India?s energy independence requires innovation in technology and a new approach in diplomacy to tap new resources at the local and international levels. India, like China, is striving for new relationships with its neighbours?Iran, Pakistan, Afghanistan and Bangladesh?to achieve energy security. As a region, Asia has a specific significance in energy resources, as the Middle East and Central Asia have the world?s largest energy resources. Various options for energy are available for analysis.
How much energy, for example, is required to sustain double-digit economic growth? To meet GDP growth of 9% or thereabouts, power availability must be increased five to six times. This could mean dependence on imports of petroleum, oil and lubricants. India?s real GDP has grown by over 6.5% annually during the last five years, whereas electricity generation has grown by just 3.8%, resulting in large power shortages. It is estimated that capacity of over 1,00,000 mw has to be added over the next five years to meet the supply deficit. The 11th Five Year Plan envisages power for all by 2012. While reforms in electricity production and distribution have been initiated, with private participation on the increase, the scenario is still not very assuring.
Take generation. The share of coal in this remains conventionally unchanged at around 40%. Generation from gas plants and nuclear reactors has been the focus of most effort, lately. In the 11th Plan, capacity addition is projected at 68,869 mw of hydro, thermal and nuclear power, and 13,500 mw of renewable power, according to a report of the Planning Commission?s working group on power.
By most indications, coal and gas will remain key sources of energy. India possesses about 8.6% of the world?s coal reserves. An estimated 55% of the total commercial energy used in India is fed by coal, and, regardless of environmental concerns, its centrality in the energy mix cannot be ignored.
The world over, natural gas has emerged as a favourite energy source. High technology and big investments are needed to make the most of this, but now that Reliance has taken a lead (its KG Basin gas discovery is huge) and pricing issues are on their way to being resolved with the government, expect gas to play a major role in India?s energy mix.
Solar energy is a big question mark for India, as it has high potential and can supplement the growing needs of the Indian economy. Photovoltaic panels can potentially generate 1,00,000 mw of solar energy when spread over an area of 60 sq km. The potential is vast.
Hydro energy is another option, and it already makes up a quarter of the country?s total installed capacity of 1,35,007 mw. The present ratio of 25-75, however, needs correction in favour of hydro power.
To what extent is nuclear technology an option? Nuclear power generation depends on the highly safeguarded and accurate deployment of sensitive modern knowledge. Given the constraints, its share in India?s energy mix has remained low, but securing international support for diplomatic initiatives to procure supplies?such as the Indo-US deal?could result in its contribution touching the 4% level or even more.
What is of utmost necessity in the present environment is renewable energy. Private equity firms are prepared to invest in this sector in a big way. Loans are being given out by banks for renewable energy equipment. Green technology has been earmarked as the generation method of the future, and the private sector is playing a leading role as far as tapping sugar mills is concerned. Ethanol is considered to be a growing source of energy. However, the big question is whether land needed for food production would be displaced.
Knowledge, technology and innovation will provide answers to questions of how to optimise the energy mix. India is a country of the young, and it is for a youthful new generation to take the initiative in exploring new options.
?The author is with Krishna Securities. These are his personal views