11

INDIA’S ECONOMIC INDIA’S ECONOMIC GROWTH, Energy GROWTH, Energy SCENARIOS AND SCENARIOS AND

CLIMATE CHANGECLIMATE CHANGES L RAOS L RAO

atat

University of AlbertaUniversity of Alberta

22

OVERVIEWOVERVIEW• In 2004 India was shining; then government lost elections, using that slogan

• Economic fundamentals-’real’ economy-erratic industry and weak Agriculture, poor infrastructure, excessive subsidies, poor social security administrative incapability to spend efficiently on any programmes, high deficits, volatile foreign funds

• Global meltdown of 2008-layoffs and slower growth in 2008, 2009

• Vast domestic market, huge potential market of the Poor, young and ambitious population, immense technological and managerial capability

• Large part of population not served by commercial energy

• Major fuel is and will be Coal

• India’s exemplary energy efficiency and emissions record

33

The Past Ten Years And NowThe Past Ten Years And Now

• GDP growth: From 1998-99-6.5, 6.1, 4.4, 5.8, 4.0, 8.5, 7.5, 9.5, 9.7*; 2008-09 7.1%? New year-5%?

• Industrial production negative growth Dec 08, Jan 09.

• High and Rising Savings rate

• Rise in Capital formation Esp. Private Sector

• Deepening Export

• Inflation at single digit for a decade; 7.7% last year, 4.2 in Dec 2005; despite fuel, power, light & lubricants at 7.1; from 03-04-8.1, 03-04-9.8); Rising in 2007-08, Nov 2008- 7.8%; Now almost zero

• Export growth trends; 01-02 onwards: 22.1, 15.0, 21.4, 27.6 & in 08-09 now drop of 20%

• Rapid growth of I.T. and B.P.O.

• Resilience: Survived face-off with USA and sanctions after nuclear explosions

44

India- A Fast Growing Economy India- A Fast Growing Economy with Greater Potentialwith Greater Potential

• Mobile Users - 362.2 million (Jan 2009); 101.1 Million new mobile users in last 10 months; growth continues

• Internet connectivity in 2010 -200 million; still growing

• 5.25 mn broadband connections (Dec 2008); growing

• 5.4 million PC’s sold in 2006; slowing down

• Cars: expected 30% growth p.a.; Will rise again with NANO

• 2010-over 94 mn cable & satellite households

• Advertising industry at Rs4000 crores=$800 million

• Slow down in Retailing; Special Economic Zones, Media

• Agriculture 20% of GDP, poor productivity, declining public investment, too many poorly targeted subsidies;

• Weak Infrastructure-Power, Roads, etc

• Social infrastructure-Health, Education, etc

• Poor Delivery systems

55

Demographic DividendDemographic Dividend

• 2004-Population =1080 million of which• Age between 15 and 64=672 million• Below 15 and over 64, non-working or dependent

population=408 million• Dependency ratio of 0.6; 2030-0.4• 2020 Average Age: India-29; China-37; Japan-48:

youngest working age population in world• Less children=more women at work; more saving;

greater growth

66

2009 - Macro Economy Indicators2009 - Macro Economy Indicators

• Falling GDP growth forecasts; 2009-10- 5%?; revival in 2010

• BOP current a/c deficit widening again; also Trade deficit doubled despite fall in crude prices; last year due Oil imports bills, now export & foreign investment decline

• Predicted Layoffs by year end-10 million

• Corporate performance under pressure but margins ok: FY 99 4.08%; Rising from FY 03 5.32, then 7.48, 9,24, 8,73, 9.84, 10.01 (FY 08), 8.54;

• Rising crude and gas costs hurt economy; but falling prices coincided with recession

• To reemphasize local and cheaper energy inputs: local coal, local gas, hydro, nuclear, renewables, renewables

• Climate Change and New Coal Technologies, ownership and investment issues

• India is in a squeeze-economic growth imperative-fuel cost rising-emissions

77

WeakWeak AgricultureAgriculture• Supports 60% of population

• Agriculture was 32% of GDP in 92-93; 17% in 2008-09 (AE)

• Agriculture growth or decline has direct effect on GDP; 97 GDP + 7.8% Agriculture +8.8; 04- 8.5 & A-9,3

• Static rice, erratic wheat, production:

• 08 07 06 05 00 91 81 (mn t)

• R 96 93 92 83 85 74 54

• W 78 76 69 69 70 55 36

• Land availability limited: Since 1980 crop area for food grains static at around 124 mn hectares

• Total Investment in Agriculture falling in 1990s as % to GDP from 1.92 in 90-91; 1.83 in 99-00; 2006-07- 2.3 %

88

Weak Agriculture-2Weak Agriculture-2

• Fall is in public investment; private keeps rising; funds for public investment diverted to poorly targeted subsidies(water, power, fertilizer)

• Productivity levels are low: Yield @ 100kg/HA; India and China in 2006: paddy 31.24 & 62.65; wheat 26.19 & 44.55; cotton 6.0 & 33.3; g.nut 8.6 & 31.2, s.cane 669.4 &825.25

• Poor policies encouraging unsuitable crops: free electricity; minimum support and procurement prices same; annual price increases; no ground water policy; free power to agriculture60% population lives on agriculture

• In downturn, companies turning to rural markets, with new Marketing methods

• Huge potential as diversification progresses

99

Weak InfrastructureWeak Infrastructure

• Non-implementation of integrated energy policy; no coordination between electricity, coal and gas

• Government ownership of Electricity distribution, coal

• Government implementation poor on Roads• Infrastructure regulation/implementation awaiting

overhaul• State ownership- high inefficiency, slow decision-

making, corruption, delays• Federal Constitution; states at loggerheads with

Centre; need for coordination

1010

Trends of Human Development Trends of Human Development Indicators in India from Indicators in India from

1951 to 1999-20031951 to 1999-2003

Trends of Human Development Indicators

32.127.4

146

62.7

7.6

5864.8

18.3

0

20

40

60

80

100

120

140

160

Life Expectancy at birth(Years)

Death Rate Infant Mortality Rate Literacy Rate (%)

1951

1961

1971

1981

1991

1996

1999-2003

1111

HDI indicatorsHDI indicators

Improvement on all fronts; others have fared much betterHDI Rank out of 174; Sri Lanka 89; China 96; Indonesia 110; India

124; Pakistan 148

India: +60 population in millions-2001-6.3%=65; 2016-8.9%=113

• -Age 15-59 2001-598mn; 2016-811mn • -Urbanization: 2001-27.8%; 2030-50%?• -Issues: Livelihoods, health, education, housing, water,

roads, sanitation, social security, law and order• Poor public health and important reason for low HDI

1212

Current Economic Crisis: Current Economic Crisis: Not just an imported phenomenonNot just an imported phenomenon

1. Rising deficits-not shown by Centre in Budgets-Oil Bonds, FCI bonds, Fertilizer bonds, Farmer Loan write-offs, etc

2. Putting Growth over inflation control

3. Desperation to add to Foreign Exchange Reserves

• Participatory Notes and round-tripping of Indian funds

• Exemption from short-term capital gains tax; Mauritius as largest foreign investor; Very volatile FII funds-stock market like yo-yo as funds ebbed and flowed

4. Power shortages; many not connected

1313

Liquidity and Falling RupeeLiquidity and Falling Rupee

• Banking meltdown in USA worsened situation

• FII’s, foreign banks withdrew to support liquidity in their HQ

• Stock markets collapsed-SENSEX from 21000 to almost 8000

• Rupee collapsed-in 11 months from Rs 38 to $ to Rs 50

• Overseas borrowing marked to market-upset balance sheets of Indian companies and

• P & L as interest costs shown in Rupees

• Energy investment affected adversely

1414

Poor Implementation-Poor Implementation-Lack of basic Administrative ReformLack of basic Administrative Reform

• Government has been very inefficient in its expenditures; more subsidies than asset building

• Similarly Public Distribution System-e.g. food grains, sugar, edible oils, cheap kerosene;

• Other subsidies poorly targeted, physical handling and inefficiencies-fertilizers, free or cheap power to agriculture;

• Social Programmes- NHRM, SSA-not efficient in spending honestly. NREG should have added to purchasing power but with estimates ranging from 40 % to 60% wasted and leakage, its effect has been reduced.

• Unspent funds in most programmes

• Infrastructure spending is also slow, eg., NHAI.

• Many projects delayed due too many Ministries, lack of coordination, non-accountability of bureaucracy

1515

India’s PotentialIndia’s Potential

1. World’s Largest Pool of Trained Manpower:• 200 million college graduates (~16%) • 500 million trained, skilled workforce (~40%)• Universal Literacy

2. World’s Leaders in Industry and Commerce• 30 of Fortune• 100 from India

3. India Accounts for 10 % of World TradeA broad scope of products and services

4. India as a Source of Global Innovations New Businesses, New Forms of Organization, New Technologies

1616

India’s PotentialIndia’s Potential

5. Focus on the Bottom of the Pyramid as a • Source of Innovations for the World• (Leaders in Health, Education, Energy, Transportation,

Sustainable Development for all)• Markets

6. A Flowering of Art, Literature, Films and Science( 10 Nobel Prize Winners from India)

7. A New Moral Voice for People Around the World India as a country where Universality and Inclusiveness is widely

practiced. India becomes the most Benchmarked country for its capacity to accept and benefit from its diversity

TO IMPROVE LIFE OF MANY, & ACHIEVE ITS POTENTIAL, INDIA NEEDS CONSISTENT HIGH ECONOMIC GROWTH AND ENERGY SUPPLIES

1717

Energy ConsumptionEnergy Consumption

• India has lowest energy consumption today

• Even with 8% annual growth till 2030 India will not catch up with most others

• Coal will be the most important energy source

• With lower calorific content, electricity using Indian coal will be much more

1818

Per capita Energy consumption Per capita Energy consumption by Countriesby Countries

 

TPES(kgoe)

ElectricityConsumption

(kwh)

Oil (kgoe)

Gas (Cu.m.)

Coal(Kg)

Nuclear (kWh)

Hydro(kWh)

India 2003-04 439 553 111 30257* (375) 16 69

India 2031-32(projected @ 8%

GDP growth)** 1250 2471 331 149925*

(1388) 256 273

World Average (2003) 1688 2429 635 538 740 403 423

OECD (2003) 4668 8044 2099 1144 1651 1924 1076

U.S.A. (2003) 7840 13066 3426 2176 3410 2624 948

China (2003) 1090 1379 213 32 1073 32 215

South Korea (2003) 4272 7007 2264 627 1541 2570 101

Japan (2003) 4056 7816 2146 845 1247 1859 816

* Per Capita coal consumption of India has been estimated based on the calorific value of hard coal used internationally (6000 kcal/kg) to maintain uniformity. The figures in brackets are the actual per capita consumption based on Indian coal with a calorific value of 4000 kcal/kg.

Source: Integrated Energy Policy : Report of the Expert Committee Pg No 32

1919

India has low CO2 emissions India has low CO2 emissions (CO2 equivalent emissions-mmt)(CO2 equivalent emissions-mmt)

1990 2000 CAGR %

Russia 3208 1833 -3

Germany 1246 1019 -2

U.K. 738 640 -1

Japan 1103 1297 2

USA 5080 6209 2

India 988 1485 4

China 3837 4820 5

Brazil 1180 1477 6

2020

Major Investment Required Major Investment Required in Energy Supply & in Energy Supply &

InfrastructureInfrastructure

Investment (billion dollars)

2001-2010 2011-2020 2021-2030 2001-2030

Total Currency Investment

172 247 347 766

Source: International Energy Agency

2121

India’s Energy Mix Over India’s Energy Mix Over Time (%)Time (%)

Oil24%

Gas0%

Coal68%

Nuclear0%Hydro

8% Oil31%

Gas8%

Coal55%

Nuclear1%Hydro

5%

1965 2001

2222

ConstraintsConstraints

With just 4% of global GHG emissions, India under pressure to curb fossil fuel consumptionIndia must find ways to decouple growth in GDP and fossil fuel for energy, but ensure universal lifeline access

• Primary Energy in million tonnes 2005-06 2031 -32• Oil equivalent 513 1536 to

1887• Of which, Non-commercial 28% • Coal 38%• Oil & Gas 8%• Hydro & Nuclear 26%

2323

The Burden of Traditional Fuels in Rural IndiaThe Burden of Traditional Fuels in Rural India

Study based on an integrated survey of 15,293 rural households from 148 villages in three states of rural North India and one state in South India. Symptoms of diseases related to air and water pollution, expenditure on health and person days lost, demographic and socio-economic information, measurements of air quality in the kitchen, outside the kitchen and the home were collected. Indicators for respiratory functions (Peak Expiratory Flow) were measured for most adults present. The doctors examined a sub-sample of individuals for confirmation of diseases.The study estimated that

• 96% of households use biomass energy, 11% use kerosene and 5% use LPG for cooking. Most of them use multiple fuels.

• Forests contribute 39 % of the fuel wood need.• 314 Mt of bio-fuels are gathered annually.• 85 million households spend 30 billion hours annually in fuel wood gathering.• Respiratory symptoms are prevalent among 24 million adults of which 17 million have

serious symptoms.• 5% of adults suffer from Bronchial asthma, 16% from Bronchitis, 8.2% from Pulmonary TB

and 7% from Chest infection.• Risk of contracting respiratory diseases and eye diseases increase with longer duration of

use of bio-fuels.

Total economic burden of dirty biomass fuel estimated at Rs.299 billion ($7.5 bn) using a wage rate of Rs.60 per day, comprising of opportunity cost of gathering fuel, working days lost due to eye infections and respiratory diseases, and the cost of medicine.

As women are the primary sufferers of the adverse impact of use of biomas fuels, there is a close linkage between gender and energy. Gender and energy issues have remained on the periphery of energy policy, and require greater attention and backing.

Source: Parikh Jyoti et al (2005)2Integrated Energy Policy: Report of the Expert Committee Pg No7

2424

Rural Household Energy Consumption Rural Household Energy Consumption mainly firewood and dung in rural, mainly firewood and dung in rural,

electricity in urban electricity in urban

July 1999-June 2000Fuel Type

Physical Units Mtoe

Rural Urban Total Rural Urban Total

Fire Wood & Chips (Mt) 158.87 18.08 176.95 71.49 8.13 79.62

Electricity (Bk Wh) 40.76 57.26 98.02 3.51 4.92 8.43

Dung Cake (Mt) 132.95 8.03 140.98 27.92 1.69 29.61

Kerosene (ML) 7.38 4.51 11.89 6.25 3.82 10.07

Coal (Mt) 1.20 1.54 2.74 0.49 0.63 1.12

L.P.G. (Mt) 1.25 4.43 5.68 1.41 5.00 6.41

             

Source: Derived from NSS 55th Round, (July 1999-June 2000) data, National Sample Survey Organisation, Ministry of Statistics and Programme Implementation, Government of India

Integrated Energy Policy : Report of the Expert Committee Pg No 8

2525

Commercial Energy Requirements (One Commercial Energy Requirements (One Scenario-Coal dominates; oil next; gas could Scenario-Coal dominates; oil next; gas could

riserise))

Year Hydro Nuclear

Coal Oil Natural Gas TPCES

8% 9% 8% 9% 8% 9% 8% 9%

2011-12 12 17 257 283 166 186 44 48 496 546

2016-17 18 31 338 375 214 241 64 74 665 739

2021-22 23 45 464 521 278 311 97 111 907 1011

2026-27 29 71 622 706 365 410 135 162 1222 1378

2031-32 35 98 835 937 486 548 197 240 1651 1858

CAGR -% (Compounded Annual Growth Rates)

5.9 11.2 5.9 6.3 5.1 5.6 7.2 8 6 6.4

Per Capita consumption In 2032 (Kgoe)

24 67 569 638 331 373 134 163 1124 1266

In 2004 (Kgoe) 6.5 4.6 157 157 111 111 27 27 306 306

Ratio 2032/2004 3.7 14.6 3.6 4.1 2.9 3.4 5.2 6.3 3.7 4.1

Source: Integrated Energy Policy : Report of the Expert Committee Pg No 28

2626

Model Results-Model Results-Commercial energy requirementsCommercial energy requirements

• BAU-from 391 MTOE in 06-07 to 2123 in 2031-32, of which coal rises from 193 to 1176

• Hybrid-from 391 to 1503 in 2031-32 with coal from 193 to 767

• Energy intensity in BAU scenario falls from 0.022 kgoe per Rupee of GDP in 2001 to 0.017 in 2031 fall of 23%

• In Hybrid-from 0.022 to 0.012, fall of 29%

2727

Projected Commercial Primary Energy RequirementsProjected Commercial Primary Energy Requirements

Projections for Electricity Requirements (Based on Falling Elasticities )

Total Energy Requirement

Energy Required at Bus Bar

@ GDP Growth Rate

@ GDP Growth

Rate @ GDP Growth Rate @ GDP Growth Rate

8% 9% 8% 9% 8% 9% 8% 9%

2003-04 633 633 592 592 89 89 131 131

2006-07 761 774 712 724 107 109 153 155

2011-12 1097 1167 1026 1091 158 168 220 233

2016-17 1524 1687 1425 1577 226 250 306 337

2021-22 2118 2438 1980 2280 323 372 425 488

2026-27 2866 3423 2680 3201 437 522 575 685

2031-32 3880 4806 3628 4493 592 733 778 960

Note: Electricity generation and peak demand in 2003-04 is the total of utilities and non-utilities above 1 MW size. Energy demand at bus bar is Note: Electricity generation and peak demand in 2003-04 is the total of utilities and non-utilities above 1 MW size. Energy demand at bus bar is estimated assuming 6.5% auxiliary consumption. Peak demand is estimated assuming system load factor of 76% up to 2010, 74% for 2011-12 to estimated assuming 6.5% auxiliary consumption. Peak demand is estimated assuming system load factor of 76% up to 2010, 74% for 2011-12 to 2015-16, 72% for 2016-17 to 2020-21 and 70% for 2021-22 and beyond. The installed capacity has been estimated keeping the ratio between total 2015-16, 72% for 2016-17 to 2020-21 and 70% for 2021-22 and beyond. The installed capacity has been estimated keeping the ratio between total installed capacity and total energy required constant at the 2003-04 level. This assumes optimal utilization of resources bringing down the ratio installed capacity and total energy required constant at the 2003-04 level. This assumes optimal utilization of resources bringing down the ratio between installed capacity required to peak demand from 1.47 in 2003-04 to 1.31 in 2031-32. Integrated Energy Policy : Report of the Expert between installed capacity required to peak demand from 1.47 in 2003-04 to 1.31 in 2031-32. Integrated Energy Policy : Report of the Expert Committee Pg No 20Committee Pg No 20

2828

Energy efficiencyEnergy efficiency• Ratio of Total Primary energy Consumption to GDP in

PPP terms-2005:

• India 0.15;China 0.22;USA 0.21; Russia 0.47

• India has shown in 2001-06 least energy consumption growth to GDP growth: Av GDP +8% p.a. & 3.7% annual energy consumption growth

• India’s population 3,5 times USA and 3 times EU20, but GDP growth is double with lower absolute incremental consumption of fossil fuels

• China grew faster on incremental basis; but in absolute terms, since 2002, it consumed over 9 times fossil fuel compared to EU20, 10 times of USA, and 11 times India

• India has achieved this result by denying modern commercial fuels to over half its population

2929

Energy Efficiency must improve Energy Efficiency must improve further in Indiafurther in India

• Indian energy intensity is =Japan & Brazil• Below U.K. at 0.14, Denmark-0.12• India can improve energy efficiency by at least 20%

based on currently available technologies• Can improve especially in some industries, buildings,

transport,

3030

Fuel (MT) 2001/02 2036/37

Coking coal 27 50

Non-coking coal 299 550

Lignite 25 50

MT - million tonnes

Maximum values of domestic coal availability-not enough for needs

3131

YearArea under plantation

(%)Bi--diesel

(million tonnes)

2006 0 0.0

2011 5 2.0

2016 10 3.9

2021 25 9.8

2026 70 27.5

2031 90 31.9

2036 100 35.4

Source: National Energy Map for India: Technology Vision 2030: Pg.No. 57

Estimates of bio-diesel production

3232

Source/technology UnitPotential/

availabilityPotential exploited

Biogas plants Million 12 3.22

Biomass-based power MW 19500 384.00

Efficient wood stoves Million 120 33.86

Solar energy MW/km2 20 1.74

Small hydro MW 15000 1398.00

Wind energy MW 45000 1367.00

Energy recovery from wastes MW 1700 16.20

Renewable energy source potential

3333

Other Efficiency Measures & SourcesOther Efficiency Measures & Sources

-POWER-POWER • Clean Coal can double life of coal from present 40-45 years from

conventional mining• Coal bed methane can double gas reserves• Circulating Fluidized Bed Combustion (CFBC) technology enhances

options with low quality Indian coal and lignite • Integrated Gasification Combined Cycle technology (IGCC) with

imported coal can raise consumption efficiencies• Nuclear energy• Expanded Hydrocarbon supply options in India and overseas• Integrated renewable energy policy• Solar cells in arid lands, deserts, mountaintops, home & vehicle

roofs• Market reforms-subsidies, free energy, efficiency of generation,

distributed power

3434

CO2 Emissions ProfileCO2 Emissions Profile

Scenario 2001 2011 2021 2031

BAU 917 1663 3332 7267

Hybrid 917 1479 2443 4774

Sector in 2031 BAU HYB

Power 2879 1329

Industry 2830 2510

Transport 1377 759

Others 181 176

Total 7267 4774

(In million tonnes)

3535

Barriers to GHG MitigationBarriers to GHG MitigationPOWERPOWER

• High upfront capital cost per MW of Power & hence tariffs, cross-subsidies

• Lack of experience and technical know-how in advance power generation technologies

• IGCC not demonstrated commercially for high ash Indian coal

• Lack of funds with states for R & M

• Renewables-high generation cost

3636

Barriers to GHG MitigationBarriers to GHG MitigationINDUSTRYINDUSTRY

• Cement, iron & steel, petrochemicals, other chemicals improved

• Pulp & Paper, Textiles, Fertilizers, etc, behind

• SME’s-credit & capital constraints

3737

Barriers to GHG MitigationBarriers to GHG MitigationTRANSPORTTRANSPORT

• Need for tough regulatory standards-e,g, fuel economy on auto manufacturers

• Huge investments required• MRTS- divert resources from other priorities;

& no door-to door connectivity• Need to change lifestyles and individual

preferences

3838

Regulatory Aspects of GHG MitigationRegulatory Aspects of GHG Mitigation

• EXISTING: Programmes for energy efficiency in industry, appliances, buildings, municipalities

• UMPP-supercritical boilers

• Created Bureau of Energy Efficiency

• Notified norms for vehicle exhaust emissions from 2010

• Minimum 10% by 2012 of total energy sales as R.E.

• REQUIRED: Trading in certified energy savings in excess of mandated savings

• Incentives for Energy efficiency-e.g., differential taxation on certified energy efficient appliances

• Financing of energy efficiency through public private partnerships

3939CBM – cool bed methane: CFL – compact fluorescent lamp, LED – light emitting diode;HVDC – high voltage direct current; HVAC – high voltage alternating current;IGCC – integrated glasification combined cycle; T & D – transmission and distributionR & D – research and development

Source: National Energy Map for India: Technology Vision 2030: Pg.No. 201

Suggested Technology Deployment Programme2006-11 2011-21 2021-31

Power generation technologies  

Hydro power generation Commercialize IGCC Demonstration of commercial of commercial scale thorium based reactors demonstrated

Supercritical boilers/ulta-supercritical boilers Ultra-supercritical boiler to be commercialized

Advanced gas turbines (for example, H-frame Turbine)

 

Refinery-residue-based IGCC  

Demonstration of commercial scale IGCC plants using indigenous and imported coals

 

Fast breeder nuclear reactor    

End-use technologies

Cogeneration State-of-the-art industrial processes to be adopted

State-of-the-art industrial processes to be adopted

Use of waste recovery in industrial processes  

Lighting technologies: CFL, LED  

Energy-efficient white goods refrigerators, alternating current

 

T & D loss reduction: HVDC, HVAC, and amorphous Core transformer

   

R & D in exploration and production of fuels

Natural gas from gas hydrates In-situ coal gasification to be commercialized Natural gas from from gas hydrates to be commercialized

In-situ coal gasification Deep-sea natural gas commercially available  

Deep-sea natural gas  

CBM CBM production to be commercialized  

Mining of cool from seams greater than 300 metres

Commercial mining of coal from seams greater than 300 metres

 

4040

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