In the post-war decades securing oil supplies at reasonable prices and developing capabilities to ward off ‘oil crises’ were at the crux of energy security strategies of India. India sought to strengthen its energy security through :
(a) investments in domestic oil production for increasing self-sufficiency
(b) investments on global oil equity assets to control ownership of supply sources
(c) development of diplomatic ties with oil producers for favourable terms of trade and
(d) investments in non-fossil alternatives such as nuclear power and renewable energy.
These supply centric strategies are reiterated in most of India’s planning and policy documents including the most recent ones.
In the last decade historic rationales for energy security have evolved or changed considerably and new security concerns arising from environmental degradation caused by energy use have emerged as major drivers of energy policy. The strategic significance of oil has reduced considerably with the rise of other fossil and non-fossil fuels in meeting energy needs. At the national level, strategies that hedge against the market have become less relevant as markets for fuels that are increasingly global, diverse and competitive have proved to be quite efficient in delivering energy supplies. However, at the individual level, the failings of the market and the state in providing universal access to energy have are becoming ever more striking and are influencing energy policy decisions.
OUTLOOK FOR INDIA’S ENERGY FUTURE
Almost three quarters of India’s current primary energy demand estimated to be about 775 million tonnes of oil equivalent (mtoe) is met by fossil fuels with coal accounting for the largest share of about 44 per cent. Coal along with oil that accounts for 23 per cent of demand and natural gas that meets 6 per cent of demand take the overall share of fossil fuels in India’s primary energy demand to 73 per cent. Biomass (firewood, dried animal dung and other forms of traditional fuels) account for the 24 per cent of India’s primary energy demand which leave a tiny 3 per cent for other primary fuels such as nuclear energy, hydro-power and renewable energy. The only significant change expected in the relative shares of primary fuels in the next 25 years is in the share of biomass that is expected to fall to about 11 per cent on account of millions gaining access to electricity for the first time as per projections by the International Energy Agency (IEA). Consequently the share of coal is expected to increase to about 49 per cent as most of the electricity is likely to be coal based. India’s total energy demand is expected to double in the next 25 years and the increase is expected to be led by coal whose growth in consumption is projected to be the largest in the world. Oil and coal imports are expected to double in this period while the import of natural gas expected to treble.
While India’s carbon-di-oxide (CO2) emissions are expected to double, its carbon intensity (CO2 emissions for a unit of Gross Domestic Product and energy intensity - energy required for a unit of GDP) are expected to fall by about 40 per cent in this period.
FROM ASSUMPTIONS TO OUTCOMES
Niti Ayog has developed an interesting excel based tool to explore energy pathways leading up to 2047 which is freely available on the website http://indiaenergy.gov.in/#. The tool is based on UKs 2050 Pathways and fits the description given in the UK website that it is a ‘user friendly model that lets the user create his own energy pathway and see the impact using real scientific data’.
Among the many scenarios that are pre-set in the model is the ‘least effort’ scenario which sets all demand components growing at current rates and supply possibilities also growing at current levels. For example, in the ‘least effort’ scenario’, the tilt towards road based travel is expected to increase and the share of public road transport is expected to deteriorate to 42 per cent by 2047. Not surprisingly road transport is expected to account for over 70 per cent of freight transport by 2047. 85 per cent of urban households are expected to use modern cooking fuels by 2047 but 65 per cent of rural households are expected to continue using biomass as fuel for cooking in the ‘least effort’ scenario’ a tragic outcome especially in the light of the fact that resources and effort thrown into 100 years policy interventions may not achieve 100 per cent energy access.
On the other hand, the ‘heroic effort’ scenario sets all possible demand components towards preferred outcomes from sustainability, equity, security and other stand points that are generally considered desirable. For example the share of rail in freight transport is expected to increase to 44 per cent and the share of public road based transport is expected to increase to 66 per cent. The use of modern cooking fuels is expected to increase and cover all the households in urban areas and more than 70 per cent of the households in rural areas by 2047.
What conclusions can we draw from the outcomes under these scenarios which could be seen to represent two extreme ends of many possible outcomes? To begin with, we can observe that the total energy demand would fall by 32 per cent in the ‘heroic’ effort’ scenario compared to the least effort scenario. In addition we can see that total commercial energy imports would fall by 44 per cent with oil imports falling by 23 per cent, coal imports by 47 per cent and gas imports by 14 per cent when we move from the least effort to the heroic effort scenario. If we think that high energy demand and high import share are problems, the recommended solution is to reduce energy demand and reduce energy import share. But unfortunately, the converse of the problem statement does not constitute a solution.
Other interesting observations that could be made are the differences that emerge in supply options between the ‘maximum energy security’ scenario and the ‘minimum emissions’ scenario. If we want the ‘maximum energy security’ scenario, efforts towards solar, wind, nuclear and hydro need to be scaled back with respect to heroic effort scenario while heroic efforts must be maintained for biomass, bio-fuels, algae and waste based fuels. Among conventional fuels, gas based power generation and coal based power generation must be scaled back compared to levels in the heroic effort scenario while domestic gas, oil and coal production must be maintained at heroic levels. What this implies is that maximum energy security is presumed to be achieved primarily by maximising domestic energy production irrespective of whether energy is derived from conventional or renewable fuels. In the minimum emissions scenario, the assumptions that kick in are that all renewable energy supply options are scaled up to heroic or near heroic levels while coal and gas based power supply are limited at least effort supply levels. These outcomes are not unexpected.
THE PAST MAY NOT BE A GUIDE TO THE FUTURE
The dominant concept of energy security as it is used and interpreted in India is based on the epistemological assumption that energy will remain scarce, expensive and unreliable. The energy security strategies of India is designed to address these ‘threats’.
Recommendations by government and non-government agencies made in the last two decades towards building an energy secure India are largely responses to the threat of scarcity and uncertainty (in securing energy resources) derived from a wide range of academic theories. The recommendation to build relationships with oil producing countries and the recommendation to make equity investments in energy resources of producing countries (primarily oil & gas and to a lesser extent coal) are derived from realist approaches of international relations theory. The recommendation to invest in institutions such as regulatory bodies is from rational choice theories that argue that norms and regular practices build the basis for stability and security in economic relations. The recommendation to liberalize the sector and allow the market to set the price of energy is derived from liberal economic theories which see the market as the best means of mediating imbalances in supply and demand of scarce resources such as energy. The recommendation to strengthen maritime forces in order to secure sea lanes of transport of energy is derived from critical (non-liberal) theories that see energy primarily as a weapon of national security.
Econometric models that are used for energy planning in India are also based on the premise that energy resources will remain scarce, expensive and unreliable. They forecast energy demand as a function of the growth rate of gross domestic product (GDP) and then proceed to recommend ways and means to secure the scarce, expensive and unreliable energy resources in the light of exponential growth in demand for energy. The underlying cornucopian assumption of uninterrupted growth and progress is embedded in these strategies.
Studies on India’s energy security that emerged from the west in the last decade amplified threat perceptions. The unprecedented energy demand from India and China was perceived to unsettle the global energy order hitherto dominated by the United States. Until the early 2000s, the United States was a large and growing oil market, the ultimate dream of OPEC producers. Oil imports of the United States were equal to the total imports of China and Japan. The United States was the only player others needed to interact with as it had sufficient market and military power to induce change in the energy system if necessary. China and India were portrayed as actors that could not be more different. Their demand was supposed to be growing at a time when there are perceptions of scarcity in resource availability and constraints on resource use and is therefore seen to be ‘challenging’ rather than ‘driving’ the global market. China and India did not participate in systems such as the IEA that coordinated cooperation among oil importers. The new ‘energy silk-road’ between oil producers in the Middle East and oil consumers in Asia was said ‘unwelcome nexus’ in the industrialized world. Some saw a resource war materialising between India and China primarily in the context of oil. Studies from the west also argued that India will face a coal crisis around 2020 as India’s geological reserves of coal were supposedly over-estimated. Strong recommendations arguing for a shift towards renewables and nuclear energy were made probably with the ulterior motive of weaning India away from coal.
Few of any of these threats have materialised. Energy resources are anything but scarce today. The unfolding collapse in commodity prices in general and energy prices in particular make scarcity and high prices inaccurate assumptions. The assumption that oil supply from the Persian Gulf will remain uncertain and undependable is also questionable. In the past, political turmoil in the region similar to what is happening now on account of the growing power of non-state actors would have sent oil prices sky-rocketing. Now oil prices seem to have developed an inverse relationship with political turmoil in the region: oil prices fall as conflict intensifies. Furthermore, taking on India on a resource war is likely to be the last thing on China’s mind today. Lastly India does not appear to be on the verge of a crisis on coal supply as predicted.
The current trends that contradict expectations may reverse or change course but they present an opportunity for India to revisit the underlying assumptions of scarcity and uncertainty that are embedded in its energy security strategies. There is a need for retrospective analysis of India’s energy forecasts and energy security strategies.