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Implementing Integrated Energy Policy
Expanding of Options for Power 26,July 2006
Integrated Research and Action for
Development New Delhi
PwC
connectedthinking
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Contents

• Context
• Requirements Key Issues
• Options for Expanding Power

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ContextDefining Energy Security for India

• Current Energy Mix, Intensity Security
• Development Growth Requirements
• Role of Power in Energy Security

The country is energy Secure when we can supply
lifeline energy to all our citizens as well as
meet their effective demand for their safe and
convenient energy to satisfy various needs at
affordable costs at all times with a prescribed
confidence level considering shocks and
disruptions that can be reasonably expected
- Expert Committee on Integrated Energy
Policy
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India Energy Needs Energy Development Index

• IEA has developed a simple composite measure of a
  countrys progress in transition to modern fuels
  the degree of maturity of energy end-use
• It has been calculated for 75 developing
  countries only.
• It is a simple average of the following three
  sub-indicators
• Per capita commercial energy consumption.
• Share of commercial energy in total final energy
  use.
• Share of population with access to electricity.
• India ranks a poor 53rd and fares very poorly in
  all three sub-indicators

EDI and components for select countries
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Fuel Diversity and Energy Position
Fuel Diversification Index
Country  Oil Natural Gas Coal Nuclear Energy Hydro electric Fuel Diversification Index?
USA 40 24 25 8 3 0.291
China 21 3 70 1 6 0.533
Russia 19 54 16 5 6 0.357
Japan 47 14 23 13 4 0.307
India 30 9 55 1 6 0.402
Germany 38 24 25 11 2 0.275
Canada 32 26 10 7 26 0.248
India is the fifth largest energy consumer and
will become the third largest in the next two
decades India, exhibit high index indicating less
diversification, shows a higher degree of
reliance on oil and coal and lower development of
other forms of energy.
?Fuel Diversification Index measures the
diversification among various energy sources
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Energy Security Strategy Vulnerability to
external shocks

• India, despite the improvement, is three times
  more energy intense when compared to developed
  nations making the economic growth energy
  dependent
• India because of higher import dependence
  relative to the exports remains vulnerable
• India has a lonely position in a quadrant which
  is high dependence and vulnerability
• It is imperative that India chalks an energy
  security strategy to lessen the external shocks
  and sustain its economic growth

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Indias Energy Security- Requirements Key Issues

• Learning from other countries
• Diversification of Energy Supply

Energy Security Equity, efficiency, diversity
sustainability
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Need to alter the source of energy for
householdsEquity component of energy security

• Quantum of Biomass waste (Fuel wood, straw,
  charcoal, agricultural residue cow dung)
  consumption at 54 is very high.
• Dependence on Petroleum is significantly high

The changes in energy mix in residential use
will help to address equity issues There is
huge potential to improve overall energy
efficiency in industrial and transport sector The
Challenge is related to governance of the large
dispersed rural system
Source IEA
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Improving energy efficiency reducing oil
dependency Opportunity for expanding power
Source MoPNG

• Improved Access to Electricity could
  significantly reduce Kerosene for domestic use
• Appropriate Supply of Power for Irrigation will
  reduce Diesel in Agriculture
• Improved Mass Transportation based on Electricity
  can arrest rapid growth of the Motor Spirits

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Expanding Power in Transportation A case of
INDIAN RAILWAYS

• Total energy consumption of transport sector only
  1.5 met through electricity and remaining about
  98.5 through petroleum products
• IR consumes about 5.1 of total energy consumed
  by transport sector (and 1.1 of total energy
  consumption)
• Within Railways energy consumption
• 77.5 consumed in the form of diesel (HSD)
• 22.5 consumed in the form of electricity
• As a proportion to the total energy consumption
  by the Nation
• 1.8 of total electric energy
• 4.4 of total diesel consumption
• Had there been no electrification IR would have
  been using additional 2.25 million tonnes of
  diesel oil per annum
• This would have raised consumption of oil in Rail
  sector from 4 to 9
• If entire IR was electrified there would have
  been saving of 1.7 million tonnes of diesel oil
  per annum
• This would have reduced the nations requirement
  of diesel oil by 4

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Urban Mass TransportEnhancing energy efficiency
Expanding power

• Increase Mass Urban Transport
• Savings in fuel costs is potentially high with
  introduction of electrified Metro (EIA study for
  Bangalore estimates savings of Rs.876 cr./yr on a
  price of Rs.35/ltr of petrol for just 2 3
  wheelers for just 32 km of metro length)

Expected reduction of fuel consumption in 2011 Expected reduction of fuel consumption in 2011 Expected reduction of fuel consumption in 2011 Expected reduction of fuel consumption in 2011 Expected reduction of fuel consumption in 2011 Expected reduction of fuel consumption in 2011
Category of Vehicles No of vehicles without Metro No of vehicles with Metro Fuel consumption without Metro (litres) Fuel consumption with Metro (litres) Fuel Saved (litres)
Two Wheelers 2,394,075 1,676,137 1,795,556 1,257,102 538,454
Three Wheelers 157,224 125,829 786,120 629,145 156,975
Total Saving in Fuel, litres per day Total Saving in Fuel, litres per day Total Saving in Fuel, litres per day Total Saving in Fuel, litres per day Total Saving in Fuel, litres per day 695,429

• In the Delhi Metro project phase-II, the
  estimated foreign exchange savings due to reduced
  consumption of 7 Mn lts of Diesel, 31.5 Mn lts of
  Petrol and 18.6 Mn kg of CNG is Rs. 1.722 Bn, in
  addition to reduced CO2, travel time and
  decongestion of roads
• With a fully integrated Metro, Bus and Rail
  network, only 13 use personal motorised
  transport to travel into central London

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Indian Energy Mix Need for DiversificationLessen
the impact of market risks

• Coal has not kept pace with Indias growing
  energy needs
• Hydro Power development has also not addressed
  the energy needs as required and both energy
  forms have declined despite an abundance of both
  these resources
• Natural Gas has rescued a perilous situation
  where otherwise Oil would have filled the
  strategic void
• Despite abundant reserves Coal production
  continues to be a limiting factor for the rapid
  growth in the power sector
• Natural gas supply will also be in short supply

Eastern Region will by able to supply only half
the potential planned due to coal supply
limitations
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Energy Security Strategies Learning from other
countries
Hydro Regional Gas
Dash for Gas
Conserve, Replace Oil-LNG Nuclear
Go Nuclear
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Diversification - International lessons
Comparison of Total Final Consumption
MTOE 1571 418 162 885 116 394
Source IEA 2003

• Local/Regional resources play a critical role in
  meeting the energy needs (E.g. USA Coal Oil,
  China Coal, Russia Nat. Gas)
• For Developed Economies, reliance on
  Combustibles, renewables and wastes decreases,
  almost disappears India would need to find
  commercial energy for all
• Transportation and Industrial Sector increases
  its share in sectoral mix vis-à-vis residential
  sector requiring a multiplier to the energy
  needs. The next decade will require India to
  review its transportation growth options in view
  of the energy needs

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Options for Expanding Power

• Expanding of Regional Markets
• Expanding Internal Resources

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Options for Expanding PowerExpanding Regional
Markets

• Energy Resources of the Regions
• Development of Regional Power Markets
• Bilateral and Regional Energy Market Development

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Why Regional Resources for power?Generation
Based on Imported Fuel

• Imported fuel poses significant cost implication
  for power generation
• Light area shows price at which gas is
  competitive vis-à-vis coal, while dark area coal
  is competitive
• Spot prices and freight rates indicate 45/ton
  of delivered cost of coal and gas prices is
  considered at 6.2 MMBTU bus-bar cost of
  generation at these levels is Rs. 3.0/kwh and
  Rs. 3.39 per kwh respectively
• Current levels are however ruling at their highs
  and recent long term deals are showing signs of
  softening prices

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Energy Resources of the RegionNepal
Total Hydro Potential of Nepal

• Nepals topography and hydro sources emanating
  from snows and glaciers provides scope for
  hydroelectric development
• India has assisted in a limited way Nepal to
  develop its hydro resources
• HE schemes Pokhra (1 MW), Trisuli (21 MW),
  Western Gandak (15 MW) and Devighat (14.1 MW)
• Projects under consideration
• Karnali (10,800 MW)
• Pancheshwar (5,600 MW)
• Sapta Koshi (3,300 MW)
• NHPC considering Upper Karnali Project (300 MW)
  as an IPP
• DPR of Burhi Gandaki (600 MW) by WAPCOS under
  consideration

River Basin Major (MW) Small (MW) Total (MW)
Kosi 18,750 360 22,530
Gandak 17,950 270 20,650
Karnali (Ghaghra) 28,840 3,170 32,010
Mahakali 3,840 320 4,160
Southern Rivers 3,070 1,040 4,110
Total 72,450 10,830 83,280
Improving political situation in Nepal could
facilitate development of some of the above
potential.
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Nepal Interconnections with India
India Nepal Voltage
Anand Nagar Bhairahawa 33 kV
Itawa Krishna Nagar 33 kV
Nanpara Nepalganj 33 kV
Pallia Dhangadhi 33 kV
Tulsipur Koliabas 11 kV
Lohiahead Mahendranagar 33 kV
Pithoragarh Baitadi 11 kV
Dharchula Jaljibe 11 kV
Dharchula Pipale 11 kV
Gandak East Surajpura 132 kV
Raxaul Birganj 33 kV
Jogbani Biratnagar 11 kV
Thakurganj Bhadrapur 33 kV
Balmikinagar Surajpura 11 kV
Kataiya Duhabi 132 kV
Kataiya Biratnagar 33 kV
Kataiya Rajbiraj 33 kV
Bargania Gaur 11 kV
Sitamarhi Jaleswar 33 kV
Transmission links at 132 kV, 33 kV and 11 kV
Low capacity for energy exchange
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Energy Resources of the RegionBhutan

• Bhutans hydro power potential is assessed to be
  30,000 MW, of which 23,500 MW is considered
  techno-economically feasible.
• Developed hydro capacity of 469 MW constitutes
  2 of the potential
• The upcoming Tala Project will add 1020 MW of
  new capacity on commencement (July 06) and
  increase the capacity threefold
• Tala is expected to produce 4865 MU
• Hydro Projects to be taken up on Priority basis
  have been identified

Tala Transmission System Developed by
Powerlinks, a JV between Tata Power PGCIL
(5149) provides a secure infrastructure for
Bhutan power to reach more power deficit Northern
Indian States. Indirectly it provides also access
to western Indian market 3000 MW Capacity, 1200
km length (2384 Ckt Km) BOOT project is
integrated into Eastern Transmission system.
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Regional Energy Cooperation

• There is a need and potential for higher level of
  energy co-operation within the region to promote
  energy security
• SAARC Initiatives
• BIMSTEC Initiatives
• Strengthen bi-lateral agreements
• Allow of more access to Indian market segments
• Integration Strengthening of transmission
  network
• Developing commercial framework for trading
  framework trading agreements, model power
  purchase agreements
• Cross-border energy exchanges through
  trans-national oil gas pipelines and
  transnational grids for transmission of power.

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Options for Expanding PowerExpanding Internal
Resources

• Energy Resources Demand
• Transmission Infrastructure
• Power Trading Arrangements
• Technology Improvements

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Energy Resources Demand

• Energy resources are concentrated in Eastern
  region
• North East India ranked highest in unexploited
  hydro potential
• The Northern, Western and Southern are expected
  face the maximum shortages in energy, while the
  eastern region is expected remain surplus and
  export power

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Hydro Power Potential in India
State Assessed (MW) In Operation Under Construction Balance (MW)
Arunchal Pradesh 50,328 11 405 49,913
Uttaranchal 18,898 1,610 3,453 13,835
Himachal Pradesh 18,820 3,823 1,926 13,071
Jammu Kashmir 14,146 1,394 469 12,283
Sikkim 4,286 84 519 3,683
Karnataka 6,602 2,789 222 3,591
Meghalaya 2,394 185 - 2,209
Mizoram 2,196 - 60 2,136
MP/ Chattisgarth 4,485 899 30 1,684
Kerala 3,514 1,800 30 1,684
West Bengal 2,841 301 936 1,605
Manipur 1,784 105 90 1,589
Nagaland 1,574 75 24 1,475
Orissa 2,999 1,838 66 1,096
Total 134,867 14,912 8,231 109,852

• India itself has significant hydro-power
  capability undeveloped and has targeted 50 GW for
  development
• Significant potential for development in N-E and
  North India.
• These states see hydro power as the main strategy
  for development of their economies
• South India and Western India has diminishing HEP
  opportunity. These states are facing energy and
  peak power shortages

Uttaranchal HP have focused plans for Hydro
power development through involvement of private
sector.
CEA Ranking Study on River Basins
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Requirements for meeting demand

• Transmission system
• To facilitate evacuation of power from eastern
  region to rest of India
• The capacity of the transmission system needs
  multi fold increase
• JVs similar to Tala system would help to speed up
• Development of Power Market
• Incentives for eastern region states to attract
  investments in Generation
• Country wide consistent Open Access regime to
  provide choice and competition
• Third party supplies with credible open access is
  essential prerequisite as payment security
  mechanism
• Need to remove both tariff and non-tariff
  barriers

Year ER-SR ER-NR ER-WR ER-NER NR-WR WR-SR NER-NR Total
2002 600 100 400 1,250 1,000 1,700 0 5,050
2007 3,600 5,000 2,800 1,250 2,100 1,700 0 16,450
2012 3,600 8,500 8,500 2,250 7,600 2,700 4,000 37,150
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Potential capacity addition through Open Access

• A successful Open Access regime would
• Bring in investment in generation, and
• Innovation and Efficiency in choice of size,
  fuel, etc..
• ..without the need for contingent liabilities
  through long term contracts with the State

Maharashtra 2007 Supply Situation (MW)
14,000
12,000
10,000
8,000
6,000
1
4,000
Currently Contracted Generation to Maha Discom is
about 9,000 MW
2,000
0
Source PwC Research for a World Bank sponsored
study
Demand
Supply
Size of Open Access market estimated at US 3-5
billion
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The change challenge
The Big Leap PwC Utilities Survey 2006 - Inside
the boardroom

• Nearly 60 of respondents thought the industry
  needed to have a strong 10-year focus on reducing
  environmental damage, developing new technologies
  and improving customer service relationships.

The importance of technology is highlighted by
utility companies identification of coal,
alongside piped gas, as the key fuel in meeting
much of future demand growth. Nuclear has grown
in favour and finds fifth rank. Hydro-Carbons
(LNG and Oil) are low on the rankings of CEOs
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Big Leap Where would technology Investment
yield results
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Summary
Expanding options for Power

• Energy Security challenges are Global in nature
  but we need to develop India specific strategy
  and action plans
• Oil intensity of our economy has to be reduced in
  favour of Electricity
• Coal Hydro potential of the nation and the
  region could help alter the energy balance
• Energy Security Plans have to be developed at the
  State level progressing further from Expert
  Committee Recommendations
• Indian supply resources have to be augmented
  through national transmission network development
  connectivity
• Regional Power resources could be developed
  through appropriate development of regional power
  markets and Framework Agreements on trade
  energy cooperation

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Thank You