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Infrastructure

Background

India’s energy future: Consequences of India’s coal rush and alternative energy scenarios

26 September 2011

Notes of meeting, Washington DC, September 20, 2011

Speakers: Sarah Alexander (Manager, Innovation Department, SELCO-INDIA), Srinivas Krishnaswamy (Chief Executive Officer, Vasudha Foundation), Vaishali Patil (Leader, People’s Movement on the Konkan Coast of Maharashtra) Ron Somers (President, US-India Business Council)

Introduction: Shuja Nawaz (Director, South Asia Center, Atlantic Council)

Moderator: Steve Kretzman (Director, Oil Change International)

India’s economic growth has significantly increased its demand for energy. The country now sits at an important crossroad where it must decide how best to address its energy needs. Coal has traditionally been seen as the best method to ensure continued economic development and deliver energy to the Indian population. India now has new coal-fired power plants in the pipeline that are equivalent to six times its current installed capacity. However, this dependence has created a number of consequences ranging from energy security threats to adverse social and environmental impacts, especially for marginalized communities. As India works to scale up clean energy systems, it must now weigh the positive and negative impacts of coal against these emerging clean energy options to determine how best to meet the country’s long-term energy demands.
 
Panellists will discuss India’s reliance on coal, rural electrification needs, the costs and benefits of an aggressive coal power expansion, and the possibilities for driving India’s low carbon growth path.

Soumya Dutta

Fossil fuel can’t remain main energy source in part due to growing emissions as well as shrinking coal reserves. Who in India consumes what? About 40% of people have no electricity. 50% get 1 bottle of oil a week. The poor still pay more than those in Delhi for energy. Energy is far more than electricity – must remember this as being more than electricity. Forget about 85% of energy needs if only talking about electricity. Many people still rely on traditional biomass. 75% of rural households still use biomass for majority of energy needs.

Areas where most dense population also has high natural resources so you would think people would get a lot of access to energy resources. But there are large problems of equity. There is always a social and environmental impacts. Less than 10% of households are electrified in areas in India where the energy resources are concentrated.

Water stress due to power/energy plants, industry and mining and at same time rising demand for agriculture to produce food for people. No country has increased its GDP without increasing its pollution a lot. Many who have electricity connections get electricity for 2 hours or less per day – 33% less than 50kw hour/ month, 13% 50-100 kw hour/ month.
In India people talk about how alternatives to coal are too expensive. Large portions of India have very high solar potential – vast deserts in Rajasthan for example – population density is very low in this area.

There are also very large potentials for saving electricity in energy savings in transmission. There are huge tax wavers to corporations every year. The lack of money is not a question. 10% of India lives close to European standards and are having as many polluting impacts. We are not lacking in money.

Coal costs which are cheap are not taking into account all of associated costs like mining and transmission lines and cutting of forest. The forests are not being destroyed by local people using them for wood. The forest Department has had the largest impact in terms of cutting for commercial logging. This is government data.

Coal gets tremendous subsidies. $2m/kw if you take into account associated costs, not even including social and environment  issues.

Hydro plants have submerged large amounts of forest and have meant that women and girls have to travel farther to access forests to gather wood and fuels. World Bank finances coal fired power plants. Now they are financing big hydro-electric plants. The World Bank is a consultant in many of these projects. Integrated coastal management project is being funded by World Bank. It is limiting access to traditional energy resources that is affecting women.

Ron Somers

The rural energy problem is largest challenge. Many living on under $2/ day and don’t have electricity. How does India maintain movement toward growth targets? Also have a very young population. 1.2 billion, 600m under age of 25 and all are seeing others around world with electricity and asking why they can’t have it as well.

India consumes per capita 700 kw hours/ year we consume 14,000 kw hours/ year. As India tries to maintain 8% GDP you have to access to reliable forms of energy. We all wish we could displace coal and oil and gas, but India needs every bit of energy they can generate. The driver is jobs and GDP.

You have to go to most reliable base load first that British went after first, which is hydro. The problem with hydro is that when you have a dense population most people are concentrated along riparian zones. Means big hydro is finished in India.

Next most reliable base load comes from coal. How can they leap frog ahead (as was done with cell phones tech) coal fired into the renewable space.

The good story is that Coal India is so inefficiently mining coal to provide the fuel the country needs, that the country must go outside India for coal – foreign exchange out flow to Indonesia, South Africa, Australia. At some point government may decided this is not sustainable. 70% dependent on hydrocarbons. India has 300 years of coal supplies in country but their companies are too inefficient and land acquisition is problematic. They are competing with China and is driving the price up and making coal power too expensive. How does this help spur a renewable market?

India has 5 grids in the country – not totally integrated. Makes it difficult to manage most efficient use of renewable in India. Must ask how to integrate grids so they can use flows of renewables for base load when it is available.

India has embarked on largest solar project in world, 20,000 MW by 2022. Solar is still unproven. Have to be able to take advantage of energy when available. Also need policy to support these goals. Policy on technology content could create challenges, among other things.

India’s wind is also a large undertaking. Wealthy put up wind mills for tax credits and then strip them and wind does not end up getting generated. How do you finance India’s vast future energy needs – need to add 350,000 MW just to get their economy at 8% GDP. Looking at another $350bn. How do you mobilize money if people buying it are not paying the true cost. Agriculture sector is highly subsidized with free power. Very political issue because it helps local politicians get re-elected. The solution is ultimately privatisation of utilities because the system is not working now with local government utilities.

 

Sarah Alexander

SELCO is a for-profit- social enterprise undertaking solar projects. When they started in early 90s people were hostile, frustrated about not having energy, feel it is too costly and energy should and will eventually come free. SELCO needed to tackle affordability and servicing.

Came up with ‘Door Step’ model. Solar panel, light, battery and control panel and charger. SELCO goes into field and try to understand what people need light for and then go in and do installation. Could only work when packaged with financing.  Had to set up partners with local financial institutions to help people be able to pay for systems. Developed loan products with the financial institutions. 3-5 year loan periods. Now provided to almost 120,000 households. Now are moving into cook stoves.

Have been successful because SELCO has tried to understand what people need. Finance is often the largest barrier. SELCO has to also deal with transaction costs of sending staff to remote areas and banks sending staff to remote areas – have tried to look at subsidies in the context but are not in favour of energy subsidies broadly.

You have people who can’t access service because they don’t have land rights and have titling issues. Others live just near a connection but it doesn’t extend to them. Others are willing to pay but they are so remote that people don’t do outreach to them. Others can’t make the investment to pay for energy. We can’t homogenize what works for people. How do you create many small enterprises like SELCO that together can address need and deal with issues of scale? SELCO is trying to work with others to teach them and help them adapt to their own contexts. Organisations like the World Bank can help address how to overcome financing challenges which are many of the challenges faced in SELCO’s work.