Just a month before the close of the year 2017, International Energy Agency (IEA) came out with its annual publication, the World Energy Outlook 2017. WEO 2017 holds a special significance for India as it is the first publication after India became an associate member following a series of intense consultations between IEA and relevant Indian energy ministries. As for IEA and NITI Aayog, the formal engagement between them started in March 2016 when a Statement of Intent was signed to enhance collaboration in the field of energy. As a result of formal engagements and various interactions with concerned ministries, this year’s WEO has included as inputs for its energy modeling exercise, recent initiatives of the country towards wider energy access, low carbon mobility, higher renewable energy etc. Given the above background, it is worthwhile to use this space to disseminate information on key takeaways for India from the above exercise.
At the outset, it is important to note that the WEO 2017 in modeling for scenarios assumes a GDP growth rate of 6.5% for the entire period, i.e. 2016 to 2040. Of course, if a different GDP growth rate is assumed, results will be different.
The Highlights for India:
1. India is the largest contributor to global demand growth between 2016 and 2040, amounting to almost 30%.
2. Oil demand in India increases by more than 4 times by 2040. India will emerge as a major force behind world oil demand growth. It also indicates that the decrease in oil demand growth in advanced economies will be offset by a demand growth from the developing economies, half of that i.e. almost 6mb/d will come from India as it doubles its oil consumption between 2016 and 2040. Transport sector will account for a major share in the increase in oil demand on account of rising vehicle ownership.
3. Gas demand in India almost triples by 2040. Use of gas in the power sector to meet the variability in renewables will be the single largest source of demand for gas, with a share of over 40%. Transport is another area where demand for gas will grow by up to 9 times mainly because of the push to increase the use of CNG vehicles.
4. India’s coal use more than doubles by 2040. Even though coal is proposed to be used less in the power sector, its share in the energy sector continues to be high mainly because of increase in production in cement and steel industries which use coal intensively. Steel and cement production increase four times and three times respectively in the next 25 years. These industries use coking coal as inputs. Three fourth of coking coal requirement will be met by imports in 2040 as India in spite of having an abundance of coal is not self-sufficient in coking coal. In the power sector, where steam coal is used, the outlook reports that coal demand growth faces significant uncertainty due to subdued power demand growth and increase in competition to coal from the lower cost of solar PV.
5. Electricity demand almost triples from where it is today, from 1102 TWh to 3606 Twh in 2040. India will be the fastest growing market with electricity demand increasing at the rate of 5% per year. Buildings have the highest share in electricity demand compared to other end-use sectors, within buildings demand will be driven by higher air conditioning and appliance ownership.
6. On the supply side in the power generation mix, renewables will give big competition to the coal sector. By 2040 coal’s share drops to half from 76% today, solar PV rises by 100-fold and wind by nine-fold.
7. As a special feature, in a special scenario for India called the Clean Energy Ambition scenario, the outlook analyses the effect of fully achieving the targets of 100% electrification of vehicles by 2030 and 175 GW of renewables by 2022 in power generation. The results from this scenario show that in 2040 with an increase in the use of EVs, oil demand in the end-use transport sector will reduce, but the share of oil in primary energy mix falls only slightly, as oil gets used as a fuel input to meet the additional electricity demand. The savings in emissions compared to baseline scenario from reduced use of oil in the transport sector are offset by increased oil use in power generation.
The above scenario results have several important implications; two that stand out are mentioned here. With India expanding its share in global energy demand, it is important that energy efficiency is given due importance in the end-use sectors. Energy saved from efficiency is comparable to energy supplied. At present, renewables are getting substantial attention but there is limited publicity to the importance of energy efficiency in end-use sectors. The social attractiveness of energy efficiency has to be brought out through adequate advertising. At the policy level, there have been some notable steps like the Energy Conservation and Buildings Code (ECBC), the Performance Achieve and Trade (PAT) Scheme for select energy-intensive industries and Bharat Emission Standards for vehicles, but more can be done to remove obstacles in their implementation. Secondly, the strategy for EVs must go hand in hand with decarbonizing the power sector, without that low carbon mobility will not translate into a net reduction in emissions for the country.
Before concluding, it must be mentioned the Outlook has lauded two achievements of India as trend breaking. One, the access to electricity initiative which led to increasing access from 42% of the population in 2000 to 82% today, making it one of the countries that have achieved the largest number of connections in a relatively short time. Two, India’s Light emitting diode (LED) initiative which contributed to unlocking large improvements in energy efficiency significantly fast. And with regard to clean energy access for cooking, WEO brings out a worrisome point that in spite of current government initiatives on LPG and improved cook stoves, one in three people will not have access to clean cooking in 2030.
(Simi Thambi is a Young Professional in the Energy Division, NITI Aayog)
Disclaimer: The views expressed in this blog are those of the author. They do not represent the views of NITI Aayog