Implementing Integrated Energy Policy
Expanding of Options for Power*
26,July 2006
Integrated Research and Action for Development
New Delhi
*connectedthinking
PwC
Contents
Context
Requirements & Key Issues
Options for Expanding Power
Context
Defining Energy Security for India
Current Energy Mix, Intensity & Security
Development & Growth Requirements
Role of Power in Energy Security
“The country is energy Secure when we can supply lifeline energy to all our citizens as
well as meet their effective demand for their safe and convenient energy to satisfy
various needs at affordable costs at all times with a prescribed confidence level
considering shocks and disruptions that can be reasonably expected”
- Expert Committee on Integrated Energy Policy
India Energy Needs: Energy Development Index
•
IEA has developed a simple composite measure of a country’s progress in
transition to modern fuels & the degree of maturity of energy end-use
•
It has been calculated for 75 developing countries only.
•
It is a simple average of the following three sub-indicators
1. Per capita commercial energy consumption.
2. Share of commercial energy in total final energy use.
3. Share of population with access to electricity.
India ranks a poor 53rd and fares very poorly in all three sub-indicators
EDI and components for select countries
EDI and components for select countries
1
Brazil
China
Indonesia
India
0.75
0.5
0.25
0
EDI
Expanding Power
PricewaterhouseCoopers
Commercial energy Commercial energy
use per capita
to total energy
Electrification
Index
July 2006
Slide 4
Fuel Diversity and Energy Position
Fuel Diversification Index
Oil
Natural
Gas
Coal
Nuclear
Energy
Hydro
electric
Fuel Diversification
Index
USA
40%
24%
25%
8%
3%
0.291
China
21%
3%
70%
1%
6%
0.533
Russia
19%
54%
16%
5%
6%
0.357
Japan
47%
14%
23%
13%
4%
0.307
India
30%
9%
55%
1%
6%
0.402
Germany
38%
24%
25%
11%
2%
0.275
Canada
32%
26%
10%
7%
26%
0.248
Country
India is the fifth largest energy consumer and will become the third largest
in the next two decades
India, exhibit high index indicating less diversification, shows a higher
degree of reliance on oil and coal and lower development of other forms of
energy.
Fuel Diversification Index measures the diversification among various energy sources
Expanding Power
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July 2006
Slide 5
• India, despite the improvement, is three
times more energy intense when
compared to developed nations making
the economic growth energy dependent
•India because of higher import
dependence relative to the exports
remains vulnerable
Energy Imports as % of Exports
Energy Security Strategy
Vulnerability to external shocks
30%
India, 39
25%
20%
15%
10%
Japan, 112
Germany, 59France, 46
which is high dependence and
vulnerability
China, 52
Brazil, 11
5%
UK, 30
Canada, 23
Com petitive - Low Dependence &
Vulnerability
0%
•India has a lonely position in a quadrant
High Risk - Vulnerable &
Dependant
USA, 246
0
0.2
0.4
0.6
0.8
1
1.2
Energy Intensity
Bubble size indicates Oil Import Bill in 2003 USD
•It is imperative that India chalks an
energy security strategy to lessen the
external shocks and sustain its economic
growth
Expanding Power
PricewaterhouseCoopers
July 2006
Slide 6
India’s Energy Security- Requirements & Key Issues
Learning from other countries
Diversification of Energy Supply
Energy Security : Equity, efficiency, diversity & sustainability
Need to alter the source of energy for households
Equity component of energy security
Total Final Consumption: By Source
Coal
9%
Gas
2%
Quantum of Biomass & waste (Fuel wood,
straw, charcoal, agricultural residue & cow
dung) consumption at 54% is very high.
Electricity
9%
Petroleum
26%
Combusti
ble &
Waste
54%
Dependence on Petroleum is significantly
high
Total Final Consumption: By sector
Other Agriculture
2%
Non energy
2%
3%
The changes in energy mix in residential
use will help to address equity issues
Transport
9%
Industry
27%
Source: IEA
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Residential
57%
There is huge potential to improve
overall energy efficiency in industrial and
transport sector
The Challenge is related to governance
of the large dispersed rural system
July 2006
Slide 8
Improving energy efficiency & reducing oil dependency
Opportunity for expanding power
End-Use Oil (2004Keros
Furnac
05)
LPG
ene Naphta Diesel LDO
e Oil
Total Consumed
(MMT)
9.9
9.4
14.0
39.7
1.5
9.4
Domestic
95.4% 98.9% 0.0%
0.0% 0.0%
0.0%
Transport
0.0% 0.0%
0.0% 56.8% 3.3%
2.7%
Power Gen
0.0% 0.0%
6.9%
7.0% 5.9%
3.3%
Agri
0.0% 0.0%
0.0% 18.9% 2.5%
0.0%
Industrial/Comm
4.6% 1.1% 93.1% 17.4% 88.3% 94.0%
LSHS
MS
4.4
8.3
0.0%
0.0%
0.0% 100.0%
28.1% 0.0%
0.0%
0.0%
71.9% 0.0%
Source: MoPNG
Improved Access to Electricity could significantly reduce Kerosene for
domestic use
Appropriate Supply of Power for Irrigation will reduce Diesel in Agriculture
Improved Mass Transportation based on Electricity can arrest rapid growth of
the Motor Spirits
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July 2006
Slide 9
Expanding Power in Transportation
A case of INDIAN RAILWAYS
•
•
Total energy consumption of transport sector only 1.5% met through electricity and
remaining about 98.5 % through petroleum products
IR consumes about 5.1% of total energy consumed by transport sector (and 1.1%
of total energy consumption)
Within Railways energy consumption
- 77.5% consumed in the form of diesel (HSD)
- 22.5% consumed in the form of electricity
As a proportion to the total energy consumption by the Nation:
- 1.8% of total electric energy
- 4.4% of total diesel consumption
•
•
Had there been no electrification IR would have been using additional 2.25 million
tonnes of diesel oil per annum
- This would have raised consumption of oil in Rail sector from 4% to 9%
If entire IR was electrified there would have been saving of 1.7 million tonnes of diesel
oil per annum
- This would have reduced the nation’s requirement of diesel oil by 4%
Expanding Power
PricewaterhouseCoopers
July 2006
Slide 10
Urban Mass Transport
Enhancing energy efficiency & Expanding power
Increase Mass Urban Transport
• Savings in fuel costs is potentially high with introduction of electrified Metro (EIA
study for Bangalore estimates savings of Rs.876 cr./yr on a price of Rs.35/ltr of
petrol for just 2 & 3 wheelers for just 32 km of metro length)
Category of
Vehicles
Expected reduction of fuel consumption in 2011
No of
No of vehicles
Fuel consumption
Fuel consumption
vehicles with
without Metro
without Metro (litres)
with Metro (litres)
Metro
Two
Wheelers
Three
Wheelers
•
•
2,394,075
157,224
1,676,137
1,795,556
125,829
786,120
Total Saving in Fuel, litres per day
Fuel Saved
(litres)
1,257,102
538,454
629,145
156,975
695,429
In the Delhi Metro project phase-II, the estimated foreign exchange
savings due to reduced consumption of 7 Mn lts of Diesel, 31.5 Mn lts
of Petrol and 18.6 Mn kg of CNG is Rs. 1.722 Bn, in addition to
reduced CO2, travel time and decongestion of roads
With a fully integrated Metro, Bus and Rail network, only 13% use
personal motorised transport to travel into central London
Expanding Power
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July 2006
Slide 11
Indian Energy Mix: Need for Diversification
Lessen the impact of market risks
India Energy Mix
Coal has not kept pace with India’s
growing energy needs
Hydro Power development has also
not addressed the energy needs as
required and both energy forms have
declined despite an abundance of
both these resources
Natural Gas has rescued a perilous
situation where otherwise Oil would
have filled the strategic void
100%
80%
60%
40%
20%
0%
Nuclear
Hydro
Coal
Gas
Oil
1965 1970 1975 1980 1985 1990 1995 2000 2005
Despite abundant reserves Coal
production continues to be a limiting
factor for the rapid growth in the
power sector
Natural gas supply will also be in short
supply
Eastern Region will by able to supply only half the
Expanding Power
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potential planned due to coal supply limitations
July 2006
Slide 12
Energy Security Strategies: Learning from other countries
Brazil Energy Mix
UK Energy Mix
100%
Nuclear
80%
Nuclear
60%
Hydro
40%
Coal
20%
Gas
0%
1965 1970 1975 1980 1985 1990 1995 2000 2005
100%
80%
60%
40%
20%
0%
Oil
Hydro
Coal
Gas
Oil
1965 1970 1975 1980 1985 1990 1995 2000 2005
Hydro & Regional Gas
Dash for Gas
Japan Energy Mix
France Energy Mix
100%
Nuclear
80%
Nuclear
60%
Hydro
40%
Coal
20%
Gas
0%
Oil
1965 1970 1975 1980 1985 1990 1995 2000 2005
Conserve, Replace Oil-LNG & Nuclear
Expanding Power
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100%
80%
60%
40%
20%
0%
Hydro
Coal
Gas
Oil
1965 1970 1975 1980 1985 1990 1995 2000 2005
Go Nuclear
July 2006
Slide 13
Diversification - International lessons
Comparison of Total Final Consumption
Total Final Consumption: by sector
Total Final Consumption - by source
MTOE
1571
USA
418
Russia
162
Brazil
885
China
116 Indonesia
394
India
Combustible
& wastes
Petroleum
Products
Electricity
Coal
Gas
0%
20%
40%
60%
80% 100% Others
Residential
USA
Russia
Industry sector
Brazil
Transportation
sector
Agriculture
China
Indonesia
Other sectors
India
0%
20%
40% 60%
80% 100%
Non-Energy Use
Source : IEA 2003
Local/Regional resources play a critical role in meeting the energy needs (E.g. USA–
Coal & Oil, China– Coal, Russia– Nat. Gas)
For Developed Economies, reliance on Combustibles, renewables and wastes
decreases, almost disappears – India would need to find commercial energy for all
Transportation and Industrial Sector increases its share in sectoral mix vis-à-vis
residential sector requiring a multiplier to the energy needs. The next decade will
require India to review its transportation growth options in view of the energy needs
Expanding Power
PricewaterhouseCoopers
July 2006
Slide 14
Options for Expanding Power
Expanding of Regional Markets
Expanding Internal Resources
Options for Expanding Power
Expanding Regional Markets
Energy Resources of the Regions
Development of Regional Power Markets
Bilateral and Regional Energy Market Development
Why Regional Resources for power?
Generation Based on Imported Fuel
•
Imported fuel poses significant cost
implication for power generation
•
Light area shows price at which gas is
competitive vis-à-vis coal, while dark
area coal is competitive
•
Spot prices and freight rates indicate
$ 45/ton of delivered cost of coal and
gas prices is considered at $6.2
MMBTU – bus-bar cost of generation
at these levels is Rs. 3.0/kwh and
Rs. 3.39 per kwh respectively
•
Current levels are however ruling at
their highs and recent long term deals
are showing signs of softening prices
Expanding Power
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July 2006
Slide 17
Energy Resources of the Region
Nepal
Nepal’s topography and hydro sources
emanating from snows and glaciers
provides
scope
for
hydroelectric
development
India has assisted in a limited way Nepal
to develop its hydro resources:
• HE schemes: Pokhra (1 MW), Trisuli
(21 MW), Western Gandak (15 MW)
and Devighat (14.1 MW)
• Projects under consideration:
-
•
•
Karnali (10,800 MW)
Pancheshwar (5,600 MW)
Sapta Koshi (3,300 MW)
NHPC considering Upper Karnali
Project (300 MW) as an IPP
DPR of Burhi Gandaki (600 MW) by
WAPCOS under consideration
Expanding Power
PricewaterhouseCoopers
Total Hydro Potential of Nepal
River
Basin
Major
(MW)
Small
(MW)
Total
(MW)
Kosi
18,750
360
22,530
Gandak
17,950
270
20,650
Karnali
(Ghaghra)
28,840
3,170
32,010
Mahakali
3,840
320
4,160
Southern
Rivers
3,070
1,040
4,110
Total
Improving political
72,450
situation
10,830
in83,280
Nepal
could facilitate development of some
of the above potential.
July 2006
Slide 18
Nepal – Interconnections with India
India
Nepal
Voltage
Anand Nagar
Bhairahawa
33 kV
Itawa
Krishna Nagar
33 kV
Nanpara
Nepalganj
33 kV
Pallia
Dhangadhi
33 kV
Tulsipur
Koliabas
11 kV
Lohiahead
Mahendranagar
33 kV
Pithoragarh
Baitadi
11 kV
Dharchula
Jaljibe
11 kV
Dharchula
Pipale
11 kV
Gandak East
Surajpura
132 kV
Raxaul
Birganj
33 kV
Jogbani
Biratnagar
11 kV
Thakurganj
Bhadrapur
33 kV
Balmikinagar
Surajpura
11 kV
Kataiya
Duhabi
132 kV
Kataiya
Biratnagar
33 kV
Kataiya
Rajbiraj
33 kV
Bargania
Gaur
11 kV
Sitamarhi
Jaleswar
33 kV
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Transmission links at 132 kV, 33 kV and 11 kV –
Low capacity for energy exchange
July 2006
Slide 19
Energy Resources of the Region
Bhutan
Tala Transmission System Developed by
Powerlinks, a JV between Tata Power &
PGCIL (51:49) provides a secure
infrastructure for Bhutan power to reach
more power deficit Northern Indian States.
Indirectly it provides also access to western
Indian market
Bhutan’s hydro power potential is
assessed to be 30,000 MW, of which
23,500 MW is considered technoeconomically feasible.
Developed hydro capacity of 469 MW
constitutes ~2% of the potential
The upcoming Tala Project will add
1020 MW of new capacity on
commencement (July 06) and
increase the capacity threefold
Tala is expected to produce 4865 MU
Hydro Projects to be taken up on
Priority basis have been identified
3000 MW Capacity, 1200 km length (2384
Ckt Km) BOOT project is integrated into
Eastern Transmission system.
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July 2006
Slide 20
Regional Energy Cooperation
There is a need and potential for higher level of energy cooperation within the region to promote energy security
•SAARC Initiatives
•BIMSTEC Initiatives
•
•
•
•
Strengthen bi-lateral agreements
Allow of more access to Indian market segments
Integration & Strengthening of transmission network
Developing commercial framework for trading: framework
trading agreements, model power purchase agreements
Cross-border energy exchanges through trans-national oil & gas
pipelines and transnational grids for transmission of power.
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July 2006
Slide 21
Options for Expanding Power
Expanding Internal Resources
Energy Resources & Demand
Transmission Infrastructure
Power Trading Arrangements
Technology Improvements
Energy Resources & Demand
• Energy
resources
are
concentrated
in
Eastern
region
• North
East India ranked
highest in unexploited hydro
potential
• The Northern, Western and
Southern are expected face
the maximum shortages in
energy, while the eastern
region is expected remain
surplus and export power
Energy & Power Requirement
MU
157107
150000
115705
100000
78037
50000
50700
81492
54500
97500
71900
0
FY 01
FY 03
Peak Requirement (MW)
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FY 07
FY 12
Energy Requirement (MU)
July 2006
Slide 23
Hydro Power Potential in India
• India itself has significant hydro-
power capability undeveloped
and has targeted 50 GW for
development
• Significant
potential
for
development in N-E and North
India.
• These states see hydro power as
the
main
strategy
for
development of their economies
• South India and Western India
has diminishing HEP opportunity.
These states are facing energy
and peak power shortages
Uttaranchal & HP have focused plans
for Hydro power development through
involvement of private sector.
Expanding Power
PricewaterhouseCoopers
State
Assessed
(MW)
In
Operation
Under
Construction
Balance
(MW)
Arunchal
Pradesh
Uttaranchal
50,328
11
405
49,913
18,898
1,610
3,453
13,835
Himachal
Pradesh
Jammu &
Kashmir
Sikkim
18,820
3,823
1,926
13,071
14,146
1,394
469
12,283
4,286
84
519
3,683
Karnataka
6,602
2,789
222
3,591
Meghalaya
2,394
185
-
2,209
Mizoram
2,196
-
60
2,136
MP/
Chattisgart
h
Kerala
4,485
899
30
1,684
3,514
1,800
30
1,684
West
Bengal
Manipur
2,841
301
936
1,605
1,784
105
90
1,589
Nagaland
1,574
75
24
1,475
Orissa
2,999
1,838
66
1,096
134,867
14,912
8,231
Total
CEA Ranking Study on River Basins
109,852
July 2006
Slide 24
Requirements for meeting demand
Transmission system
• To facilitate evacuation of power from
eastern region to rest of India
• The capacity of the transmission
system needs multi fold increase
• JVs similar to Tala system would help
to speed up
Development of Power Market
•Incentives for eastern region states to
attract investments in Generation
• Country wide consistent Open Access
regime to provide choice and competition
•Third party supplies with credible open
access is essential prerequisite as
payment security mechanism
•Need to remove both tariff and non-tariff
barriers
Expanding Power
PricewaterhouseCoopers
Year
2002
2007
ERERERERNRWR-SR NER- Total
SR
NR
WR
NER
WR
NR
600
100
400
1,250
1,000
1,700
0
5,050
3,600 5,000 2,800
1,250
2,100
1,700
0 16,450
2012
3,600
8,500
8,500
2,250
7,600
2,700
4,000 37,150
July 2006
Slide 25
Potential capacity addition through Open Access
A successful Open Access regime would
• Bring in investment in generation, and
• Innovation and Efficiency in choice of size, fuel, etc..
• ..without the need for contingent liabilities through long term contracts
with the State
Maharashtra 2007 Supply Situation
(MW)
14,000
3
The Eligible Customer market could conceivably
contract for as much as 3,175 MW from other
sources, alleviating all or part of the expected supply
shortfall
12,000
10,000
2
The Discom plans another 2,997 MW of contracts for
2007. This leaves an expected 13% shortage on peak
8,000
6,000
1
4,000
Currently Contracted Generation
to Maha Discom is about 9,000
MW
2,000
Source: PwC Research for a World Bank sponsored study
0
Demand
Supply
Size of Open Access market estimated at US$ 3-5 billion
Expanding Power
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July 2006
Slide 26
The Big Leap: PwC Utilities Survey 2006 - Inside the boardroom
The change challenge
Nearly 60% of respondents thought the industry needed to have a strong 10-year focus on
reducing environmental damage, developing new technologies and improving customer service
relationships.
The importance of technology is highlighted by utility companies’ identification of coal, alongside
piped gas, as the key fuel in meeting much of future demand growth. Nuclear has grown in favour
and finds fifth rank. Hydro-Carbons (LNG and Oil) are low on the rankings of CEOs
Expanding Power
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July 2006
Slide 27
Big Leap – Where would technology Investment yield results
Expanding Power
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July 2006
Slide 28
Expanding options for Power
Summary
•
•
•
•
•
•
Energy Security challenges are Global in nature but we need to develop
India specific strategy and action plans
Oil intensity of our economy has to be reduced in favour of Electricity
Coal & Hydro potential of the nation and the region could help alter the
energy balance
Energy Security Plans have to be developed at the State level progressing
further from Expert Committee Recommendations
Indian supply resources have to be augmented through national
transmission network development & connectivity
Regional Power resources could be developed through appropriate
development of regional power markets and Framework Agreements on
trade & energy cooperation
Expanding Power
PricewaterhouseCoopers
July 2006
Slide 29
Thank You
Expanding Power
PricewaterhouseCoopers
July 2006
Slide 30