INDIA S ECONOMIC GROWTH Energy SCENARIOS AND CLIMATE CHANGE

INDIA’S ECONOMIC GROWTH, Energy SCENARIOS AND CLIMATE CHANGE S L RAO at University of Alberta 1

OVERVIEW • In 2004 India was shining; then government lost elections, using that slogan • Economic fundamentals-’real’ economy-erratic industry and weak Agriculture, poor infrastructure, excessive subsidies, poor social security administrative incapability to spend efficiently on any programmes, high deficits, volatile foreign funds • Global meltdown of 2008 -layoffs and slower growth in 2008, 2009 • Vast domestic market, huge potential market of the Poor, young and ambitious population, immense technological and managerial capability • Large part of population not served by commercial energy • Major fuel is and will be Coal • India’s exemplary energy efficiency and emissions record 2

The Past Ten Years And Now • GDP growth: From 1998 -99 -6. 5, 6. 1, 4. 4, 5. 8, 4. 0, 8. 5, 7. 5, 9. 7*; 2008 -09 7. 1%? New year-5%? • Industrial production negative growth Dec 08, Jan 09. • High and Rising Savings rate • Rise in Capital formation Esp. Private Sector • Deepening Export • Inflation at single digit for a decade; 7. 7% last year, 4. 2 in Dec 2005; despite fuel, power, light & lubricants at 7. 1; from 03 -04 -8. 1, 03 -04 -9. 8); Rising in 2007 -08, Nov 2008 - 7. 8%; Now almost zero • Export growth trends; 01 -02 onwards: 22. 1, 15. 0, 21. 4, 27. 6 & in 08 -09 now drop of 20% • Rapid growth of I. T. and B. P. O. • Resilience: Survived face-off with USA and sanctions after nuclear explosions 3

India- A Fast Growing Economy with Greater Potential • Mobile Users - 362. 2 million (Jan 2009); 101. 1 Million new mobile users in last 10 months; growth continues • • Internet connectivity in 2010 -200 million; still growing • • • 5. 25 mn broadband connections (Dec 2008); growing 5. 4 million PC’s sold in 2006; slowing down Cars: expected 30% growth p. a. ; Will rise again with NANO 2010 -over 94 mn cable & satellite households Advertising industry at Rs 4000 crores=$800 million Slow down in Retailing; Special Economic Zones, Media Agriculture 20% of GDP, poor productivity, declining public investment, too many poorly targeted subsidies; Weak Infrastructure-Power, Roads, etc Social infrastructure-Health, Education, etc Poor Delivery systems 4

Demographic Dividend • 2004 -Population =1080 million of which • Age between 15 and 64=672 million • Below 15 and over 64, non-working or dependent population=408 million • Dependency ratio of 0. 6; 2030 -0. 4 • 2020 Average Age: India-29; China-37; Japan-48: youngest working age population in world • Less children=more women at work; more saving; greater growth 5

2009 - Macro Economy Indicators • • Falling GDP growth forecasts; 2009 -10 - 5%? ; revival in 2010 • • Predicted Layoffs by year end-10 million Corporate performance under pressure but margins ok: FY 99 4. 08%; Rising from FY 03 5. 32, then 7. 48, 9, 24, 8, 73, 9. 84, 10. 01 (FY 08), 8. 54; Rising crude and gas costs hurt economy; but falling prices coincided with recession To reemphasize local and cheaper energy inputs: local coal, local gas, hydro, nuclear, renewables Climate Change and New Coal Technologies, ownership and investment issues India is in a squeeze-economic growth imperative-fuel cost rising-emissions • • BOP current a/c deficit widening again; also Trade deficit doubled despite fall in crude prices; last year due Oil imports bills, now export & foreign investment decline 6

Weak Agriculture • • • Supports 60% of population Agriculture was 32% of GDP in 92 -93; 17% in 2008 -09 (AE) Agriculture growth or decline has direct effect on GDP; 97 GDP + 7. 8% Agriculture +8. 8; 04 - 8. 5 & A-9, 3 Static rice, erratic wheat, production: 08 07 06 05 00 91 81 (mn t) R 96 93 92 83 85 74 54 W 78 76 69 69 70 55 36 Land availability limited: Since 1980 crop area for food grains static at around 124 mn hectares Total Investment in Agriculture falling in 1990 s as % to GDP from 1. 92 in 90 -91; 1. 83 in 99 -00; 2006 -07 - 2. 3 % 7

Weak Agriculture-2 • Fall is in public investment; private keeps rising; funds for public investment diverted to poorly targeted subsidies(water, power, fertilizer) • Productivity levels are low: Yield @ 100 kg/HA; India and China in 2006: paddy 31. 24 & 62. 65; wheat 26. 19 & 44. 55; cotton 6. 0 & 33. 3; g. nut 8. 6 & 31. 2, s. cane 669. 4 &825. 25 Poor policies encouraging unsuitable crops: free electricity; minimum support and procurement prices same; annual price increases; no ground water policy; free power to agriculture 60% population lives on agriculture In downturn, companies turning to rural markets, with new Marketing methods Huge potential as diversification progresses • • • 8

Weak Infrastructure • Non-implementation of integrated energy policy; no coordination between electricity, coal and gas • Government ownership of Electricity distribution, coal • Government implementation poor on Roads • Infrastructure regulation/implementation awaiting overhaul • State ownership- high inefficiency, slow decisionmaking, corruption, delays • Federal Constitution; states at loggerheads with Centre; need for coordination 9

Trends of Human Development Indicators in India from 1951 to 1999 -2003 10

HDI indicators Improvement on all fronts; others have fared much better HDI Rank out of 174; Sri Lanka 89; China 96; Indonesia 110; India 124; Pakistan 148 India: +60 population in millions-2001 -6. 3%=65; 2016 -8. 9%=113 • • • -Age 15 -59 2001 -598 mn; 2016 -811 mn -Urbanization: 2001 -27. 8%; 2030 -50%? -Issues: Livelihoods, health, education, housing, water, roads, sanitation, social security, law and order • Poor public health and important reason for low HDI 11

Current Economic Crisis: Not just an imported phenomenon 1. Rising deficits-not shown by Centre in Budgets-Oil Bonds, FCI bonds, Fertilizer bonds, Farmer Loan write-offs, etc 2. Putting Growth over inflation control 3. Desperation to add to Foreign Exchange Reserves • • 4. Participatory Notes and round-tripping of Indian funds Exemption from short-term capital gains tax; Mauritius as largest foreign investor; Very volatile FII funds-stock market like yo-yo as funds ebbed and flowed Power shortages; many not connected 12

Liquidity and Falling Rupee • Banking meltdown in USA worsened situation • FII’s, foreign banks withdrew to support liquidity in their HQ • Stock markets collapsed-SENSEX from 21000 to almost 8000 • Rupee collapsed-in 11 months from Rs 38 to $ to Rs 50 • Overseas borrowing marked to market-upset balance sheets of Indian companies and • P & L as interest costs shown in Rupees • Energy investment affected adversely 13

Poor Implementation. Lack of basic Administrative Reform • Government has been very inefficient in its expenditures; more subsidies than asset building • Similarly Public Distribution System-e. g. food grains, sugar, edible oils, cheap kerosene; • Other subsidies poorly targeted, physical handling and inefficiencies-fertilizers, free or cheap power to agriculture; Social Programmes- NHRM, SSA-not efficient in spending honestly. NREG should have added to purchasing power but with estimates ranging from 40 % to 60% wasted and leakage, its effect has been reduced. Unspent funds in most programmes Infrastructure spending is also slow, eg. , NHAI. Many projects delayed due too many Ministries, lack of coordination, non-accountability of bureaucracy • • 14

India’s Potential 1. World’s Largest Pool of Trained Manpower: • 200 million college graduates (~16%) • 500 million trained, skilled workforce (~40%) • Universal Literacy 2. World’s Leaders in Industry and Commerce • 30 of Fortune • 100 from India 3. India Accounts for 10 % of World Trade A broad scope of products and services 4. India as a Source of Global Innovations New Businesses, New Forms of Organization, New Technologies 15

India’s Potential 5. 6. 7. Focus on the Bottom of the Pyramid as a • Source of Innovations for the World • (Leaders in Health, Education, Energy, Sustainable Development for all) • Markets Transportation, A Flowering of Art, Literature, Films and Science ( 10 Nobel Prize Winners from India) country where Universality and Inclusiveness is widely practiced. India becomes the most Benchmarked country for its capacity to accept and benefit from its diversity TO IMPROVE LIFE OF MANY, & ACHIEVE ITS POTENTIAL, INDIA NEEDS CONSISTENT HIGH ECONOMIC GROWTH AND ENERGY SUPPLIES 16

Energy Consumption • India has lowest energy consumption today • Even with 8% annual growth till 2030 India will not catch up with most others • Coal will be the most important energy source • With lower calorific content, electricity using Indian coal will be much more 17

Per capita Energy consumption by Countries India 2003 -04 TPES (kgoe) 439 Electricity Consumption (kwh) 553 Oil (kgoe) 111 Gas (Cu. m. ) Coal (Kg) Nuclear (k. Wh) Hydro (k. Wh) 30 257* (375) 16 69 256 273 India 2031 -32 (projected @ 8% GDP growth)** 1250 2471 331 149 925* (1388) World Average (2003) 1688 2429 635 538 740 403 423 OECD (2003) 4668 8044 2099 1144 1651 1924 1076 U. S. A. (2003) 7840 13066 3426 2176 3410 2624 948 China (2003) 1090 1379 213 32 1073 32 215 South Korea (2003) 4272 7007 2264 627 1541 2570 101 Japan (2003) 4056 7816 2146 845 1247 1859 816 * Per Capita coal consumption of India has been estimated based on the calorific value of hard coal used internationally (6000 kcal/kg) to maintain uniformity. The figures in brackets are the actual per capita consumption based on Indian coal with a calorific value of 4000 kcal/kg. Source: Integrated Energy Policy : Report of the Expert Committee Pg No 32 18

India has low CO 2 emissions (CO 2 equivalent emissions-mmt) 1990 2000 CAGR % Russia 3208 1833 -3 Germany 1246 1019 -2 U. K. 738 640 -1 Japan 1103 1297 2 USA 5080 6209 2 India 988 1485 4 China 3837 4820 5 Brazil 1180 1477 6 19

in Energy Supply & Infrastructure Investment (billion dollars) 2001 -2010 2011 -2020 2021 -2030 2001 -2030 Total Currency Investment 172 247 347 766 Source: International Energy Agency 20

India’s Energy Mix Over Time (%) 1965 2001 21

Constraints With just 4% of global GHG emissions, India under pressure to curb fossil fuel consumption India must find ways to decouple growth in GDP and fossil fuel for energy, but ensure universal lifeline access • Primary Energy in million tonnes 2005 -06 • Oil equivalent 513 1887 • Of which, Non-commercial 28% • Coal 38% • Oil & Gas 8% • Hydro & Nuclear 26% 2031 -32 1536 to 22

The Burden of Traditional Fuels in Rural India Study based on an integrated survey of 15, 293 rural households from 148 villages in three states of rural North India and one state in South India. Symptoms of diseases related to air and water pollution, expenditure on health and person days lost, demographic and socio-economic information, measurements of air quality in the kitchen, outside the kitchen and the home were collected. Indicators for respiratory functions (Peak Expiratory Flow) were measured for most adults present. The doctors examined a sub-sample of individuals for confirmation of diseases. The study estimated that • • 96% of households use biomass energy, 11% use kerosene and 5% use LPG for cooking. Most of them use multiple fuels. Forests contribute 39 % of the fuel wood need. 314 Mt of bio-fuels are gathered annually. 85 million households spend 30 billion hours annually in fuel wood gathering. Respiratory symptoms are prevalent among 24 million adults of which 17 million have serious symptoms. 5% of adults suffer from Bronchial asthma, 16% from Bronchitis, 8. 2% from Pulmonary TB and 7% from Chest infection. Risk of contracting respiratory diseases and eye diseases increase with longer duration of use of bio-fuels. Total economic burden of dirty biomass fuel estimated at Rs. 299 billion ($7. 5 bn) using a wage rate of Rs. 60 per day, comprising of opportunity cost of gathering fuel, working days lost due to eye infections and respiratory diseases, and the cost of medicine. As women are the primary sufferers of the adverse impact of use of biomas fuels, there is a close linkage between gender and energy. Gender and energy issues have remained on the periphery of energy policy, and require greater attention and backing. Source: Parikh Jyoti et al (2005)2 Integrated Energy Policy: Report of the Expert Committee Pg No 7 23

Rural Household Energy Consumption mainly firewood and dung in rural, electricity in urban Physical Units Mtoe July 1999 -June 2000 Fuel Type Rural Urban Total Fire Wood & Chips (Mt) 158. 87 18. 08 176. 95 71. 49 8. 13 79. 62 Electricity (Bk Wh) 40. 76 57. 26 98. 02 3. 51 4. 92 8. 43 Dung Cake (Mt) 132. 95 8. 03 140. 98 27. 92 1. 69 29. 61 Kerosene (ML) 7. 38 4. 51 11. 89 6. 25 3. 82 10. 07 Coal (Mt) 1. 20 1. 54 2. 74 0. 49 0. 63 1. 12 L. P. G. (Mt) 1. 25 4. 43 5. 68 1. 41 5. 00 6. 41 Source: Derived from NSS 55 th Round, (July 1999 -June 2000) data, National Sample Survey rganisation, Ministry of Statistics and O Programme Implementation, Government of India Integrated Energy Policy : Report of the Expert Committee Pg No 8 24

Commercial Energy Requirements (One Scenario-Coal dominates; oil next; gas could rise) Coal Year Hydro Nuclear Oil Natural Gas TPCES 8% 9% 2011 -12 12 17 257 283 166 186 44 48 496 546 2016 -17 18 31 338 375 214 241 64 74 665 739 2021 -22 23 45 464 521 278 311 97 111 907 1011 2026 -27 29 71 622 706 365 410 135 162 1222 1378 2031 -32 35 98 835 937 486 548 197 240 1651 1858 CAGR -% (Compounded Annual Growth Rates) 5. 9 11. 2 5. 9 6. 3 5. 1 5. 6 7. 2 8 6 6. 4 Per Capita consumption In 2032 (Kgoe) 24 67 569 638 331 373 134 163 1124 1266 In 2004 (Kgoe) 6. 5 4. 6 157 111 27 27 306 Ratio 2032/2004 3. 7 14. 6 3. 6 4. 1 2. 9 3. 4 5. 2 6. 3 3. 7 4. 1 Source: Integrated Energy Policy : Report of the Expert Committee Pg No 28 25

Model Results. Commercial energy requirements • BAU-from 391 MTOE in 06 -07 to 2123 in 2031 -32, of which coal rises from 193 to 1176 • Hybrid-from 391 to 1503 in 2031 -32 with coal from 193 to 767 • Energy intensity in BAU scenario falls from 0. 022 kgoe per Rupee of GDP in 2001 to 0. 017 in 2031 fall of 23% • In Hybrid-from 0. 022 to 0. 012, fall of 29% 26

Projected Commercial Primary Energy Requirements Projections for Electricity Requirements (Based on Falling Elasticities ) Total Energy Requirement Energy Required at Bus Bar @ GDP Growth Rate 8% 9% 2003 -04 633 592 89 89 131 2006 -07 761 774 712 724 107 109 153 155 2011 -12 1097 1167 1026 1091 158 168 220 233 2016 -17 1524 1687 1425 1577 226 250 306 337 2021 -22 2118 2438 1980 2280 323 372 425 488 2026 -27 2866 3423 2680 3201 437 522 575 685 2031 -32 3880 4806 3628 4493 592 733 778 960 Note: Electricity generation and peak demand in 2003 -04 is the total of utilities and non-utilities above 1 MW size. Energy demand at bus bar is estimated assuming 6. 5% auxiliary consumption. Peak demand is estimated assuming system load factor of 76% up to 2010, 74% for 2011 -12 to 2015 -16, 72% for 2016 -17 to 2020 -21 and 70% for 2021 -22 and beyond. The installed capacity has been estimated keeping the ratio between total installed capacity and total energy required constant at the 2003 -04 level. This assumes optimal utilization of resources bringing down the ratio between installed capacity required to peak demand from 1. 47 in 2003 -04 to 1. 31 in 2031 -32. Integrated Energy Policy : Report of the Expert Committee Pg No 20 27

Energy efficiency • Ratio of Total Primary energy Consumption to GDP in PPP terms-2005: • India 0. 15; China 0. 22; USA 0. 21; Russia 0. 47 • India has shown in 2001 -06 least energy consumption growth to GDP growth: Av GDP +8% p. a. & 3. 7% annual energy consumption growth • India’s population 3, 5 times USA and 3 times EU 20, but GDP growth is double with lower absolute incremental consumption of fossil fuels • China grew faster on incremental basis; but in absolute terms, since 2002, it consumed over 9 times fossil fuel compared to EU 20, 10 times of USA, and 11 times India • India has achieved this result by denying modern commercial fuels to over half its population 28

Energy Efficiency must improve further in India • Indian energy intensity is =Japan & Brazil • Below U. K. at 0. 14, Denmark-0. 12 • India can improve energy efficiency by at least 20% based on currently available technologies • Can improve especially in some industries, buildings, transport, 29

Maximum values of domestic coal availability-not enough for needs Fuel (MT) Coking coal Non-coking coal Lignite 2001/02 27 299 25 2036/37 50 50 MT - million tonnes 30

Estimates of bio-diesel production Year 2006 Area under plantation (%) 0 Bi--diesel (million tonnes) 0. 0 2011 5 2. 0 2016 2021 2026 2031 2036 10 25 70 90 100 3. 9 9. 8 27. 5 31. 9 35. 4 Source: National Energy Map for India: Technology Vision 2030: Pg. No. 57 31

Renewable energy source potential Source/technology Unit Biogas plants Million Biomass-based power MW Efficient wood stoves Million Solar energy MW/km 2 Small hydro Potential/ availability Potential exploited 12 3. 22 19500 384. 00 120 33. 86 20 1. 74 MW 15000 1398. 00 Wind energy MW 45000 1367. 00 Energy recovery from wastes MW 1700 16. 20 32

Other Efficiency Measures & Sources -POWER • • • Clean Coal can double life of coal from present 40 -45 years from conventional mining Coal bed methane can double gas reserves Circulating Fluidized Bed Combustion (CFBC) technology enhances options with low quality Indian coal and lignite Integrated Gasification Combined Cycle technology (IGCC) with imported coal can raise consumption efficiencies Nuclear energy Expanded Hydrocarbon supply options in India and overseas Integrated renewable energy policy Solar cells in arid lands, deserts, mountaintops, home & vehicle roofs Market reforms-subsidies, free energy, efficiency of generation, distributed power 33

CO 2 Emissions Profile (In million tonnes) Scenario BAU Hybrid Sector in 2031 2001 917 2011 1663 1479 2021 3332 2443 BAU HYB Power Industry Transport Others Total 2879 2830 1377 181 7267 2031 7267 4774 1329 2510 759 176 4774 34

Barriers to GHG Mitigation POWER • High upfront capital cost per MW of Power & hence tariffs, cross-subsidies • Lack of experience and technical know-how in advance power generation technologies • IGCC not demonstrated commercially for high ash Indian coal • Lack of funds with states for R & M • Renewables-high generation cost 35

Barriers to GHG Mitigation INDUSTRY • Cement, iron & steel, petrochemicals, other chemicals improved • Pulp & Paper, Textiles, Fertilizers, etc, behind • SME’s-credit & capital constraints 36

Barriers to GHG Mitigation TRANSPORT • Need for tough regulatory standards-e, g, fuel economy on auto manufacturers • Huge investments required • MRTS- divert resources from other priorities; & no door-to door connectivity • Need to change lifestyles and individual preferences 37

Regulatory Aspects of GHG Mitigation • EXISTING: Programmes for energy efficiency in industry, appliances, buildings, municipalities • UMPP-supercritical boilers • Created Bureau of Energy Efficiency • Notified norms for vehicle exhaust emissions from 2010 • Minimum 10% by 2012 of total energy sales as R. E. • REQUIRED: Trading in certified energy savings in excess of mandated savings • Incentives for Energy efficiency-e. g. , differential taxation on certified energy efficient appliances • Financing of energy efficiency through public private partnerships 38

Suggested Technology Deployment Programme 2006 -11 2011 -21 Power generation technologies Hydro power generation 2021 -31 Commercialize IGCC Supercritical boilers/ulta-supercritical boilers Demonstration of commercial scale thorium based reactors demonstrated Ultra-supercritical boiler to be commercialized Advanced gas turbines (for example, Hframe Turbine) Refinery-residue-based IGCC Demonstration of commercial scale IGCC plants using indigenous and imported coals Fast breeder nuclear reactor State-of-the-art industrial processes to be adopted End-use technologies Cogeneration Use of waste recovery in industrial processes Lighting technologies: CFL, LED Energy-efficient white goods refrigerators, alternating current T & D loss reduction: HVDC, HVAC, and amorphous Core transformer Natural gas from gas hydrates In-situ coal gasification to be commercialized Natural gas from gas hydrates to be commercialized In-situ coal gasification Deep-sea natural gas commercially available R & D in exploration and production of fuels Deep-sea natural gas CBM production to be commercialized CBM – of cool from CFL – compact fluorescent 300 Miningcool bed methane: seams greater than lamp, LED – light emitting diode; Commercial mining of coal from seams HVDC – 39 metres high voltage direct current; HVAC – high voltage alternating current; greater than 300 metres Source: National Energy Map for India: Technology IGCC – integrated glasification combined cycle; T & D – transmission and distribution Vision 2030: Pg. No. 201 R & D – research and development

THANK YOU 40