Energy Security has always been a concern for India as it continues to be a net importer of primary energy, mainly Oil and Gas. The import of Oil and Gas, as per estimates of the International Energy Agency (‘IEA’), consistently exceeds 50 % of India’s total Oil and gas requirement.
This situation is undesirable for the health of the macroeconomy as it exposes India to extreme uncertainties in terms of its prices and, more importantly, in terms of the security of supplies. It emerges clearly that ENERGY SECURITY IS NATIONAL SECURITY. Energy independence must be one of India’s policy goals to become a superpower in today’s complex world. Low carbon intensity pathways for developing countries like India are certainly superior strategies towards net zero.
India appears set to become 3rd largest economy in the world soon. Energy independence must be one of the policy goals aligned with the goal of low carbon intensity – for these reasons, it will be essential to accelerate India’s Energy Transition. On the renewable energy front, India has made significant progress over the past decades. There are, however, risks in relying solely on one solution for various sectors of our economy. As a strategy, we must look at multiple technologies and other energy sources over the next few decades. The consequent growth burst will help facilitate a smoother transition. The government has provided a pragmatic approach and framework for this transition by 2070. The only caveat is that it must be supported with a time-bound Macro and Micro Action Plan with accountability to be monitored by the highest body in the government. Perhaps the slow movement in the past leading to the sluggish situation must be arrested. At the same time, it is impossible for a developing country like ours to fall in with the dictates of developed countries to use only non-carbon fuels.
To achieve the objectives, we should move towards low carbon intensity pathways, a superior net-zero strategy. Natural gas, a greener and lower carbon intensity option, is a critical fuel in this category. The world’s natural gas reserves are exceeding 250 years as of now. Natural gas logistics have also tremendously advanced during the last two decades, particularly with the advent of LNG. Therefore, natural gas is the ideal bridge fuel until renewables take centre stage. While India has been strongly advocating for the last decade or so to be a gas-based economy, we have yet to be able to move as fast as needed. We may have been hampered by inconsistent policy issues, leading to insufficient market signals. One of the critical lacunae of India’s policy approach to natural gas has been derived from the mindset of resource shortage and treating it as a non-tradable commodity. Further price regulation and allocations have been a hindrance in achieving a free market for natural gas.
The share of Natural Gas in India’s Energy Basket continues to be 6 to 7 % against the target of 15 % against the world’s current average of 25 %. Accordingly, this period is crucial for India, so we must make sure to use this period strategically and wisely.
To move towards our objectives, we need to debate among all stakeholders and come out with a cogent hydrocarbon and gas policy which will go a long way in :
☸ creation of a stable fiscal framework
☸ pricing mechanism that will establish and promote markets
☸ a marketing structure that ensures fair competition and transparency, providing good governance.
The areas that would require immediate attention are as follows:-
1. Ensuring stable resource availability can be achieved by enhancing domestic oil and gas production. We must revive and enlarge the Production Sharing Contractual (PSC) system. Long Term LNG Contracts, along with enhancing capacities to Regas through new terminals and expanding existing capacities will go a long way to make greater use of natural gas, leading to at least a 15 % share of Natural Gas in India’s Energy Basket.
2. Establish a National Pipeline Grid to ensure uninterrupted supply. The dilemma of whether “Markets First” or “Infrastructure First” should be dispelled – the grid should be established in a similar concept as Roadways and Railways, perhaps by levying Cess if needed.
3. It is critical to unbundle transportation and marketing of natural gas to ensure the security of supplies and market development, allowing consumers to benefit from a liberalized market environment.
4. It is imperative to ensure the viability of gas-based power through policy reforms in the electricity markets with a mechanism that provides flexible pricing.
5. India should continue to pursue and explore the creation of Cross Country Pipelines for low-cost imports, including the Sub-Sea Corridor that connects key gas-producing nations in the Gulf Region. Such a step will ensure the security of supplies with viable transportation costs. Such interdependence will contribute significantly to National Energy Security and Regional Stability.
The preceding appears in line with decisions taken in the recently concluded G-20 summit wherein the US, Europe, Saudi Arabia, UAE, and India have decided to create an Economic Corridor. Including a Gas Pipeline alongside will be a game changer for India and needs to be closely pursued. Finally, I see a welcome development in this context of Energy Security and Energy Transition by giving thrust to biofuels such as bio-diesel, bio-gas, and ethanol. The Union Cabinet has cleared the Global Biofuel Alliance (GBA), which could speed up the development of multiple system low carbon energy pathways, and it emerges as one of the key takeaways from the weekend summit of G- 20 leaders. It will reinforce India’s position in the fight against Climate Change. Biofuels are a sustainable source of energy which helps reduce vehicular emissions and raise farmers’ incomes and dependence on imported oil and gas for India.
Sources: Author’s Experience
Citation: This insight may be cited as InfEneTy ‘Energy Transition for Energy Security’ 20.09.2023
Tags: Energy, Energy Transition, Energy Security, Natural Gas, Gas Based EconomyAbout InfEneTy
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