growth story in India - services or manufacturing - would also define the levels of CO2 emissions. In case of an overall 6.5% growth where services sector grows faster than manufacturing the emissions grow nearly 10 times in 50-year horizon, while if the same growth were to be with manufacturing sector growing faster the emissions would be nearly 14 times in comparable period.

The awareness level about harmful consequences of global greenhouse gas emissions is very high now. The science may still be far from being conclusive on climate change but fossil fuel based energy production and use has evident relation to carbon dioxide emissions. Given such connections, it is not very difficult to perceive the future levels of emissions either. Today no policymaker in energy sector ignores the carbon consequence of recommendations put forth by him or her. The report of Expert Committee on Integrated Energy Policy of Planning Commission and the draft New and Renewable Energy Policy Statement 2005 of the Ministry of Non-conventional Energy Sources, the most recent policy documents to cite, duly address the issue of future carbon dioxide emissions.

Industry on its part is doing much more than just keeping itself abreast with the latest developments in the field. Indian industry is very active in the market for Certified Emission Reductions (CERs) under the Clean Development Mechanism, which is one of the flexibility mechanisms available for India under the Kyoto Protocol (The Economic Times, 2006). However, this is only a short-term measure by which the industries can gain some mileage by selling the CERs that they generate to countries or companies that have to meet their reduction commitments under the Protocol. In the longer term, industries would also need to switch gears towards more benign production of goods and services.

Purely from the energy supply perspective, several options of ensuring adequate supply are included in the scenarios summarized in the previous section. These measures are not aimed at reducing the carbon dioxide emissions but to generate the options for securing energy supply needed to fuel the growth requirements. In our scenario analysis the effect of the combination of these measures on emissions is significant. Under this scenario, the total CO2 in 2050 are nearly 23% lesser compared to the reference scenario, with emissions from electricity reducing by about 28% and those from road transport reducing by about 55%. Notwithstanding the reason to believe that some of the measures considered in the scenario above seem to be optimistic, the point is that even without considering policies to target carbon emission reduction a well-designed energy policy could define the future low emissions trajectory for India.

One of the important elements of such a policy is providing incentives for energy technology R&D. Technology development has been traditionally the realm of technologically advanced nations. IEA underlines this in one of its recent reports on development of climate-friendly technologies, which says that while developing countries

22 are taking steps to develop such technologies, even if independent of climate concerns, the ‘vast majority of efforts to develop modern alternatives to fossil fuels are concentrated in OECD countries’. The technology thus developed in OECD countries and deployed in developing countries often proves to be a costly for the latter, not only in basic costs but also in bearing the costs of adapting to local conditions, learning to use the technology, and maintenance. Additionally, there are dangers of technology ‘lock-in’ .

The countries outside the ‘core ’ group of nations leading the technology development and diffusion can be grouped as ‘rim’ countries, which, while currently on the periphery, are rapidly catching up and likely to join the core, and others which have little or no endogenous technology development. India can be easily categorized as one of the ‘rim’ countries in the above innovation geography as various emerging trends such as international labor migration and knowledge flows through diasporas and social networks are being observed here, which are important for environmentally friendly endogenous technological developments. With more conducive policies the nation can spur the R&D to develop indigenous solutions for our emerging energy problems. In India and other developing countries, the choice-set of future options to create the backbone technologies is considerably wider than in industrialized countries where the technologies have already locked-in. Investment in infrastructure to meet development needs is still to be done in developing countries.

Shape of second-tier cities and towns is still evolving, as the spatial distribution of the population and economic activities is still not settled in such cities in the developing countries. There are possibilities of technological "leapfrogging" whereby developing countries can bypass dirty intermediate technology and jump straight to cleaner technologies. By taking the right opportunities, developing countries could create such technological pathways to meet their current developmental goals upon which would depend the future technological base required to achieve the desired climate outcomes.

In summary, the choices made today towards the policies of spurring growth, its nature, diversification of supply options, and conducive environment for endogenous technological change could give the desired economic growth and at the same time keep India a low carbon economy.

7. Concluding remarks

Energy security chiefly connotes security of supply in context of countries with strong growth prospects and those who are net energy importers. In the context of globalization, the import dependence for any country is not going to vanish altogether and countries do make efforts to mitigate the risks involved with imported energy, especially oil and gas, by creating partnerships not only at the individual company level but also at the higher or diplomatic levels.

One of the efforts to reduce import dependence is to utilize domestic energy resources to their full potential. Quantification for the Indian energy sector in this study shows that in the case where all our domestic resources are utilized fully, the import dependence

23 (measured as the total import requirement as a fraction of total energy consumption) would reduce to 61% compared to the baseline case of 81%.

An additional benefit from full utilization of domestic resources, which essentially results in greater use of hydro electricity, nuclear electricity and renewables, is that the cumulative CO2 emissions from the energy sector from 2000 to 2050 are reduced by 23% over the baseline, under full utilization of electricity and 32% when energy reduction potential in transport is also combined. CO2 emissions from energy are the main contributor towards the total accounted GHG from the country, with more than 60% contribution at present. These results show a large untapped potential.

The utilization of domestic resources depends, on a large part, on the domestic policies governing the energy sector. Government of India is currently evolving an Integrated Energy Policy through a high level committee, which reports to the Prime Minister. The committee has published its report, comprehensively covering the issues in all the energy sectors and giving concrete suggestions for the policies needed for each of these sectors in such a way that bridges the current gaps in policy. For instance, the report suggests comprehensive reforms in the coal sector, which is the only sector remaining out from the reforms process so far. Further reforms in pricing, taxation and regulatory structure for electricity and oil and gas sectors are also suggested in the report.

The process of reforms in India is nearly 15 years old now. The reforms began in around 1991 with introduction of policies required for broad fiscal correction and inflation control. Restructuring of electricity sector, unbundling of generation and distribution, also started taking shape in one state after another soon after the general reforms started. Oil and gas sector in India also saw several key reforms such as opening up of upstream exploration and downstream retail to private sector investment, rationalization of tariffs and so on. The current dialogue and discussion in the policy circles indicates that the trends of reforms in India are irreversible and further reforms are on the anvil as the nation is setting higher growth targets. The Approach Paper to 11th Five-year Plan has set the target of achieving an average growth rate of 8.5% (Planning Commission, 2006a).

Further reforms and more conducive policies in the energy sector are the need of the hour. When they are put in place their results would be seen a few years down the line and would take India towards a more secure and cleaner energy future.

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