Why India needs a robust energy policy

The last few years have seen many rapid transformations in the global and local energy space. While the Indian government has begun work on integrating global energy trends in its sectoral energy policies, the nation now needs to draft a sharply defined forward-looking roadmap of India’s long-term energy agenda, with consensus among industry stakeholders.

Considering India imports 80 percent of its oil needs, the fall in crude oil prices in 2014 was deemed a sign that India would meet its fiscal deficit targets. However, a now-anticipated crude price rally necessitates a more resilient energy basket.

While considering taking crude price movements, the Draft National Energy Policy (DNEP) has acknowledged the need to strengthen renewables, and support the government’s rural electrification mission.Aligned to an overarching theme of energy security and sustainability, the DNEP has identified key areas of supply-side intervention and presented viable proposals such as enhancing oil and gas exploration and production, enhancing capacity, and enhancing transmission and distribution.

The draft policy should have also considered an analysis of diverse requirements across India’s states. Instead of a "one-solution-fits-all" approach, India’s energy policy must use a state-specific bottom-up approach.

Further, the high electricity generation and sustainable energy pathway outlined in the NITI Ambition Scenario (NAS) 2040 indicates the government’s willingness towards environmentally clean outcomes. However, the high volume of coal-fired power generationrequired to meet India’s energy needs offsets this. In this context, meeting India's Nationally Determined Contribution targets of 175 GW of renewable electricity by 2022 will need suitable short-term incentives. Many, such as deferral of tax, renewable purchase obligations, capital subsidy, and tariff guideline are already in place.

However, their implementation requires extra coordination amongst various ministries, which will only be possible with an Inter-Ministerial Committee with representation from the Centre, states, and the local government bodies. India also needs a single window clearance and regular check on the policy implementation. Over time, this can lead to adoption of autonomous uptake of renewable energy.

However, before setting out to make India’s electricity generation and distribution capabilities future-ready, the power generation sector must face its existing concerns. Despite India’s heavy and often unmet demand for electricity, our generation capacity remains grossly underutilised. This gap arises because generation companies are often wary to enter PPAs with financially stressed discoms, and vice-versa. With revenue shortfalls covered by public sector banks, discoms have no incentive for growth.

Power sector reforms must therefore include discom privatisation. Taking cue from the telecom sector, where customers choose a service provider based on the best value proposition, discoms must also give open access to private distributors to sell electricity on the grid. Private agents will demand transmission of electricity without undue losses along the T&D grid, enforcing efficiency. Enabling this necessitates significant policy overhaul to encourage an entrepreneurial mindset in electricity distribution, while navigating discoms out of their current financial distress.

An open market should also be implemented for India’s industrial consumers, who are levied some of the world’s highest electricity prices, to pay for cross-subsidies. These subsidies ensure that agriculture sector and consumers receive electricity at zero, or often below-cost prices. The DNEP's recommendation of taxing the industrial customer electricity purchases, using the tax proceeds to subsidize vulnerable customers, can bring transparency and efficiency through electricity distributor competition. However, this must be implemented in a phased manner to avoid a chaotic scenario.

The energy sector also needs a uniform, 'one nation one policy' approach, ending artificial state barriers between states caused by differing state regulations. This can open the power value chain to market forces. The roadmap to a truly sustainable future energy mix cannot be an abrupt switch to renewables, but requires a phased approach. Gaseous fuel can be the bridge, its use steadily increased to displace coal, thus reducing carbon emissions.

To begin, India can replace coal plants with natural gas-based plants, which emit half the pollutants compared to coal plants. Gas can also become the fuel of choice for rural India - It is versatile enough to support micro and mini-grids, while biogas-based technologies can provide clean cooking fuel in the remotest of areas.

With its flexibility as a versatile fuel, biogas can supplement the power and transportation sector’s energy requirements. Upgraded forms of biogas, i.e. Bio-CNG, or Bio-PNG further opens new possibilities, for utilization of locally available organic waste.

As a matter of fact, India's power sector consumed less than 32 million standard cubic metres per day (mmscmd) of domestically produced gas and imported LNG, of a total volume of 139.37 mmscmd. Modern gas-fired power plants can be the perfect fit for fueling, transport, and heating and lighting homes, and powering industries. A coal-to-gas transition gives India the time to onboard the technologies that can renewable power’s shortcoming, such as intermittency.

The NEP’s recommendations for Oil & Gas - a robust regulatory regime, enhancing infrastructure for refining and distribution, and market determination of fuel prices – underpin this uptake. The draft provides a good head-start towards setting up a positive tone towards providing the much-needed impetus to clean and sustainable energy.

Source- ET Energyworld