- •Foreword
- •Table of contents
- •1. Executive summary
- •India is making great strides towards affordable, secure and cleaner energy
- •Major energy reforms lead to greater efficiency
- •India is making energy security a priority
- •Significant progress in sustainable development
- •Energy technology and innovation enables “Make in India”
- •Key recommendations
- •2. General energy policy
- •Country overview
- •Major energy supply and demand trends
- •Energy consumption
- •Primary energy supply
- •Energy production and self-sufficiency
- •Political system and energy sector governance
- •Electricity sector
- •Coal sector
- •Oil and natural gas sectors
- •Climate and environment
- •Other ministries
- •Governance of public companies in the energy sector
- •Economy and the energy sector
- •Financial health of the power sector
- •Energy and climate policy
- •Energy taxation and subsidies
- •Goods and Services Tax
- •Subsidies
- •Electricity access
- •Clean cooking
- •The way towards a national energy policy
- •Energy data and statistics in India
- •Assessment
- •A co-ordinated national energy policy
- •Access to electricity and clean cooking
- •Economic efficiency
- •Energy security
- •Sustainability
- •Energy data and statistics
- •Recommendations
- •3. Energy and sustainable development
- •Overview
- •Energy, environment and sustainable development: An integrated policy response in the context of SDGs
- •Ensuring sustainable energy for all: SDG 7
- •Access to electricity and clean cooking: SDG 7.1 progress and outlook
- •Electricity access
- •Clean cooking
- •Renewables: SDG 7.2 progress and outlook
- •Energy efficiency: SDG 7.3
- •Energy and air quality: SDG 3
- •Current status of air pollutants
- •Air quality policy framework
- •Transport sector
- •Power sector
- •Industrial sector
- •The outlook for air quality
- •Energy-related CO2 emissions and carbon intensity: SDG 13
- •Sectoral GHG status and stated policy outlook
- •Energy sector role in GHG mitigation policy
- •Pricing of energy sector externalities
- •Energy sector climate change adaption and resilience
- •Assessment
- •Energy access
- •Energy sector and air quality
- •Energy and climate adaptation and resilience
- •Energy sector cost-effective response to climate change
- •Recommendations
- •4. Energy efficiency
- •Overview
- •Supply and demand trends
- •Energy consumption by sector
- •Industry
- •Residential
- •Services and agriculture
- •Transport
- •Policy framework and institutions
- •Policies and programmes
- •Industry
- •Buildings
- •Appliances and equipment
- •Municipalities
- •Agriculture
- •Transport
- •Assessment
- •Co-ordination, institutional capacity and data
- •Leveraging private-sector investments
- •Industry
- •Buildings
- •Appliances and equipment
- •Municipalities
- •Agriculture
- •Transport
- •Recommendations
- •5. Renewable energy
- •Overview
- •Supply and demand trends
- •Renewable energy in TPES
- •Electricity from renewable energy
- •Institutions
- •Policy and regulation
- •Electricity
- •Utility-scale renewables
- •Rooftop solar PV
- •Offshore wind
- •Off-grid solar PV
- •Bioenergy and waste
- •Barriers to investment in renewable energy projects
- •Transport
- •Industry
- •Assessment
- •Electricity
- •Transport
- •Industry
- •Recommendations
- •6. Energy technology innovation
- •Overview
- •Energy technology RD&D and innovation policies
- •Energy technology RD&D landscape
- •Public-sector RD&D actors
- •Public-sector RD&D priorities and co-ordination
- •Public-sector funding for energy RD&D
- •Private-sector energy RD&D landscape
- •International collaboration
- •Assessment framework
- •Non-financial support and policies
- •Direct and indirect financial support
- •Assessment
- •Strategic planning of energy RD&D activities
- •Inter-ministerial RD&D programme co-ordination
- •MI RD&D goals
- •Private-sector engagement to spur energy RD&D investment
- •Leadership in energy RD&D international collaboration
- •Recommendations
- •7. Electricity
- •Overview
- •Supply and demand trends
- •Electricity generation
- •Imports and exports
- •Consumption
- •Electricity access
- •Institutions
- •Market structure
- •Transmission
- •Captive producers
- •System operation
- •Power market reforms
- •Assessment framework
- •A. India’s power system transformation
- •Policies for decarbonisation
- •The role of nuclear power
- •B. Electricity markets to maximise investments and consumer outcomes
- •The wholesale market
- •Wholesale market reforms
- •Investment in the power sector
- •Power assets under financial stress
- •The retail markets in India
- •Retail market rules and regulations
- •Metering and smart meters
- •The financial health of the DISCOMs
- •Tariff reforms
- •Electricity retail pricing
- •C. Ensure power system security
- •Reliability
- •Generation adequacy
- •Network adequacy
- •Quality of supply
- •Flexibility of the power system
- •Assessment
- •Recommendations
- •8. System integration of variable renewable energy
- •Overview
- •Supply and demand trends
- •Penetration of VRE at the state level
- •India’s system integration challenges
- •General considerations for system integration
- •Different timescales of system flexibility requirements
- •System operation and electricity markets
- •System operation – generation dispatch
- •System operation – forecasting of wind and solar output
- •Power market design to support system integration of renewables
- •Flexibility resources in India
- •Power plants
- •Thermal plants
- •VRE sources
- •Electricity networks and grid infrastructure
- •Case study – Green Energy Corridors
- •Distributed resources
- •Demand response and retail pricing
- •Storage
- •Battery storage
- •Future sector coupling, hydrogen (ammonia)
- •IEA flexibility analysis – A scenario outlook to 2040
- •Assessment
- •Advanced system operation
- •Improving electricity market design
- •Flexibility resources
- •Recommendations
- •9. Coal
- •Overview
- •Supply and demand
- •Resoures and reserves
- •Domestic production
- •Imports
- •Coal consumption
- •Institutional framework
- •The public sector
- •The private sector
- •Government policies
- •Royalties and levies
- •Commercial mining
- •Coal and railways
- •Coal supply allocation and pricing
- •Coal washing
- •Local air quality policies
- •India’s climate commitments and the role of coal
- •Carbon capture and storage
- •Assessment
- •Recommendations
- •Overview
- •Supply and demand
- •Oil supply
- •Oil demand
- •Oil trade: imports and exports
- •Crude oil imports
- •Oil products imports and exports
- •Institutions
- •Retail market and prices
- •Market structure
- •Pricing
- •Upstream: Exploration and production policies
- •Infrastructure
- •Refineries
- •Ports and pipelines
- •Storage
- •Security of supply
- •Emergency response policy and strategic stocks
- •Demand restraint
- •Assessment
- •Recommendations
- •11. Natural gas
- •Overview
- •Supply and demand
- •Gas production and reserves
- •Institutions
- •Gas infrastructure
- •Gas policy
- •Markets and regulation
- •Upstream
- •Midstream
- •Downstream
- •Security of gas supply
- •Domestic gas production
- •Diversity of the LNG import portfolio
- •Pipeline import options
- •Availability of additional LNG volumes
- •Availability of seasonal storage
- •Assessment
- •Recommendations
- •ANNEX A: Organisations visited
- •ANNEX B: Energy balances and key statistical data
- •ANNEX C: Acronyms, abbreviations and units of measure
11. NATURAL GAS
including gas storage). The virtual hub brings together all delivery points in one entry–exit zone. The network operator of the zone delivers the transport service between entry and exit points and balancing services. Critical elements are the legal and regulatory framework for the gas market, alongside the wholesale trading rules (Figure 11.6). India’s gas market will need to further develop from long-term contracts to short-term contracts and flexible spot-market and futures products. The regulator and a competition authority will need to play a greater role to promote supplier competition, sufficient network capacity and flexible trading products.
Security of gas supply
India’s growing dependence on imported natural gas, reaching 43% of the total gas supply in 2016 compared to 29% in 2006, requires more attention from policy makers to assure the security of gas supply. Key factors that constitute natural gas security for India are:
the pace of development of domestic production
the diversity of the gas and LNG import portfolio
pipeline import options
the availability of seasonal storage
the availability of additional LNG volumes.
Domestic gas production
Gas supply security in India has been mainly a domestic supply issue, with a shortfall caused by the KG-D6 production shutdown and slower than expected development of the exploration and production sector over the past decade in spite of objectives to double domestic output. India does not have spare capacity that it could use during a supply emergency.
Diversity of the LNG import portfolio
India has increasingly diversified its supply sources of LNG in recent years. In 2016, 60% of India’s LNG imports came from Qatar, down from 85% in 2014. Other sources of India’s LNG include Nigeria, Equatorial Guinea and Australia.
Although most of the LNG terminals are located along the west coast, India’s first eastcoast LNG terminal (Ennore) was commissioned in early 2019. The gas-fired power plants in the eastern region are already connected to the existing gas grid, and gas may be supplied to these power plants from various gas sources including LNG import terminals located on the west coast. (However, gas use in power generation based on LNG imports is not a supply issue in India, but a pricing issue.)
The International Energy Agency (IEA) analysed the readiness and timeliness of LNG sources to cover for potential supply disruptions from supplying countries and/or surges in demand (IEA, 2018). In this global study, several factors were considered including LNG as a proportion of gas consumption and gas import diversity (measured by the Herfindahl– Hirschman index). Based on these metrics, countries were grouped into four categories: exposed gas importers, exposed LNG importers, diversified gas importers and diversified
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LNG importers. India falls into the category of diversified gas importer, as opposed to being an exposed gas importer, indicating that it largely meets its natural gas requirements through domestic production, and its imports are fairly diversified in source.
In Figure 11.7, the horizontal axis indicates the share of LNG in gas consumption (LNG dependence) from 0 to 100%; the vertical axis shows the gas import diversity; and the bubble size represents the size of net gas imports in 2017.
India’s state-owned oil and gas companies have signed long term LNG contracts with companies based in a range of countries, including Qatar, Russia, Australia and the United States (PIB, 2018). As illustrated in Figure 11.7, India is moving from being a diversified gas importer in 2018 to a diversified LNG importer, as LNG imports already cover around 50% of natural gas consumption in 2019.
If additional imports of LNG are not sourced from a diverse set of producers, India risks moving closer to the exposed LNG importer category. The GoI is making efforts to prevent this by diversifying its portfolio with new long-term contacts that have been signed by the PSUs.
Figure 11.7 Security of supply position of India in the globalising LNG market, 2018
Source: IEA (2018), Global Gas Security Review 2018.
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Pipeline import options
There have been some efforts to establish a pipeline from Iran via Pakistan to India (IPI Pipeline), but it was put on hold in 2008 following sanctions against Iran by the United States. Since then, a rival pipeline from Turkmenistan via Afghanistan and Pakistan to India (TAPI Pipeline) has been studied. While both pipelines have geopolitical concerns for India as they cross Afghanistan and/or Pakistan, the latter has seen some progress. The ground-breaking ceremony of the 1 800 km long TAPI Pipeline took place in December 2015. The pipeline consortium – the TAPI Pipeline Company – was set up in 2014 with shareholdings by Turkmenistan (85%), India (5%), Pakistan (5%) and Afghanistan (5%). The project is stated to be completed within seven years, with commercial operations targeted to begin in 2022 (PIB, 2016) and is due to supply some 14 bcm per year for 30 years (PIB 2014b).
Another international pipeline is the Middle East to India Deepwater Gas Pipeline (MEIDP), being proposed by the South Asia Gas Enterprise (SAGE), from Oman to India with a length of 1 200 km and a maximum depth of 3 500 metres below sea level. However, as of 2015 this pipeline is no longer under the consideration by the GoI (PIB, 2015). SAGE has also presented the possibility of this undersea pipeline being used to import gas from Iran into India.
Availability of additional LNG volumes
In the short term, additional LNG volumes can plug shortfalls arising from supply disruptions. Additional supplies can come from various sources including uncontracted LNG available in spot markets, flexible-destination LNG and unused LNG capacity (the difference between net capacity and output).
As per IEA analysis in 2018, while contracted LNG accounted for the majority of global trade, flexible LNG amounted to approximately 150 bcm in 2017. Additionally, unused LNG liquefaction capacity was small at only 34 bcm globally. The majority of the unused capacity was located in Algeria, Angola, Malaysia and the Russian Federation (IEA, 2018).
India has no dedicated policy or emergency response strategy to address an unexpected shortfall in, or disruption to the supply of, natural gas by acquiring additionally available LNG from the global markets. A situation such as the shutdown of domestic production is an illustrative example that can trigger the need for action on security of supply, including changes in gas allocation policy, imports and pricing. In most IEA countries, the obligation to supply natural gas to priority consumers (such as households, hospitals or other public services) is borne by the suppliers/shippers, and it is up to them to fulfil their obligations with adequate means. This normally based on underground or LNG storage, but can also be spot procurement as a last resort.
Availability of seasonal storage
India’s gas demand does not have a strong seasonal component because there is no winter heating load. However, transport and market integration across India does make storage an important factor in gas security of supply. Storage of natural gas can help address shortages, disruption to supply and fluctuations in industrial demand. There is a range of options to store natural gas underground, including in depleted natural gas or oil fields, aquifer reservoirs and salt caverns. Additionally, LNG can be stored in aboveground storage tanks. Globally, natural gas storage has been developed in the
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United States, Canada and in Europe, particularly Germany, France and Italy. To date, India does not have any underground natural gas storage infrastructure, but the government has constituted a committee of ONGC, GAIL, Petronet LNG and the Oil Industry Development Board to assess the need to develop underground gas storage.
Box 11.2 International experience – gas reserves
In an increasingly globalised, liquid and short-term market, gas storage is competing with other flexibility products amid falling prices at international gas hubs. As well as hubrelated products (forward contracts, capacity bundles etc.), other flexibility sources are available: swing gas production, import contracts, line pack, swaps, interruptible contracts and LNG.
While governments may be tempted to secure gas storage capacity for emergency situations in their territory, such a possibility may not be appealing for several reasons relating to cost, administration, availability and market distortion.
Gas needs to be stored in either high-pressure or liquid form. Physical stocks for an emergency are removed from the market and are held by the government or by industry under a public-service obligation. Several EU countries have storage obligations or alternative-fuel obligations, including a government stockholding agency in Hungary and gas stockholding obligations in Denmark, Italy, Poland, Portugal, the Slovak Republic and Spain. In addition, France has strengthened the regulatory framework with regard to keeping gas in storage at appropriate levels. The contribution of gas storage facilities to security of supply and emergency situations, however, varies greatly depending on their characteristics (depleted gas field, aquifer or salt cavern) and on withdrawal rates.
Investment into new gas storage facilities is also expensive, particularly compared to oil stocks (IEA, 2014):
An underground gas storage facility costs five to seven times more than underground oil storage, also because of the capital cost of “cushion gas” (depending on the type of storage it can be up to 80% for aquifers, 50% for depleted fields or 25% of the capital cost for salt caverns).
An LNG storage facility can be even more expensive, up to 10 times the cost of stocks in oil tanks and 50 times the cost of underground oil storage (caverns).
The variable costs of maintaining gas in storage are estimated to be around 10% to 20% of the capital cost per year per facility.
Any call for public emergency stockpiling would have a direct impact on commercial storage and may deter commercial storage investment. Besides the cost, other noncommercial barriers exist. Gas storage requires time for permitting, financing and construction, unless the country has a field nearing depletion. Not all countries have geological conditions suitable for underground gas storage and thus would rely on LNG tanks, where available.
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