INDIA'S ENERGY SCENARIO IN 2020

SARMA, E.A.S., Secretary, Ministry of Power, Government of India MAGGO, J.N., Joint Adviser, Planning Commission, Government of India SACHDEVA, A.S., Deputy Adviser, Planning Commission, Government of India

1. Introduction
The Indian economy uses a variety of energy sources, both commercial and non-commercial. Fuelwood, animal waste and agricultural residue are the traditional or `non-commercial' sources of energy that continue to meet the bulk of the rural energy requirements even today. However, the share of these fuels in the primary energy supply has declined from over 70% in the early 50's to a little over 30% as of today. The traditional fuels are gradually getting replaced by the "commercial fuels" such as coal, lignite, petroleum products, natural gas and electricity. 2. At the time of Independence, the country had a very poor infrastructure in terms of energy production and supply. The per capita consumption of energy was abysmally low and the access to energy was very inadequate for the common people. The economy was dependent largely on the non-commercial sources of energy for meeting the requirements of the households and on animal and human energy in case of agriculture and transport. During the 50 years that followed Independence, the demand for energy, particularly for commercial energy, registered a high rate of growth contributed largely by the changes in the demographic structure brought about through rapid urbanisation, need for socio-economic development and the need for attaining and sustaining self reliance in different sectors of the economy. 3. Over the years, the high rate of growth of energy demand could be sustained primarily through increased dependence on commercial energy sources such as coal, oil, natural gas and electricity. However, the energy supply system that has developed over the years has tended to depend more and more on non-renewable energy resources, the availability of which is severely limited. Moreover, development of some of these energy resources is beset with serious environmental implications. To some extent, subsidised prices of certain forms of energy also led to end-use inefficiencies and, therefore, an increase in the gross energy demand. All these factors have raised questions about the long-term sustainability of such an energy supply system. Moreover, with the rapid increase in demand for petroleum products, the country has become a heavy importer of oil. The present trends indicate that in the absence of adequate measures of demand management, the country may have to resort to import of other forms of energy as well and this has raised issues of long-term energy security of the country. 4. A number of studies have been so far carried out with reference to the energy sector in India. Some of these studies were in relation to individual sub-sectors of energy whereas a few were in the nature of analysing the energy sector scenario in an integrated framework. However, in the earlier studies, the emphasis was more or less on inter-fuel substitution possibilities and cost optimisation rather than on demand management with specific reference to the environmental implications. The present paper places emphasis on the latter aspect i.e. the scope for demand side management and the need for minimising the adverse impact of energy development on environment. The essential feature of the approach is to look into the alternatives available for sustainable energy development without in any way compromising the overall objectives of economic and social development. Before the perspective of energy demand and supply is discussed, it may be useful to understand the nature of physical resource endowments of the country and their present status of development.

2. The Primary Energy Resource Endowment

5. India is not endowed with large primary energy reserves in keeping with her large geographical area, growing population and increasing final energy needs. The current assessment in regard to the primary commercial energy resources indicates that coal is the major energy resource of the

country. The gross reserves of coal are presently estimated at around 205x109 tonnes. The proven resources of coal are placed at 73x109 tonnes which are sufficient to last the next century even at an annual level of production of over 500x106 tonnes. There are some lignite deposits also which are estimated to be more than 27x109 tonnes. As far as hydrocarbons are concerned, the balance of recoverable reserves are placed at 732x106 tonnes of crude oil and 660x10 9m 3 of natural gas. The hydro-electric potential as assessed by the Central Water Commission and the Central Electricity Authority in 1987 is 600 TWh. The regional distribution of the primary commercial energy resource potential is indicated in Table 1. 6. As may be seen from Table 1, the distribution of primary commercial energy resources is quite skewed. Whereas the Eastern region accounts for nearly 70% of the total coal reserves, the Western region has over 70% of the hydrocarbons reserves in the country. Similarly, more than 70% of the total hydel potential in the country is located in the Northern and the North-Eastern regions put together. The Southern region, which has only 6% of the coal reserves and 10% of the total hydel potential, has most of the lignite deposits occurring in the country. 7. In addition, there exists potential for coal bed methane, oil shale and gas hydrates in the country. Also, as per the Central Electricity Authority, sixty three sites have been identified for development of pumped storage schemes. The total potential of these schemes adds up to around 94,000 MW. There exists another 6,780 MW of potential for exploitation through mini/micro hydel schemes. The nuclear power programme, as per the Eighth Five Year Plan, envisaged having an installed capacity of 10,000 MW. 8. As far as non-commercial or traditional sources are concerned, fuelwood is the major source. The present estimate of fuelwood use in the household sector is around 160x106 tonnes and accounts for 65% of the total non-commercial energy use in the households. The annual availability of wet dung is estimated at 960x106 tonnes. The consumption of dung cakes is presently estimated at 80x106 tonnes on an annual basis. The annual yield of crop residues is placed at around 370x106 tonnes of which nearly 45x106 tonnes are used in the household sector. 9. Table 2 gives the present assessment of the potential of non-conventional sources of energy and their present status of development. 10. Even though the size of primary commercial energy reserves appears fairly large, their availability in per capita terms is quite moderate on account of the large population of the country. If no significant additions to reserves are made in the future, the per capita availability is going to decline further in wake of the rising population. Table 3 gives the details of per capita reserves and the reserve to production (R/P) ratio of some of the conventional sources of energy as well as the major implications associated with development of these forms of energy sources.

3. Present Status of Development of Energy Resources

11. Through the process of planned development undertaken over the last five decades, the country has taken major strides in stepping up the production of primary commercial energy as shown in Table 4. Coal continues to be the main source of primary commercial energy not only for direct energy use in industry but also for indirect energy use through power generation. Concerted efforts made in exploration and development of hydrocarbons has led to a significant step up in the production of oil and natural gas. However, in the recent years, the production of crude oil has been stagnating. The availability of hydro-electricity has also increased significantly and touched a record generation of 82.71 TWh in 1994-95. There have been additions to nuclear power generation capacity as well as power generation from nuclear power plants. The wind power generation has also picked up significantly during the last six years.

4. The Energy Supply Infrastructure 4.1 Electricity Sector

12. Electricity is generated from a number of sources including coal, lignite, natural gas, liquid fuels, hydel, nuclear and wind energy sources. The installed generation capacity in the utilities

has increased from 1,743 MW in 1950-51, the beginning of the planning era, to 81,171 MW in 1994-95 and further to 84,912 MW by the end of 1996-97, the terminal year of the Eighth Five Year Plan. The gross generation of electricity in the utilities has increased from 5.3 TWh to 350.5 TWh in 1994-95 and 394.5 TWh in 1996-97. The generation capacity mix presently is 72:25:3 of thermal, hydel and nuclear capacity. The share of hydel capacity has come down from an all-time high of 50.6% in 1962-63 to 25.5% in 1996-97. The progress in addition to the electricity generation capacity in the country for a few selected years is shown in Table 5. 13. In addition to the installed generating capacity of 84,912 MW in the utilities, the non-utilities have over 12,000 MW of capacity installed with the different power intensive industries for their captive use. The generation from this capacity was around 42 TWh in 1996-97. Further, the railways also have about 148 MW of installed capacity with an annual generation of 0.02 TWh. Almost whole of the capacity available with the non-utilities is thermal, based on either coal or diesel and gas. The changes in the gross electricity generation from different modes of installed generation capacity in the utilities since 1950-51 are shown in Table 6. 14. The share of hydel generation has been progressively declining over time in the total generation in the utilities. Another noticeable feature of the electricity generation is the increasing levels of generation based on natural gas which has shown an appreciable increase over the 1970-71 level. A small contribution also has been made in the form of wind energy generation.

4.2 Oil Refineries

15. The first oil refinery in India was set up in Assam at Digboi in the year 1901 with a capacity of 0.5x106 tonnes. This refinery is still in operation. The installed capacity in the refineries sector has progressively increased over the years and was 61.5x106 tonnes by the end of the year 1996-97. The crude throughput during that year was 62.82x106 tonnes with a refinery production of 59x106 tonnes. Nearly 1.6x106 tonnes of LPG was also produced from natural gas in 1996-97. The entire refining capacity is in the public sector. Trends in the domestic production of petroleum products are shown in Table 7. Table 8 gives the trends in consumption of petroleum products since 197071. 16. It may be seen from Tables 7 and 8 that the country is deficient in middle distillates and the indigenous production is supplemented through imports. Kerosene oil and high speed diesel oil constitute bulk of the imports of middle distillates.

5. Changes in the Pattern of Primary Energy Supplies

17. The total primary energy supply (both commercial and non-commercial) increased from 89.6x106 toe (tonnes of oil equivalent) in 1953-54 to about 365x106 toe in 1996-97. The share of non-commercial fuels has declined from 72% in 1953-54 to about 32% in 1996-97. Fuelwood accounts for nearly 65% of the total non-commercial energy consumed in the country. Of the indigenous primary commercial energy production, the relative share of oil and natural gas has increased from 1.2% in 1950-51 to 27.9% in 1996-97 (as compared to nearly 34% in 1989-90). The share of coal which was 98% in 1950-51 has declined to 67.7% in 1996-97. The changes in the pattern of primary energy supplies are shown in Table 9.

6. Primary Energy Imports

18. The country is not self-sufficient in oil and oil products. As a result, the import dependence of the country for oil has been increasing over time. The degree of self-sufficiency in oil which was around 35% in 1975 increased up to 1984-85 and was the highest at 70% during that year. It has started declining thereafter in wake of the decline in indigenous production of crude oil and rising demand for petroleum products. In addition to POL imports, there have been imports of superior quality coal for use in the steel industry. The imports of coal have already touched the 10x106 tonnes mark in 1996-97. A limited quantity of electricity of around 1.5 TWh per annum is also imported from Bhutan. The changes in the share of primary energy imports in total primary commercial energy supplies in the country since 1953-54 are given in Table 10.

7. Energy Intensity of the Economy

19. The changes in the primary energy intensity of the economy (defined as primary energy use per unit of GDP at constant 1989-90 prices) over the years are given in Table 11. As may be seen from Table 11 above, the overall energy intensity of the economy has declined over the years. This has been made possible by the gradual substitution of primary non-commercial energy sources by the more efficient commercial energy sources. As a result the primary commercial energy intensity has gone up from 18.3 to 28.53 MJ/US $ during the period 1953 to 1996. 20. The changes in the sectoral final energy consumption are shown in Table 12.

8. Energy Scenario up to the Year 2020

21. The population of the country, which is likely to cross the 970x106 mark by the end of 1998, may exceed 1315x106 by the end of the year 2019-20. Based on the present trends available in the rate of urbanisation, the share of urban population is projected to increase from 25.38% in 1990-91 to 43% in the year 2020. The growth in GDP and its structural changes will have an effect on the demand for energy and the energy supply mix in future. The GDP, which grew at a rate of 3.5% on an average up to the 70's, has averaged more than 5.6% per annum growth in the 80's. The GDP grew at the rate of over 6% per annum during the Seventh Five Year Plan period as against a target of 5% per annum. The Eighth Plan had set a target of 5.6% per annum growth in GDP and the likely achievement is projected to exceed well over 6% per annum. It is assumed in the present paper that these trends in GDP growth are likely to continue in future as well. The high rate of economic growth is likely to be accompanied by an increasing per capita income and changes in life styles. This will have an effect on the energy demand as well. In view of the rising awareness in regard to the environmental protection and conservation, the future growth in energy sector must consider such concerns in order to develop in a manner which is environmentally benign. The key issues facing a developing country like India which have energy implications are, therefore, rising population, need for economic growth, access to adequate commercial energy supplies and the financial resources needed to achieve this, rational energy pricing regime, improvements in energy efficiency of both the energy supply and consumption, technological upgradation, a matching R&D base and environmental protection. 22. The scope of the present paper encompasses building up of energy demand scenarios for different sectors of the economy under various assumptions of changing patterns of energy use, efficiency improvements, inter-fuel substitution, satisfaction of energy demand for energy services, etc.. The study is centered primarily around three scenarios; Business as Usual (BAU), Efficiency-Oriented Scenario (EFF) and Environmentally Constrained Scenario (ENV). The projections under each Scenario take into account the overall availability of resources and the likely growth in the demand for energy in the economy. While BAU denotes a Scenario based on the existing trends in the energy sector, EFF considers the scope for reduction in the energy intensity of the economy, based on end-use efficiency, inter-fuel substitution and other demand management measures. In the ENV Scenario, the emphasis is on minimising the adverse environmental implications of the energy system under different sets of assumption.

8.1 Brief Description of Methodology of Demand Projection

23. The methodology adopted for estimating the long term energy demand is based primarily on the DEFENDUS approach developed by Prof. A.K.N. Reddy and his associates but with certain modifications carried out by the authors. The methodology involves generating sectoral energy accounts for different fuels and analysing the effect of various assumptions made in regard to the estimation of demand, inter-fuel substitution possibilities, improvements in efficiencies, CO2 emission, etc.. The base year chosen for projecting the long-term energy demand is 1989-90.

8.2 Estimates of Energy Requirement up to the Year 2020

24. The total energy demand by sectors in the three scenarios is given in Table 13. Table 14 gives the share of different energy sources in the total consumption requirement in different

sectors of the economy. As may be seen from Table 14, there are major changes taking place in the requirement of petroleum products, electricity and fuelwood in the final energy demand over the years in the three scenarios. The changes in the percentage share of various fuels, both commercial and non-commercial, in the final energy consumption pattern are given in Table 15.

8.3 Changes in Energy Intensity of the Economy

25. The energy intensity of the economy shows a marked decline over the years in the three scenarios on account of the effect of the efficiency measures adopted and the inter-fuel substitution possibilities taken into consideration. A comparative picture of the changes in the primary energy intensity in the three scenarios is shown in Table 16. 26. The primary non-commercial energy intensity shows a marked decline as compared to the changes in the primary commercial energy intensity. The primary commercial energy intensity increases in the BAU Scenario over the three terminal years considered as compared to the base year but a decline is observed in the EFF and ENV Scenarios. It will be interesting to see the changes in the final energy consumption-GDP intensity in the three scenarios. These changes are shown in Table 17. 27. The major changes in the final energy intensity w.r.t. GDP are seen in the case of transport and the household sectors. A further analysis brings out the changes in the efficiency of energy use in these sectors for different activities, in particular the freight movement in the transport sector and cooking in the household sector, on account of the various measures assumed in estimating the demand for final energy consumption in these sectors. Table 18 shows the increase in efficiency of energy use in freight transport due to the effect of the measures adopted for this purpose which include not only an increase in the efficiency of the transport modes but also a modal shift in the freight movement. A higher share of rail transport is assumed progressively over time so as to reach a level of 67% in a period of 20 years from the base year, to be in line with such a recommendation being made in this regard by a number of expert committees and groups set up in the past. The effect of these measures is evident as the energy intensity of freight movement shows a considerable decline in the ENV Scenario. The estimated norm of energy consumption requirement per tonne kilometer in the ENV Scenario in the year 2019-20 is almost 42% lower as compared to the estimated norm for the same year in the BAU Scenario. 28. The efficiency of energy use for cooking in the household sector also shows a marked improvement in the ENV Scenario as compared to the one observed in case of the BAU Scenario. The requirement of per capita gross energy input to meet fully the useful per capita energy requirement in the ENV Scenario in the year 2019-20 is 55% less than the requirement in the BAU Scenario in the same year. There is a consequential increase in the efficiency of energy use for cooking which goes up from a mere 11.5% in the year 2019-20 in the BAU Scenario to 25.5% in the ENV Scenario. Table 19 shows a comparative picture of efficiency of energy use in cooking in the household sector for the three terminal years for all the scenarios. 29. The changes in the efficiency of the cooking system as shown in Table 19 are brought about by the increasing use of more efficient commercial energy sources as well as an increase in the efficiency of use of non-commercial energy sources. This results in a large saving of fuelwood which is extremely important from point of view of preventing large scale deforestation taking place presently on account of indiscriminate mining of fuelwood. The changes in the requirement of fuelwood over the years in the three scenarios are shown in Table 20. 30. As may be seen from Table 20, the requirement of fuelwood declines from 338.1x106 tonnes in 2019-20 in the BAU Scenario to 84.7x106 tonnes in the ENV Scenario. Efforts need to be made to bring down the use of fuelwood further in the household sector since the level of demand estimated in the ENV Scenario is still higher than what can be maintained in a sustained manner for preventing any loss to the forest cover stipulated at around 33% of the total land area of the country.

8.4 Energy Import Requirements

31. The requirement of energy imports will depend on the extent to which the primary energy needs of the economy are met through indigenous production. As far as indigenous production of primary energy is concerned, the production profile for the year 1999-00 is assumed on the basis of the present trends and what is considered feasible within the time span under consideration. In case of the years 2009-10 and 2019-20, the production of various forms of primary energy particularly coal and primary electricity is assumed on the basis of the growth achieved in the respective sectors during the period 1979-89. Based on the balance of recoverable reserves of hydrocarbons, the production of crude oil and natural gas in future is projected to increase at a slow rate. The production of crude oil, which is likely to be 40x106 tonnes in the year 1999-00, is projected to increase to 45x106 tonnes in 2009-10 and further to 50x106 tonnes in 2019-20. The production of natural gas is projected to increase by 109m3 every year over the level of production in the year 1996-97. The oil refining capacity, which is likely to go up to 80x106 tonnes in the year 1999-00, is estimated to increase to 230x106 tonnes in 2019-20. The generation from hydel and nuclear capacity is assumed at plant load factor of 40% and 60% respectively for the period 1999-2019. These assumptions are summarised in Table 21. 32. In wake of the limited primary energy resource endowments of oil and natural gas and the increasing demand for petroleum products in the final energy consumption, dependence on energy imports is going to increase as is brought out in the estimates of energy demand as projected in the BAU Scenario. The assumptions made in the EFF and ENV Scenarios indicate a lower energy demand for final consumption and consequently less of imports. The impact of the measures adopted in the EFF and ENV Scenarios on energy imports is shown in Table 22. 33. The impact of the measures adopted in the EFF and ENV Scenarios is evident from Table 22. Whereas the indigenous coal production as projected in the BAU Scenario is not sufficient to meet the overall coal requirement in the country in any of the terminal years, there results a progressively large surplus of coal in the EFF and ENV Scenarios. Alternatively, the indigenous production requirement of coal come down to that extent. As far as import of coal is concerned, this is presently limited to import of some superior quality coal for use in steel industry. It is assumed that the coal imports will continue to be made in the future as well and may go up to 10x106 tonnes in 1999-00, 15x106 tonnes in 2009-10 and 20x106 tonnes in 2019-20 to supplement the indigenous coking coal production for meeting the requirements of the steel industry in these years. This would result in a further reduction in the indigenous production of coal. Taking this into consideration, the import scenario changes to the extent as shown in Table 23. 34. Based on Table 23, the share of energy imports in the total primary commercial energy supply in the economy is projected to go up steadily from 16.24% in the base year 1989-90 to 37.82% in 2019-20 in the BAU Scenario. Even though the measures adopted in the EFF and the ENV Scenarios reduce the demand for primary energy to a large extent, the country would still need to import 33.46% of the total primary commercial energy requirement in 2019-20 in the ENV Scenario. The increase in the share of energy imports in primary commercial energy supply is mostly on account of increase in the demand for oil products and low indigenous production of crude oil in the coming years. The self-sufficiency in oil, which was nearly 59% in 1989-90 is projected to fall sharply to less than 13% in 2019-20. The economy will thus become dependent on energy imports and the vagaries of the international market. The balance of payments, which is already in the negative, will become more so if no concrete steps are taken to reduce energy consumption in the coming years. 35. The value of net imports is estimated in terms of 1989-90 US dollars and is given in Table 24. The value of net imports in the BAU Scenario increases at a rapid pace and goes up from US $3674.6x106 in 1989-90 to US $9,385x106 in 1999-00 and further to US $61,843x106 in 2019-20. The value of net imports in the ENV Scenario comes down appreciably from US $9,385x106 to US $6,994x106 in 1999-00 and from US $61,843x106 to US $39,563x106 in 2019-20. The major share of the energy import bill will continue to be accounted for by the import of oil and oil products. The share of oil and oil products in the total energy import bill is projected to increase from 92.3% in 1989-90 to 97.2% in 2019-20 in the ENV Scenario. 36. The share of energy imports as a percentage of total exports in 1989-90 was 22.1%. If the exports continue to increase at the rate of 10% per annum in the period 1989-2019, the share of energy imports as a percentage of total exports will continue to remain more or less the same, being 21.3% in the year 2019-20 in the BAU Scenario. However, in the ENV Scenario, the share of energy imports as a percentage of total exports comes down to 13.6% in the year 2019-20. This underlines the need for efforts to be made for increasing exports on a sustained basis.

9. Cost-Benefit Analysis of Renewable Energy Development - Case of Hydel Power

37. Energy is a capital intensive sector and presently accounts for a little less than 30% of the plan expenditure in the public sector. Keeping in view the increase in demand for energy as projected in the different scenarios considered and the rising costs of creating new capacities, the investment requirements of the sector would increase accordingly. There are also adverse environmental impacts associated with energy production and consumption. This will call for an energy development strategy which is environmentally friendly and is sustainable in the long run. Moreover, in view of the depleting nature of the fossil fuels, greater attention is now being paid for developing renewable and non-conventional energy sources which are more environmentally benign. Such an energy development may result in less of GHG emissions but will have costs involved which will have to be borne by the economy and the consumers. An attempt has been made in the paper to ascertain the magnitude of investment required for development of power sector to meet fully the demand for electricity as projected in the different scenarios up to the year 2019-20. The results of the cost-benefit analysis of development of a renewable energy resource like hydro power are presented in the following paragraphs. 38. The gross electricity generation requirements are worked out after taking into consideration the changes in various technical parameters like transmission & distribution losses, plant load factors, auxiliary losses, heat rates of thermal plants, etc. Table 25 gives the gross electricity generation requirement for the different terminal years for the three scenarios. 39. The various options considered for power generation are listed below. (i) Coal Thermal (ii) Gas Combined Cycle (iii) Gas Open Cycle (iv) Hydel (v) Nuclear* (vi) Fuel oil (vii) Biogas diesel (viii) Wind (ix) Solar * The nuclear option has not been considered while working out the least cost options. The capacity levels and the generation levels are taken as given. 40. In addition, some options that will result in savings of power are also considered viz. efficient pumpsets in the farm sector, solar water-heaters replacing electric water heaters and efficient lighting systems (mainly CFLs) replacing the inefficient ones. The cost of such a replacement has also been included while estimating the financial savings that are going to arise out of lower electricity demand. 41. Based on various assumptions regarding capital costs, O&M costs, gestation lags, plant load factors and the fuel cost, the life cycle cost for each of these options has been worked out and is given below. Options Coal Thermal Gas Open Cycle Hydel Fuel oil Biogas diesel Wind Solar Cost (US cents/KWh) 6.433 11.815 9.334 8.823 9.268 14.013 59.889

Gas Combined Cycle 6.475

42. Given such a cost scenario, the gas open cycle option was dropped while estimating the least cost option for power sector. It has been assumed that the gas will be used only in combined cycle plants. With the exception of availability of coal, bounds on availability of different resources for the use in the power sector have been fixed for other options for all the terminal years. For hydro-electricity availability, two scenarios have been considered viz. lower and higher. Based on the life cycle cost mentioned above and the feasible generation from other options (depending on the availability of resources), the generation mix for the electricity sector has been worked out for each of the terminal year considered in the exercise for different demand scenarios viz. BAU, EFF and the ENV scenarios. The investment requirements have also been worked out. While estimating the investment requirements, it is assumed that investment on transmission and distribution will be 70% of the investment requirement for setting up installed generating capacity. 43. For each terminal year, two scenarios have been considered under ENV. These are ENV1 and ENV2. Under ENV1, the options are chosen (subject to assumptions about availability of resources) in the order of cost ranking. In ENV2, the options are chosen on the basis of emissions i.e. the option with the least emissions per KWh of electricity generated is picked up first. In this option greater share of hydel potential is realised than in ENV1. Obviously, in the second case the cost per KWh as well as the investment requirement per KWh would be higher. 44. The ENV scenarios considered in the preceding paragraph take into account a somewhat modest rate of addition of hydro-electric capacity, keeping in view the time and investment constraints. However, considering the large hydro potential that the country is endowed with, it should be possible to step up the rate of hydro power development, provided commensurate investments could be made. Such a scenario has considerable importance in the Indian context as it will reduce excessive dependence on coal and contain the total emissions. The accelerated hydro development (AHD) scenario assumes 75% development of the total hydro-electric potential by the year 2019-20. 45. Table 26 summarise the significant results that have emerged from this exercise for the year 2019-20. The installed capacity requirements in the BAU for the year 2019-20 increase to 384,145 MW. The investment requirement to meet this demand is likely to be US $ 867x109 (at 1989-90 prices and the exchange rate prevailing then). The share of steam generation in the total generation is estimated to be 82.5% requiring about 1175x106 tonnes of coal. The reduction in demand in EFF scenario by 11.8% vis-a-vis BAU scenario reduces the capacity requirement by 45,395 MW and the investment requirement by US$ 95x109. However, the cost/KWh increases because greater share of demand is met from hydel sources (which is costly). The CO2 emissions decline by nearly 220x106 tonnes and the requirement of coal by 146x106 tonnes. Similar picture emerges in ENV scenario where there is reduction in capacity requirement, investment requirement, coal requirement and CO2 emissions. However, the cost of generation per KWh increases. A comparison of ENV1 and ENV2 Scenarios shows interesting results. The demand is the same in the two scenarios and yet the capacity requirement, investment requirement and the cost per KWh is lower in ENV1 than in ENV2. On the other hand, share of steam generation, requirement of coal, total CO2 emissions as well as CO2 emission/KWh are lower in ENV2. This clearly brings out the fact that reducing the emissions have cost attached to it. 46. A reduction in the share of steam generation from 82.5% in BAU to 59.3% in AHD Scenario increases the average cost per KWh of electricity generation from 6.77 cents to 7.41 cents. It reduces the CO2 emissions from electricity generation from 1,887x106 tonnes to 1,112x106 tonnes. It is on account of combination of various factors viz reduced overall demand, greater utilisation of hydel share, limited substitution by wind and solar based energy etc.. To meet the same demand, a higher share of steam generation compared to hydro is associated with lower cost but greater demand for coal and higher CO2 emissions. The trade-off is clear.

10. Conclusions
47. If the process of energy development is allowed to proceed along the lines of BAU, the supply-demand gap in the energy sector is likely to widen to such an extent that a very substantial proportion of the country's export earnings will have to finance the energy import bill in the coming decades. In the long run, this is evidently unsustainable. In particular, BAU implies a substantial increase in electricity demand that is difficult to sustain entirely on the basis of indigenous resources of coal and hydro-electricity that could be developed within the time frame of this study. As a result, the country may have to import not only oil but also coal in large

quantities if the steeply increasing demand for electricity is to be fully met. Another important aspect of BAU is that the supply-demand gap in case of traditional fuels will also increase to such an extent that the fuelwood requirements will far exceed the rate at which fuelwood is regenerated. This will have serious implications for the environment. Finally, in this scenario, the total emissions will be the highest. Apart from the impact it will have on local environment, it could have serious global environmental implications. 48. In the second scenario viz EFF, some efficiency improvements are considered. In the time frame that is considered in this study i.e. up to the year 2019-20, EFF has the effect of significantly reducing the demand for almost all forms of energy, especially coal. The gap between supply and demand for commercial fuels assumes a much less serious proportion, leading to an energy import bill that could be contained within the likely export earnings of the country to a much greater extent. In this scenario, the pressure on fuelwood will also be much less compared to BAU. The total emissions show an impressive reduction and the emissions per unit energy consumption will also be less. In the electricity sector, EFF involves lesser capital investment but a marginally higher unit cost of electricity generation. 49. In ENV, greater efficiency/inter-fuel substitution possibilities are considered. In analysing the implications, two variants of ENV are further examined for the purpose of ranking the various options in electricity sector. In the first variant, i.e. ENV-1, the various options are ranked according to the costs involved for per unit electricity generation. In the second variant i.e. ENV-2, ranking is done on the basis of their implications from the point of view of emissions. There is also a third scenario considered in ENV and it is based on Accelerated Hydro Development (AHD). 50. The ENV variants generally bring down the demand for all forms of energy, especially electricity, coal, oil and fuelwood. This in turn reduces the pressure on foreign exchange resources of the country, apart from reducing the strain on biomass resources. 51. ENV-1 results in substantial savings in investment in electricity sector but would result in a further marginal increase in the unit cost of electricity. In this scenario, the total as well as the unit emission levels decline further. 52. ENV-2 results in savings in investment in electricity sector compared to BAU/EFF, but not to the same extent as in ENV-1. In this scenario, the unit cost of electricity is slightly higher compared to ENV-1. This scenario significantly reduces both total and unit emissions. The main feature of this scenario is the significant reduction that will take place in the requirement of coal. 53. In the AHD scenario, the requirement of coal and, consequently, the emission levels are reduced in the terminal year 2019-20. But this will call for much higher investments during the referred time frame. 54. The policy implications of these scenarios are self-evident. From the point of view of long term sustainability, the country can ill-afford an energy development scenario that places considerable strain on its resources. There are explicit advantages in the three ENV scenarios, especially ENV-2 and AHD that provide much greater benefits from the point of view of the environment. However, to proceed along this path, substantial investments are necessary for which suitable mechanism needs to be evolved for mobilising resources. 55. The shift in the pattern of supply and demand for energy from BAU to either EFF or ENV (ENV-1, ENV-2 and AHD) can take place only if an effort is made to consciously initiate appropriate pricing and investment policies at the earliest and pursue the relevant scenario on the basis of a well-defined strategy.

This paper is based on the country study entitled `Environmentally Constrained Alternative Energy Scenarios' prepared by the authors in April 1997 for Asia and Pacific Development Centre, Kuala Lumpur, Malaysia under the Programme on Asian Co-operation in Environment and Energy (PACE-E) of the UNDP. The views expressed in this paper are authors' own and not of the organisations they serve or of the Government of India. Year taken in this paper is the financial year. For example, the year 1950-51 represents the period between April 1, 1950 and

March 31, 1951. Year 1989-90 is taken as the base year. The exchange rate for this year is 1 US $ = Rs. 16.649. Table 1: Regional Distribution of Primary Commercial Energy Reserves Region/Resource Coal (109t) Lignite (109t) Crude oil (106t) Nat. Gas (109m3) Hydro(TWh) Northern Western Southern Eastern North-Eastern Total 1.1 48.2 13.1 141.4 0.9 204.7 1.1 0.5 25.9 27.5 584 148 732 4 497 159 660 225.0 31.4 61.8 42.5 239.3 600.0

Sources : Fourth National Power Plan 1997-2012, March 1997, Central Electricity Authority. Petroleum & Natural Gas Statistics, 1994-95, Ministry of Petroleum & Nat. Gas Annual Report 1996-97, Ministry of Coal. Table 2: Renewable Energy Potential Source/Technology Biogas Plants Potential/Availability Potential Exploited 12x106 2.7x106 69.5 MW 20x106 25 MW 250 MW 1,000 MW Nil Nil Nil

Biomass-based power 17,000 MW Efficient Woodstoves Solar Energy Small hydro Wind Energy Ocean Thermal Sea Wave Power Tidal Power 120x106 5x1015 Whr/yr 10,000 MW 20,000 MW 50,000 MW 20,000 MW 9,000 MW

Source: Annual Report 1996-97, Ministry of Non-conventional Energy Sources Table 3: Per Capita Availability of Conventional Energy Resources Resource Availability Total Coal 73x109 t Per capita 76 t 90 Moderately high R/P, Land degradation/ Resettlement constraints/ Need for Large Imports Soon Low R/P, Large Imports Necessary Low R/P, Large Imports Necessary Large Untapped Potential, Environmental, Resettlement Constraints, Need for Large R/P Ratio Implications

Oil Gas Hydro

727x106 t 660x109m3 600 TWH

0.75 t 688 cm3 625 KWh

21 30 -

Investments Nuclear 350,000 Mwe* Large Potential, Technology / Safety Issues and Need for Large Investments

*Including Thorium Resources Table 4: Trends in Production of Primary Commercial Energy Units Production 1950-51 1960-61 1970-71 1980-81 1990-91 1996-97* Coal Lignite Crude Oil Natural Gas Hydro Power 106t 106t 10 t
6

33 0.26

55.67 0.05 0.45 7.84 -

72.95 3.39 6.82 1445 25.25 2.42 -

114.01 4.80 10.51 2358 46.54 3.00 -

211.73 14.07 33.02 17998 71.66 6.14 0.03

288.65 22.54 33.87 22890 68.63 9.01 0.85

106m3 TWh 2.52 -

Nuclear Power TWh Wind Power *Provisional TWh

Table 5: Progress in Addition to Installed Generating Capacity in Utilities (MW) Year Hydro Steam Diesel Gas 1028 2436 7508 152 300 230 168 274 Nuclear Wind Total 420 860 30 40 1743 4653 14709 30214 66086 81171

1950-51 563 1960-61 1917 1970-71 6383

1980-81 11791 17122 167 1990-91 18753 43004 182 1994-95 20833 52139 302

2552 1565 5632 2225

Source: General Review, Public Electricity Supply, All India Statistics, 1994-95, CEA Table 6: Changes in the Pattern of Gross Electricity Generation in Utilities (TWh) Year Hydro Steam Diesel Gas 2.69 8.73 0.37 0.11 0.06 0.25 0.52 8.11 Nuclear Wind Total 2.42 3.00 6.14 0.03 0.05 5.29 16.94 55.83 110.84 264.32 350.49

1950-51 2.60 1960-61 7.84

1970-71 25.25 27.80 1980-81 46.54 60.71

1990-91 71.64 178.32 0.08 1994-95 82.71 243.11 0.50

18.47 5.65

Source: General Review, Public Electricity Supply, All India Statistics, 1994-95, CEA

Table 7: Trends in Domestic Production of Petroleum Products (106 Tonnes) Year Light Distillates 1970-71 1975-76 1980-81 1985-86 1990-91 1996-97 3.0 3.6 10.8 6.4 20.8 4.1 12.1 7.9 24.1 8.6 21.6 10.0 40.2 10.9 27.0 12.2 49.5 production 14.3 32.1 14.2 60.6 from natural gas

Middle Distillates 8.6 Heavy Ends Total 5.5 17.1

Note: Production of light distillates includes LPG Source: Indian Petroleum & Natural Gas Statistics, 1994-95.

Table 8: Trends in Consumption of Refined Petroleum Products (106 Tonnes) Year Light Distillates 1970-71 1975-76 1980-81 1985-86 1990-91 1996-97 2.7 3.6 11.7 7.2 22.5 4.4 17.1 9.5 31.0 6.8 29.7 10.1 40.9 9.8 33.1 12.1 55.0 14.6 49.2 15.4 79.2

Middle Distillates 9.0 Heavy Ends Total 6.2 17.9

Source : Indian Petroleum & Natural Gas Statistics, 1994-95. Table 9:Changes in the Pattern of Primary Energy Supply (106 toe) Production 1953-54 1960-61 1970-71 1980-81 1990-91 1996-97 Commercial Primary Energy Coal Lignite Crude Oil Natural Gas Hydro Power Nuclear Power Wind Power Total 23.62 0.19 0.24 24.05 35.64 0.01 0.46 0.67 36.78 6.04 2.87 0.50 36.48 0.81 7.01 0.60 2.17 0.63 47.67 12.66 0.69 0.24 56.96 1.23 10.79 1.41 4.00 0.78 75.19 24.63 3.80 0.21 94.68 3.34 33.92 11.73 6.16 1.60 151.43 31.69 5.37 0.14 124.09 6.05 34.78 18.89 5.90 2.35 0.07 192.13 62.29 7.83 0.16

Net Imports (+) 2.20 St. Changes (-) 0.24 Intl. Bunkers (-) 0.53

Total Commercial Energy Supply 25.48 39.45 59.40 95.81 177.61 246.43

Non-Commercial Primary Energy Supply 64.13 74.38 86.72 105.86 118.80 118.80

Total Primary Energy Supply

89.61

113.83

146.12

201.67

296.41

365.23

Table 10: Share of Net Imports of Energy in Primary Commercial Energy Supply (%) Year Coal POL Electricity Total 8.63 15.31 21.31 25.70 17.85 25.28

1953-54 (-)5.02 13.65 1960-61 (-)2.08 17.39 1970-71 (-)0.40 21.71 1980-81 0.25 1990-91 2.22 1996-97 2.83 25.45 15.56 0.07 22.40 0.05

Table 11: Changes in Overall Primary Energy Intensities w.r.t. GDP (MJ/US $) 1953-54 1960-61 1970-71 1980-81 1990-91 1996-97 Non-Commercial 46.04 Commercial Total 18.30 64.34 40.63 21.55 62.18 32.96 22.57 55.53 29.71 26.89 56.60 19.23 28.75 47.98 13.75 28.53 42.28

Table 12: Source-wise Consumption of Final Energy (1015 J) Year Non-commercial Energy Fuelwood 195354 196061 197071 198081 199091 199697 1700 1968 2345 2864 3210 3210 Dungcake 466 543 653 794 890 890 AgroWaste 519 603 633 774 874 874 Commercial Energy Total Coal & Pet. Lignite Product 2685 683 3114 952 3631 1070 4432 1444 4974 1827 4974 1967 142 252 649 1212 2218 3256 NaturalGas Electricity Total 12 33 283 427 27 61 175 323 762 1168 852 1265 1906 3011 5090 6818

Table 13: Sectoral Energy Requirement in Different Scenarios (1015 J) Year Sector of Consumption Household Commercial Industry Transport Agriculture Others 1989 5488 54 458 424 2062 3128 3063 1005 1958 1777 393 692 599 725 1046 1034 9727 15377 13054 Total Demand

1999 BAU 8094 EFF 6156

ENV

5644

428 665 530 560 1077 860 908

3063 5310 5164 5164 9436 9318 9318

1642 4564 3649 3198 11252 7896 6974

531 1152 967 824 1947 1714 1565

1034 1625 1595 1595 2811 2703 2704

12342 23457 18536 16502 39107 30991 27429

2009 BAU 10141 EFF ENV 6631 5161

2019 BAU 12584 EFF ENV 8499 5959

Table 14: Changes in the Pattern of Final Energy Requirement by Sources (1015 J) Year Commercial Energy Coal Lignite 1989 1999 BAU EFF ENV 2009 BAU EFF ENV 2019 BAU EFF ENV 1652 2267 2267 2267 3704 3704 3704 6444 6444 6444 & Petr. Product 2174 3573 3330 3213 7064 6033 5761 15551 12056 11505 Natural Gas 289 534 534 534 742 742 742 950 950 950 Non-Commercial Electricity Fuelwood Others 702 1570 1391 1295 3124 2708 2415 5965 5407 4771 3142 4710 3398 2965 5722 3296 1986 6723 3842 1685 1768 2723 2133 2067 3101 2052 1893 3474 2292 2074 9727 15377 13054 12342 23457 18536 16502 39107 30991 27429 Total Demand

Table 15: Changes in the Pattern of Fuel Consumption in the BAU, EFF and ENV Scenarios(%) Year Commercial Energy Coal Lignite 1989 1999 BAU EFF ENV 2009 BAU EFF ENV 17.0 14.7 17.4 18.4 15.8 20.0 22.4 & Petr. Product 22.3 23.2 25.5 26.0 30.1 32.5 34.9 Natural Gas 3.0 3.5 4.1 4.3 3.2 4.0 4.5 Non-Commercial Electricity Fuelwood Others 7.2 10.2 10.7 10.5 13.3 14.6 14.6 32.3 30.6 26.0 24.0 24.4 17.8 12.0 18.2 17.8 16.3 16.8 13.2 11.1 11.6 100 100 100 100 100 100 100 Total Demand

2019 BAU EFF ENV

16.5 20.8 23.5

39.8 38.9 41.9

2.4 3.1 3.5

15.2 17.4 17.4

17.2 12.4 6.1

8.9 7.4 7.6

100 100 100

Table 16: Changes in the Primary Energy Intensity of the Economy (MJ/US $) Year 1989 Commercial Non-Commercial Total 28.7 20.0 48.7

1999 BAU 28.6 EFF ENV 26.3 25.1

16.9 12.6 11.4

45.5 38.9 36.5

2009 BAU 30.2 EFF ENV 25.9 23.9

11.2 6.8 4.9

41.4 32.7 28.8

2019 BAU 32.5 EFF ENV 27.1 24.9

7.2 4.4 2.7

39.7 31.5 27.6

Table 17: Changes in the Final Energy Consumption Intensity (MJ/US$) Year Sector of Consumption Household Commercial Industry Transport Agriculture Others 1989 22.4 0.2 8.4 4.1 1.6 2.9 39.6 Total

1999 BAU 18.4 EFF ENV 14.0 12.8

1.0 1.0 1.0

7.1 7.0 7.0

4.5 4.0 3.7

1.6 1.4 1.2

2.4 2.3 2.4

35.0 29.7 28.1

2009 BAU 12.9 EFF ENV 8.4 6.6

0.8 0.7 0.7

6.7 6.6 6.6

5.8 4.6 4.1

1.5 1.2 1.0

2.1 2.0 2.0

29.8 23.5 21.0

2019 BAU 8.9 EFF ENV 6.0 4.2

0.8 0.6 0.7

6.7 6.6 6.6

8.0 5.6 5.0

1.4 1.2 >1.1

2.0 2.0 1.9

27.8 22.0 19.5

Table 18: Energy Intensity of Freight Traffic

1989-90 1999-00 2009-10 2019-20 Freight Traffic (109 tkm) Energy Intensity (MJ/tkm) BAU Energy Requirement (PJ) Energy Intensity (MJ/tkm) EFF Energy Requirement (PJ) Energy Intensity (MJ/tkm) ENV Energy Requirement (PJ) Energy Intensity (MJ/tkm) 537.89 0.7306 669.13 0.6965 662.82 0.6899 528.38 0.5500 1279.47 2466.45 0.7456 0.8048 960.73 1715.94 3064.81

1248.97 2336.58 0.7279 797.63 0.4648 0.7624 1415.38 0.4618

Table 19: Efficiency of Energy Use in Household Sector for Cooking 1989-90 1999-00 2009-10 2019-20 Per Capita Useful Energy Req. (MJ) 740.5 BAU Scenario Per Capita Gross Energy Req. (MJ) Efficiency of Energy Use (%) EFF Scenario Per Capita Gross Energy Req. (MJ) Efficiency of Energy Use (%) ENV Scenario Per Capita Gross Energy Req. (MJ) Efficiency of Energy Use (%) 5450.0 14.9 4019.2 22.0 3638.0 25.5 5869.4 13.9 5035.8 17.5 5063.9 18.3 7693.9 10.6 8000.9 11.0 8054.0 11.5 815.3 883.2 925.9

Table 20: Changes in the Requirement of Fuelwood (106 tonnes) 1989-90 1999-00 2009-10 2019-20 BAU Scenario 158.0 EFF Scenario 158.0 ENV Scenario 158.0 236.8 170.9 149.1 287.7 165.7 99.8 338.1 193.2 84.7

Table 21: Assumptions for Indigenous Primary Energy Production in BAU Scenario 1989-90 1999-00 2009-10 2019-20 Hydro Power Capacity (MW) Nuclear Power Capacity (MW) Wind Power Generation (GWh) Solar Power Generation (GWh) Crude Oil Production (106 t) 18311 1565 6 34.09 25235 2620 310 50 40 24450 331.41 32158 4105 920 100 45 33950 640.47 39082 10000 2730 300 50 43450 1237.75

Natural Gas Production (106m3)* 11172 Coal Production (106 t) 200.89

Lignite Production (106 t) * Natural gas production is net of flaring

12.85

25.00

45.00

60.00

Table 22: Net Imports of Primary Energy (1015 J) Source 1989-90 1999-00 BAU EFF Coal 126 630 2009-10 ENV BAU EFF ENV 2019-20 BAU EFF ENV

-113 -511 1330 -1158 -2421 1995 4550 264 7 2400

-2717 -5343 7800 3334 7 5798

Crude Oil 845 Pet. Prod. 170 Electricity 7 Total 1146

1733 1733 1733 4550 4550 670 7 415 7 291 7 1634 559 7 7

78007.67.677777 7800 7513 7 17315 3932 7 9023

3040 2042 1520 7521 3958

Table 23: Net Imports of Primary Commercial Energy - Modified Scenario (1015 J) Source 1989-90 1999-00 BAU EFF Coal 126 630 293 2009-10 ENV BAU EFF 293 1330 440 2019-20 ENV BAU 440 1995 EFF 586 ENV 586 7800 3334 7

Crude Oil 845 Pet. Prod. 170 Electricity 7 Total 1146

1733 1733 1733 4550 4550 4550 78007.67.677777 7800 670 7 415 7 291 7 1634 559 7 7 264 7 7513 7 3932 7

3040 2448 2324 7521 5556 5261 17315

12325 11727

Table 24: Value of Net Imports of Primary Commercial Energy (106 US $) Source 198990 1999-00 BAU EFF Coal 243.0 1116 519 2009-10 ENV BAU 519 2356 EFF 779 ENV 779 2019-20 BAU 3534 EFF 1038 ENV 1038

Crude Oil 2456.2 5040 5040 5040 13232 13232 13232 226847.67.67777722 22684 22684 Pet. Prod. 936.5 3172 1965 1378 7736 57 57 57 57 2646 57 1250 57 35568 57 18615 15784 57 57

Electricity 38.9 Total

3674.6 9385 7581 6994 23381 16714 15318 61843

42394 39563

Table 25: Requirement of Gross Electricity Generation (GWh) 1989-90 1999-00 2009-10 2019-20 BAU Scenario 268664 EFF Scenario 268664 ENV Scenario 268664 577638 511184 475329 1135858 2138470 972219 856360 1914991 1669443

Table 26: Results for Electricity Sector Based on Cost and Emissions Ranking (Year 201920) BAU Gross Generation Req. (GWh) EFF ENV1 ENV2 AHD

2138470 1914991 1669443 1669443 1669443 223479 338750 45395 772 95 6.79 1666.2 870.0 80.6 7.2 1029 469027 297530 86615 696 171 6.84 1420.8 851.1 77.8 8.2 865 469027 330870 53275 836 31 7.25 1200.6 719.2 64.6 21.2 718 469027 341260 42885 881 (-)14 7.41 1112.2 666.2 59.3 26.5 659

Savings in Gross Generation (GWh) Capacity Required (MW) 384145

Savings in Capacity Required (MW) Total Cost (109 US $) * Savings in Cost (109US $) * Cost/KWh (US Cents) * CO2 Emissions (10 t)
6

867 6.77 1886.8 864.0 82.5 6.4 1175

CO2 emissions (gms/KWh) Share of Steam Generation (%) Share of Hydel Generation (%) Requirement of Coal (106 t) * Excluding the cost of Nuclear option.

Summary
The paper provides an overview of the energy sector development in India during the last fifty years and the likely energy scenario in the year 2020. The initial part of the paper gives a comprehensive picture of the progress made in creation of the energy supply infrastructure, the changes in sectoral energy consumption pattern and the energy-economy relationship as evolved over time. The long term projections of energy demand are made using a spread sheet based model. The model essentially follows the DEFENDUS approach as developed by Prof. A.K.N. Reddy and his associates but with suitable modifications made by the authors in regard to the methodology of projection of energy demand for different sectors. The scope of the present paper encompasses building up of energy demand scenarios for different sectors of the economy under various assumptions of changing patterns of energy use, efficiency improvements, inter-fuel substitution, satisfaction of energy demand for energy services, etc.. The study is centered primarily around three scenarios; Business as Usual (BAU), Efficiency-Oriented Scenario (EFF) and Environmentally Constrained Scenario (ENV). The projections under each Scenario take into account the overall availability of resources and the likely growth in the demand for energy in the economy. While BAU denotes a Scenario based on the existing trends in the energy sector, EFF considers the scope for reduction in the energy intensity of the economy, based on end-use efficiency, inter-fuel substitution and other demand management measures. In the ENV Scenario, the emphasis is on minimising the adverse environmental implications of the energy system under different sets of assumption. The various implications arising out of the energy demand projections in the three scenarios have been discussed. The paper also attempts to estimate the costs and benefits of renewable energy development by analysing the implications of exploitation of hydel power potential in the overall context of power sector development needs arising out of the demand for power as projected in the three scenarios for the year 2019-20.