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India is investing heavily in natural gas and renewables to meet
the twin challenges of meeting the power needs of its rapidly
growing population with electricity and meeting its Paris Climate
Agreement obligations.
"India is set to nearly double its energy consumption over the
long term," Prime Minister Narendra Modi declared at the inaugural
session of IHS Markit's Fourth Annual India Energy Forum by
CERAWeek.
At the same time, Modi said India is committed to expanding
energy access while abiding by its commitment under the Paris
Climate Agreement to reducing its greenhouse gas (GHG) emissions
intensity by at least 33% by 2030 compared with 1990 levels.
With a population of 1.35 billion, India is the world's
third-largest emitter of GHGs, after China and the US.
"For instance," Modi, said, "India is the third-largest and the
fastest-growing aviation market, in terms of domestic aviation.
Indian [oceangoing cargo] carriers are projected to increase their
fleet from 600 to 1,200 by 2024."
Referencing in his comments seven horses driving the chariot of
the Hindu sun god, Surya, Modi said India's energy map will be
transformed by:
Increasing the share of natural gas in energy usage to 15% from
the current 6% by 2030.
Installation of 175 GW of renewable power capacity by 2022 and
450 GW by 2030. India will meet its 2022 goal ahead of schedule,
Modi said.
Increasing the contribution of electricity to decarbonize
mobility.
Emissions controls at facilities using petroleum and coal.
Expanded biofuels production.
Moving into emerging fuels, including hydrogen.
Digital innovation.
COVID-19 will make achieving those goals more difficult,
acknowledged Manoj Jain, chairman and managing director of
state-owned oil and gas company GAIL India Ltd., in a panel
discussion at the October conference, "Growing share of gas in
India's energy mix: What is realistic?"
But Jain said the recovery is well underway. "Energy demand in
India returned to peak [pre-COVID] levels in September," he said,
and LNG imports are on track for a slight increase compared with
2019.
Importantly, the country stayed the course on the policies
needed to create the transformation, Jain said, even while actual
projects were delayed by the pandemic. "This was the time when [the
government] could not do it on the ground, but did it on the policy
front," he said, by continuing reforms to bring more market
discipline to energy production and use.
The year 2020 saw the commissioning of two LNG import terminals,
which increased the country's processing capacity to 40 million
metric tons/annum (MMtpa). In November 2020, GAIL completed the
Kochi-Mangalore Pipeline project, which Jain said "will
debottleneck" the Kochi LNG terminal so it can operate at its 5
MMtpa design capacity. IHS Markit data show it operated at just 21%
of capacity in July through September 2020.
The gas pipeline network also was expanded in 2020, bringing
large volumes of gas to the eastern and southern parts of the
nation for the first time, Jain said. "The next three to four
years, we will double [the length of] the national pipeline grid to
55,000 km," he said, at a cost of about US$13 billion.
Tripling gas demand
Even with the challenges of COVID-19 in 2020, India's long-term
potential for LNG is very strong, said fellow panelist Meg Gentle,
who was the president and CEO of US-based Tellurian LNG until late
November. "The market has the potential to grow about 120 MMtpa,"
Gentle said. "In August, India became the third-largest importer of
LNG in the world. It could be the largest by 2030."
GAIL is currently the largest of buyer of US LNG in India, and
Jain said the government's goal of 15% gas in its energy mix by
2030 will result in a tripling of demand for gas by 2030. "Domestic
[gas] production is only 15-20 [MMtpa], and the rest must come from
the international market, including LNG," Jain said.
Gas demand growth in India will come from many sources,
including LNG, Jain said. The heavy-duty trucking sector alone
eventually could be responsible for 10 MMtpa of LNG demand. In
addition, Jain said, natural gas will serve as a reliable backup
source of power as the nation's renewable capacity grows, but
leaves it vulnerable to periods when those intermittent sources are
not available.
This is where US LNG comes in. The US is ideally suited to
meeting India's demand for LNG, said Gentle, as new trains are
coming online at US facilities, and the liquefaction plants have
access to large volumes of inexpensive gas. "The cost of gas in the
US is less than $1.50/MMBtu at the wellhead, so [with liquefaction
costs] LNG can leave the US at less than $3.50/MMBtu and be
delivered to India at less than $5.00/MMBtu," she said.
Don't forget about coal
While $5.00/MMBtu LNG is significantly less expensive than
forecasts of a few years ago, others active in India's energy
market, as well as analysts, say the country's energy transition
needs to be kept in perspective.
"Coal is still less than $3/MMBtu [equivalent]," said conference
panelist Ernie Thrasher, CEO and chief marketing officer, Xcoal
Energy & Resources, a US-based coal exporter. "It is a very
competitive price level for gas to make a widescale penetration in
the market."
While agreeing with other panelists that coal use in India will
be challenged on policy and environmental grounds, Thrasher
predicted "an evolution, albeit over time…. I don't see coal
disappearing, and I don't see gas disappearing for a long
time."
IHS Markit came to the same conclusion in a December 2020
analysis, "India's new renewable power targets: How feasible are
they?" by Research Analyst Simran Dua and Director Steven Knell.
"The message from our outlooks is that while policy support for
renewables drives solar and wind additions, more policy support is
needed to incentivize higher levels of additions sooner while
retiring more coal assets ahead of schedule," they wrote.
IHS Markit ran two scenarios. In the "Rivalry base case," it
anticipates 325 GW of new power installations from 2020 to 2030, of
which non-hydro renewables account for about 200 GW, and coal
represents about 100 GW. Due to a relatively slow rebound from the
pandemic, this represents a significant shortfall compared with the
country's stated target of 450 GW of added renewable power by
2030.
However, in another scenario, "Autonomy," India's economy
recovers more quickly, with power demand doubling by 2030.
Governmental support and private investment in renewables enable
installation of 348 GW of new non-hydro renewable power, and coal
contributes only about 40 GW, as the country's path towards more
sustainable energy is clearer under this scenario.
Health and wealth
Low-carbon or carbon-free energy also can help to address a
major public health problem in India, observed Daniel Yergin, IHS
Markit vice chairman and host of the India Energy Forum. Namely,
the country's rural population still relies on firewood, dung and
charcoal for cooking.
"I think there's a mistake in North America and Europe in
thinking that the energy transition is only one thing. In India,
it's two things: the movement towards cleaner energy that is
provided by renewables…but it's also a transition away from using
traditional fuels for indoor cooking," he said.
Propane (liquefied petroleum gas) is the primary solution to the
problem in the short term, and the expansion of the gas pipeline
network is key to a longer-term solution, Dharmendra Pradhan,
Minister of Petroleum and Natural Gas and Minister of Steel, told
Yergin in a forum discussion session titled, "New Map of Energy for
India."
"We have about 280 million LPG consumers, and 80 million of them
are 'the poorest of the poor,'" he said, a group that the
government has targeted for free propane distribution. During the
height of the COVID-19 lockdowns in the spring, he said the
ministry was distributing 5 million cylinders of LPG per day.
The country's economic reforms go hand-in-hand with a
post-pandemic recovery and the transition to a lower carbon future,
added Rajiv Kumar, vice chairman, National Institution for
Transforming India. "For 2022, we hope GDP will exceed 2019, as
recovery is underway… [and] infection rates are low and recovery
rates are high," he said.
The recovery plan includes liberalization of markets to
encourage investment and innovation, he said. For a company such as
GAIL Ltd., this translates to building a network of at least 150
LNG refueling stations on the nation's highways to support
transitioning heavy-duty trucking to LNG use.
Posted 07 January 2021 by Kevin Adler, Editor, Energy and Natural Resources Group, IHS Markit