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BW Businessworld

Expectations 2016: Fueling India's Future

India has huge potential to become a leading contributor in generating eco-friendly and cost effective Hydropower as well. However, share of hydro-power has been receding steeply.

Photo Credit : (AP)


India is relatively growing fast. Reliable and uninterrupted supply of energy is central to India's development ambitions & to support India's expanding economy and to meet infrastructure needs of what is soon expected to be the world's most populous country. The Government of India has set in motion central schemes, which will accelerate industrialization, provide much-needed jobs, sustain growth and drive development. This will raise the energy demand like-wise.

The potential for rapid growth in demand for energy in India is enormous. In order to meet India's growing energy needs, huge commitment of capital is required. To incentivize capital investment, systemic and structural weaknesses in the system need to be adequately addressed. Perhaps the biggest challenge that the Indian power system is currently facing is the financial viability of state distribution companies, which suffer large losses across the distribution system, for both technical and commercial reasons - low average end-user tariffs, high technical losses in the network and high level of non-billing or non-payment for electricity. Stimulating necessary grid strengthening and capacity addition requires pressing ahead with regulatory and tariff reform and a robust system of permitting and approvals for new projects. The Tariff Policy that is being devised by the Union Power Ministry is expected to boost the regulatory mechanism for distribution companies and clear some of the roadblocks presently being faced by the industry. Coal-supply constraint is another key issue plaguing the sector. To meet the increasing demand for coal for power generation, coal exploration, production and processing will need to be speeded up and expanded. Although the Indian coal sector does have significant exploration and resource assessment capacity, this capacity is increasingly under strain. The key limiting factors for increasing exploration capacity at present are the recent policy changes that do not allow seamless transition from exploration to mining, limited domestic technological capacity and low availability of suitable human resources.

No conversation about meeting India's energy demand is complete without discussing India's potential in the space of renewable energy. While fossil fuel is India's reality now, India's future will also be shaped by renewable non-fossil fuels. A special World Energy Outlook report of the International Energy Agency says that by 2040, over 50% of India's new generation capacity will come from renewables and nuclear energy. This makes sense, especially in view of the recent Climate Change Agreement in Paris that saw more than 190 nations come together in the fight against climate change. The agreement has reinforced India's focus on the increased use of renewable energy and has given renewed vigor to the government's plan to increase its renewable power capacity (photovoltaic, wind, biomass) to 175 gigawatts by 2022. The National Renewable Energy Bill 2015, which is being drafted by the Ministry of New and Renewable Energy is expected to give further boost and necessary direction to India's renewable energy sector and give it the much needed institutional, structural and policy roadmap.

Considering the anticipated enormous energy demand in India, it is important to look beyond traditional sources of energy and other widely-discussed sources of renewable energy. India must look at off-grid solutions and geothermal energy also. The Union Ministry of New and Renewable Energy has assessed the potential of generating 10,600 MW from 340 hot springs spread across seven geothermal provinces in 11 states. In order to incentivise investment in the sector, the government has recently released the Draft National Policy on Geo-Thermal Energy which seeks to put in place various support measures for projects in the geo-thermal energy sector including providing land on lease for these projects, providing 100 % Foreign Direct Investment in the renewable energy sector and soft loans at concessional interest rates for supporting exploration activities. Geothermal energy is crucial for India's energy security. Similarly, off-grid solutions must be looked at to supply power especially to those living in areas distant from existing transmission lines or in areas with lower population density.

India has huge potential to become a leading contributor in generating eco-friendly and cost effective Hydropower as well. However, share of hydro-power has been receding steeply. In the last three decades the share has reduced from 40% to about 17% now and is likely to go down to about 14% in next few years. India has good hydro potential. Its just that the policies and incentivisation needs re-alignment.

India's economy, already the world's third-largest, is growing rapidly. Policies are in place to modernise the nation and expand domestic manufacturing. A well-managed expansion of energy supply needs to be achieved to enable this growth, to a point that energy-supply becomes a spur rather than a hindrance to India's growth. Policy-makers need to ensure that obstacles that stand in the way of investment are removed. While coal is by far the most important fuel in the energy mix, India's recent climate pledge underlined the country's commitment to a growing role for low-carbon sources of energy.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Anil Sardana

The author is MD & CEO of Tata Power

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