6 min readJan 2, 2023 09:17 AM IST
First published on: Jan 2, 2023 at 07:40 AM IST
Twelve months back I reflected through this column that in 2022, India will have to navigate the choppy waters of a volatile petroleum market without straying off the “green” course towards clean energy. I proffer the same reflections for 2023. The waters will be choppier and the course more labyrinthine, but the challenge will be essentially similar. What should our leaders do to manage this conundrum?
The answer is not easy. The international energy market has been convulsed by the Ukraine conflict. Four factors in particular mark this convulsion. One, the energy market has fragmented and energy nationalism is the driving force behind policy. Two, a second iron curtain has come down. Irrespective of how and when the Ukraine conflict ends, Russia will not be allowed access to the western markets for as long as President Putin is at the helm of the affairs. One fallout is the tightening energy embrace between Russia and China. Three, OPEC plus one which is, in effect, Saudi Arabia plus Russia has stepped outside the Western orbit. Saudi Arabia has made clear it intends to pursue a “Saudi first”, non-aligned approach to international relations including with the US. And four, new centres of energy power are emergent around countries that have a large share of the metals, minerals and components required for clean energy. China is currently the dominant power.
It is against this international backdrop that India must pivot the needle of its energy compass towards short-term energy security and long-term decarbonisation. A combination of the following measures should be considered in 2023.
Discounted Russian crude is an opportunistic panacea. It does not provide a sustainable cover to meet our requirements. To secure such a cover, government must increase the productivity of our existing producing fields; additional resources should be allocated for accessing relevant enhanced oil recovery technologies. Further, it should leverage the country’s market potential to secure a long-term supply relationship with Saudi Arabia and an equity partnership with Iran. It should enhance the strategic petroleum reserves to cover at least 30 days of consumption and remove the sword of Damocles that the CBI/CVC/CAG wield over the heads of the public sector petroleum companies so that their traders can, without fear, take advantage of market volatility. The construction of a pan-India national gas pipeline grid should be expedited.
Coal will remain the bulwark of India’s energy system for decades. It is no doubt the dirtiest of fuels, but it remains amongst, if not the cheapest, source of energy. Plus hundreds of thousands depend on the coal ecosystem for their livelihood. The option of phasing out coal whilst environmentally compelling is not yet a macroeconomic or social possibility. In the interim, the government has to find an energy transition route that balances livelihoods and pushes forward the green agenda. Some small, politically feasible steps in that direction would include increased R&D expenditure for coal gasification and carbon capture and sequestration technologies; setting a carbon tax; the establishment of regulatory and monitoring mechanisms for measuring carbon emissions from industry; the closure of inefficient and old plants and a decision not to approve any new ones. In parallel, it would help if Niti Aayog were to pull together a group of economists and energy experts to determine the competitiveness of coal versus solar on a full-cost basis.
Energy security cannot be achieved by focusing only on the supply and distribution side of the equation. The demand conservation and efficiency side is equally important. It is the cheapest, easiest and quickest way to reduce dependence on external sources. Europe will save 10 bcm of gas annually by simply adjusting their thermostats downwards by 1-degree centigrade. The government has conceptualised several demand management measures, but these have not been rigorously implemented. So a priority for 2023 should be to fill this lacuna.
Three other measures should be brought onto this year’s policy agenda. First, allocation of funds for upgradation of the transmission grid network to render it resilient enough to absorb “clean” electrons on an intermittent basis. The sun does not shine at night and the wind does not blow all the time. In parallel, the underlying structural issues currently impeding the scaling up of renewables must be addressed. Amongst them, the repair of the balance sheets of state distribution companies (discoms), easing the procedures for the acquisition of land and the removal of regulatory and contract uncertainties are most important. Failure to sort out the finances of discoms will erode confidence in the sanctity of the Power Purchasing Agreements (PAAs) signed between them and renewable companies.
Second, the addition of the arrow of mineral and chip diplomacy to the quiver of Indian diplomats. It will take decades to harness our indigenous resources of the metals and minerals critical for clean energy and build up a domestic chip industry. In the interim, diplomats should secure diversified sources of supply to reduce the country’s vulnerability. Finally, the creation of an enabling ecosystem for developing and commercialising third-generation clean energy technologies like hydrogen, biofuels and modular nuclear reactors. Nuclear, in particular, should be pushed.
India is not responsible for global warming, but it will be amongst the worst affected. Millions live around its coastline. Their livelihoods will be undermined by rising sea levels. Millions will also be affected by melting glaciers and extremes of temperatures. So irrespective of who is to blame, India has to stay on the path of decarbonisation. It cannot afford to develop first and clean up later.
The writer is chairman and distinguished fellow, Centre for Social and Economic Progress
The international energy market has been convulsed by the Ukraine conflict. Four factors in particular mark this convulsion. One, the energy market has fragmented and energy nationalism is the driving force behind policy. (File) 
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