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How prepared are we for the energy transition?
Now that the dawn of the renewables has finally arrived. India too must follow suit by instituting new initiatives for this much-needed transition,

Historically, for meeting energy needs, humanity transited from wood to coal starting in the late 17th century, and then to oil from the late 19th century. 

We are stepping into the age of renewable energy. It is high time India heralded the same by planning aggressively and smartly to leapfrog to the new era.

 

Policy flip-flops...

In 2014, the Indian government (under UPA) decided to manufacture diesel locomotives in Bihar and signed a contract with GE.  Later when Suresh Prabhu was the Railway Minister, the NDA government signed it. However, when Piyush Goyal took over the ministry, he announced that Indian Railways would go for complete electrification by 2022. This flip-flop resulted in the government asking GE to change the plan of manufacturing diesel locomotives. Later when GE threatened to hamper future FDI if India quashed the present deal, the government rescinded its decision and agreed to comply with the original contract of building diesel locomotives.

Before signing a contract with GE, did the government study the pros and cons of diesel versus electric engines? Did it undertake a scenario analysis to find out what would happen should the government decide to go for total electrification? Can such a significant investment in a diesel loco plant, designed for operation over 30 years, change in a span of mere four years?

 

Intriguing issues of energy transition

Energy experts have been studying how the world energy demand and supply will change when massive energy transition takes place in the next few years from wood to coal to oil to renewables. It is time India put together an independent committee of world-class experts from multiple fields to chart a similar strategy. The Draft National Energy Plan (DNEP) did make for a good kickoff, but neither did it comprehensively study the impact of energy transition nor did it suggest a credible plan of action. 

The Table provides statistics of three forecasts of India’s primary energy demand. Total energy demand in 2035 as per BP is 1803 million tonnes of oil equivalent (MTOE) while IEA and DNEP predict it to be 1909 and 1862 MTOE respectively. Though they are not comparable, we can make some useful inferences.  

BP is far more optimistic in predicting energy demand than the other two. However, there are significant differences in how the total energy demand will be met. DNEP forecasts considerable reduction in contribution from coal. It is optimistic in increasing the participation of renewables. All three institutions have more or less similar input from oil and gas ranging between 31.8 per cent and 30.8 per cent. This shows that all three have ignored the potential impact of energy transition from fossil fuels likely to be brought about by electric vehicles (EV) and renewables. 

 

EVs’ tectonic shift 

How EVs are going to bring about a tectonic change by

•the rapid drop in the price of renewables like wind and solar. 

•faster penetration of EVs in the transportation sector owing to their competitive price against the internal combustion engines (ICEs). 

•speedier adaption of distributed power with improvement in the storage battery, digitisation and nanotechnology. 

•  bringing an end to the coal era by added efforts to decarbonize to reduce greenhouse gases and combat climate change. 

At the beginning of the 20th century, ICEs replaced horse-drawn carts within 15 years. Some experts predict a similar development with electric vehicles. Such a massive change in transportation is bound to impact oil demand. In India, consumption of petrol and diesel by the transportation sector accounts for about 40 per cent of total. 

While Norway, France, Netherlands and a few other European countries have declared the target of banning ICEs between 2025 and 2040, India has affirmed to go ‘all electric’ by 2030. Sale of all new vehicles as EVs in itself is  a monumental task; so to envision that all cars will run on battery seems inconceivable. Even assuming a large percentage of the vehicles are battery-driven, it will have a severe impact on the consumption of petrol and diesel, which in turn will impact future refinery construction. 

Increasing number of EVs will need a substantial amount of charging stations while downsizing the number of current petrol stations. Shell recently bought the largest EV charging company in Europe, New Motion, as a strategic step to take advantage of EVs displacing ICEs. Such increase in charging stations would not only spike electricity demand, but the stability of the grid itself could be challenged based on how and when the EVs are charged. 

Are our planners for the private and public sector oil companies attuned to this possibility? 

Distributed power supply is the next go-to. With dropping solar and wind energy prices to compete with coal, India should earnestly consider distributed power for electrifying villages. In recent months, during the auction for wind energy, the bid price of Rs. 2.64/kwh was lower than coal-based power cost of Rs. 3.20/kwh. The last bid price for solar has been even lower at Rs. 2.44/kwh. 

Electrifying villages based on solar energy distributed with or without connection to the grid will revolutionise the power market in India. It will be similar to the rapid spread of cable TV in India. Each village can have a micro/mini unit based on distributed energy using PV solar energy.  Smart Power India, a NGO supported by Rockefeller Foundation, has already supplied power to about 106 villages in UP, Bihar, and Jharkhand, meeting the power needs of 42,000 through mini-grids. This model can be replicated in other parts of India and reach the target of supplying power to all by 2022 on a 24x7 basis. It is surprising that NITI Aayog did not incorporate such a model while developing DNEP though the plan provides for 120 GW of distributed power (10 per cent of total generating capacity) in 2040. 

The rest of the world is shifting from coal to renewables. Now that the dawn of the renewables has finally arrived,  India too must follow suit by instituting new initiatives for this much-needed transition. 

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