Shaping a sustainable energy future for India - SSRN

Shaping a sustainable energy future for India: Management challenges

Subhes C. Bhattacharyya Senior Lecturer, CEPMLP, Dundee University Dundee, United Kingdom Email: [email protected] / [email protected] Tel: 44 1382 388876 Fax: 44 1382 385854 [This paper has been accepted for publication in Energy Policy. This in the unformatted, uncorrected proof of the paper. ]

Abstract Most of the studies on the Indian energy sector focus on the possible future scenarios of Indian energy system development without considering the management dimension to the problem - how to ensure a smooth transition to reach the desired future state. The purpose of this paper is to highlight some sector management concerns to a sustainable energy future in the country. The paper follows a deductive approach and reviews the present status and possible future energy outlooks from the existing literature. This is followed by a strategy outline to achieve long-term energy sustainability. Management challenges on the way to such a sustainable future are finally presented. The paper finds that the aspiration of becoming an economic powerhouse and the need to eradicate poverty will necessarily mean an increase in energy consumption unless a decoupling of energy and GDP growth is achieved. Consequently, the energy future of the country is eminently unsustainable. A strategy focussing on demand reduction, enhanced access, use of local resources and better management practices is proposed here. However, a sustainable path faces a number of challenges from the management and policy perspectives. Key words: sustainable energy future, India, management challenges

Electronic copy available at: http://ssrn.com/abstract=1574918


1. Introduction India’s energy sector, like its economy, is at a crossroad: from a contrasting juxtaposition of formal- informal activities, prevalence of low-quality technologies alongside high- tech activities, wide disparity in the lifestyles of the rich and the poor and a distinct rural-urban divergence, the country aspires to leap forward to become a global economic powerhouse with low poverty. This calls for a sustained high growth of the economy at the rate of 8 to 10% per year for the next 25 years (IEP, 2006). Fuelling such a high growth will require a very substantial expansion of the energy system but unless the characteristics of the sector changes and becomes greener, it is unlikely to be sustainable in the long-run. While there is a recent resurgence of focus on India’s economic growth and consequent energy implications, as is evidenced from IEP (2006), IEA (2007) as well as wider media coverage, the focus of most of the studies remains on the analysis of supply-demand issues and environmental consequences without much emphasis on the process of achieving such a transformation. In other words, the management of the evolution process as well as issues related to managing the sector receive less emphasis. Although IEP (2006) has attempted to develop an integrated vision by covering the entire supply chain and considering various issues such as environment, security of supply, research and development, and related policies, the analysis paid limited attention to the demand-side and did not eventually lead to a sustainable solution. Similarly, IEA (2007) has analysed possible future outlooks for the Indian energy sector but did not necessarily propose a sustainable path or considered the sector management issues. This paper aims to bring out the challenge dimension from the sector management perspective and suggests some elements of a strategy for achieving a sustainable energy future in India. To achieve the above objective, we consider the following questions: a) Is the country on a sustainable energy path at present? b) Is the future as forecast by authoritative studies looking sustainable? c) How to shape a sustainable energy future for India? d) What are the challenges for managing such a transformation? The paper provides answers to first two questions based on the review of existing literature while the subsequent questions are analysed using a deductive approach. The organisation of the paper is as follows: the second section discusses the key features of the Indian energy sector at present; section 3 paints a future energy outlook from a quick review of some recent studies; section 4 discusses the essential features of a sustainable energy future while section 5 presents the management challenges. Finally, some concluding remarks are presented.

2. Features of an unsustainable energy sector India’s energy sector is full of contrasts. In this section, we bring out the salient features by considering the achievements and the disturbing features of the past development.

2 Electronic copy available at: http://ssrn.com/abstract=1574918


2.1 Salient developments The sector has undergone a number of changes over the past 50 years or so. A few characteristic features are given below: a) High demand growth: The primary energy supply in India grew at about 3.7% per year on average between 1971 and 2006 (see Fig. 1). 1 The demand for modern commercial fuels grew at above 5% per year on average, with the exception of natural gas which recorded a 12% growth rate during the period. The growth has been faster in recent times and consequently, the total primary supply of coal, oil and primary electricity has doubled between 1991 and 2006, while the natural gas supply has trebled during the same period. The traditional energies have grown slowly – on average at 1.67% per year (IEA 2008a), which depresses the overall energy supply growth to a modest level. The imprecise nature of traditional energy data and the wide variation in their heating values make a clear comparison of traditional and non-traditional energies difficult. b) System expansion: To fuel economic growth, the energy sector has seen a large expansion in terms of its capacity to deliver energy. The installed capacity of the power sector has increased more than 4.5 times between 1980 and 2007. 2 Coal production has increased from about 120 Mt in 1980 to 433 Million tonnes in 2005 3 . Oil and gas production has on the other hand grown more slowly due essentially to limited resource availability while the hydropower has grown just marginally. Consequently, the energy system has become more carbon-intensive. c) High self-reliance 4 : As the country relies on its domestic sources to a large extent, its dependence on imports is low in the overall primary energy supply. The level of self-reliance did not change much over the past 35 years: in 1971, 75% of the commercial energy demand was met from domestic supplies (90% of all demand) while in 2006 the share of domestic supply has fallen to 68% (77% of all demand). 5 This is a significant achievement, although oil import dependency is more than 60% of its needs 6 , showing signs of vulnerability of the country due to volatile oil market situation (see Fig. 2). High self-reliance in energy has been achieved through reliance on local coal and biomass resources but the environmental implications of this local resource dependence are significant. d) Intensification of energy use: A much faster growth in energy use compared to its population growth has improved energy use per capita over the past 35 years (see Fig. 3), although India’s average per capita consumption in 2006 was about a third of world average per capita energy consumption (which was 1.8 toe per person in 2005, IEA (2008b)). Energy use per unit of economic output (GDP) shows two contrasting pictures: Energy consumption per unit of local currency has shown a significant decline since 1990s while in constant

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This is based on IEA (2008a) and includes traditional energies. The data came from the Ministry of Power website at http://powermin.nic.in/ and CEA (2006). 3 Coal Data for 1980/81 from TERI (1997), 2005 data from IEA (2007). 4 Self reliance is measured as the ratio of domestic production to overall total primary energy supply. 5 IEA (2008a). 6 Oil import dependence reduced for a short period in the 1980s due to enhanced production from the Bombay High offshore area but this could not be sustained in the long-term. 2

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Shaping a sustainable energy future for India: Management challenges US dollar terms 7 on the other hand the intensity was increasing until 1993 and since then there is a clear improvement in performance with a sharp fall in recent years. IEA (2007) suggests that a shift towards the service sector has facilitated this downward trend. Yet, India remains quite inefficient in its energy use compared to developed countries. 8 e) Improved access to energy: India has made significant progress in improving access to energies, which is visible in the declining share of traditional energies in total primary energy supply. From a level of 61% of energy demand being met by traditional energies in 1971, India now relies on 28% of its energy needs from such energies (IEA, 2008a). Fig. 1: India’s total primary energy supply 600 500 Mtoe

400 300 200

2005

2003

2001

1999

1997

1995

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Year coal

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Data source: IEA (2008) via ESDS. Note: Pr. Elec – Primary electricity; CRW – combustible renewable and waste.

Energy independence

Fig. 2: India’s energy independence 1.2 1 0.8 0.6 0.4 0.2 0 1971

1976

1981

1986

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Year commercial

Coal independence

oil independence

Gas independence

Data source: IEA (2008) via ESDS. 7

We have used the market exchange rate to convert Indian rupees to US dollars and GDP deflator to obtain real GDP values. 8 The energy intensity of India in 2007 was 0.77 toe/ thousand dollars at constant 2000 prices whereas Japan had an intensity of 0.1 toe/ thousand dollars at constant 2000 prices, the U.K. had an intensity of 0.12 and the USA had an intensity of 0.2 toe/ thousand dollars at constant 2000 prices.

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Energy intensity

Fig. 3: Intensification of energy use 1.2 1 0.8 0.6 0.4 0.2 0 1971

1976

1981

1986

1991

1996

2001

2006

Year toe/capita-comm

toe/capita-all

toe/'1000 USD-comm

toe/'1000 USD-all

Data source: IEA (2008) via ESDS.

2.2 Disturbing features Simultaneously, the energy sector also shows a number of disturbing trends/ characteristics. They include: a) Coal dominated system: Figure 1 clearly indicates India’s heavy reliance on coal to meet her energy needs. Of all fossil fuels, the share of coal remained high throughout –58% in 1971 to 55% in 2006. Oil has maintained a steady share as well – around 36.6% in 1971 to 33.5% in 2006 (of fossil fuels). Despite high growth rate of natural gas, its share in the primary energy mix remains 7% in 2006. Overall, the fossil fuels accounted for 72% of primary energy demand of the country in 2006, thereby indicating an unsustainable energy future. b) Rising pollution: Because of high dependence on dirty fuels, India’s carbon emission is fast rising. With about 1.25 billion tons of CO2 emission in 2006, India emits more carbon than Japan, although its emission is still about onefifth of that of China and the USA (IEA, 2008b). Similarly, the emission of particulates, sulphur and nitrous oxides is also increasing with higher energy use. According to CPCB (2007), 47% of the ambient air pollution monitoring stations reported the level of solid particulate matters exceeding the National Ambient Air Quality Standards by a factor of 1.5 or more in 2006-07. While the reported cases of SO2 and NOx –related violations have declined over time, the overall pollution level remains high due to a rapid increase in the vehicle population and continued use of coal for industrial and energy purposes. In addition, there is a deterioration of water quality (in terms of organic and bacterial contamination) of Indian water streams due to discharge of industrial, municipal and agricultural waste loads (CPCB, 2007), a part of which is derived from the energy sector. Further, the local indoor pollution in rural and poor households often exceeds the permissible level by a factor

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Shaping a sustainable energy future for India: Management challenges ranging from 4 to 15 due to high reliance on traditional fuels (WHO, 2002) 9 . Clearly, the social cost of energy-related pollution is considerable and cannot be ignored. c) Government ownership: Since independence of the country in 1947, the energy sector was under state control for a long time and accordingly, the state plays an important role in the entire supply chain of the energy industry. Although private participation has been allowed since 1990, the domination of the public sector continues. For example, about a quarter of electricity generation capacity, refining and gas production is in the private hands at present while the rest is in the state hands (IEA, 2007). d) Skewed demand pattern: Indian energy consumption shows a large income bias (see Fig. 4): consumers in the high income bracket consume much more than the poorer section of the population and the effect is more pronounced in urban areas compared to rural areas. e) Large urban-rural divide in energy use: The pattern of energy consumption varies widely between urban and rural areas of the country (See Fig. 4 for variations in cooking energy use). Firewood is the main cooking energy in rural India irrespective of expenditure level, although its share falls from around 90% for the lowest expenditure class to around 64% in the highest expenditure class. Clearly, access to clean cooking energies in rural areas is a greater challenge (Pachauri and Jiang, 2008). In urban areas, the use of firewood diminishes quite appreciably as income rises and the use of cleaner fuels such as LPG or electricity increases. However, the consumption pattern is skewed towards higher income groups as indicated earlier. Fig. 4: Urban-rural divide- Pattern of energy consumption by income

20 15 10 5

30 30 0 035 0 35 042 42 5 550 50 0 057 57 5 566 5 66 577 77 5 59 91 15 51 11 120 20 -1 50 15 0 00 -1 ab 925 ov e 19 25

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Exp. class Firewood

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coal

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As against the EPA standard of 150 mg/m3 for PM10, WHO (2002) reports that the exposure to respirable particulates ranges from 500 mg/m3 to 2000 mg/m3 in Indian households relying on biofuels.

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22 22 5 525 25 5 530 30 0 034 34 0 038 38 0 042 0 42 047 47 0 052 52 5 561 61 5 577 77 5 59 ab 50 ov e 95 0

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Data source: National Sample Survey Organisation (2001)

LPG

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f) Access issue: The country still faces a significant challenge in terms providing access of clean energy to a large section of population in rural areas. While efforts are being made for providing electricity access, the challenge remains for providing access of clean cooking energies to around 140 million household (Census 2001) 11 . There is a clear link between the income level (and hence the level of economic development) of a state and the level of access to electricity (and by extension to clean energies, see Fig. 5). In general, higher the per capita GDP, higher is the access to electricity for lighting. This can be seen from Fig. 12. The level of electricity access is less than 10% for per capita income below ten thousand rupees per year. Rapid increases in the access level can be noticed for the income ranges between 10 and 20 thousand rupees per year, and is followed by an asymptotic saturation as per capita GDP reaches around 40,000 rupees per year. The figure suggests a strong relationship between economic growth and electricity access across states in India. As any modern energy has to compete with traditional energies in rural areas, the poor, who normally lack regular money income flows due to unemployment or part-employment, have a natural preference for the fuel that involves no or minimum money transactions (Bhattacharyya 2006). As the sustainability of subsidized schemes is highly doubtful, any credible alternative has to ensure adequate money supply to the poor on a regular basis, which makes it necessary for rural energy supply issues to be set in a broader canvass of overall development. Finding appropriate strategic solutions that integrate energy issues with developmental goals remain the challenge (Ailawadi and Bhattacharyya, 2006). Further, the poor are adversely affected by the problems of security of energy supply, and local and global environmental problems arising from reliance 10

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NSSO, 2001, Census 2001, Tables on houses, household amenities and assets, Census of India, 2001.

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Shaping a sustainable energy future for India: Management challenges on non-renewable energies. Integrating local issues with the overall sustainability strategy is then another challenge.

% of electrified households

Fig. 5: Electricity access and income link 120 Himachal

100

Punjab

80 60

Kerala

40 Bengal

20 Bihar

0 0

10000

20000

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income per person (Rupees)

Data Source: Census (2001).

g) Distorted energy prices: India’s energy prices are not market-based but decided through administrative processes. The regulated/ administrative prices tend to charge more than the economic cost of supply to certain consumers while subsidising others. This distorted pricing mechanism sends wrong signals to consumers and distorts their consumption decision. Electricity is one area where the distortion has remained a chronic problem and has caused serious financial distress to the state-owned electricity supply companies. Distorted prices encourage wasteful consumption that aggravates the environmental consequences. Although there could be some justification for subsidised energy supply to improve energy access to the poorer section of the population, the price distortion in India has often benefitted the well-to-do families and did not help improve energy access in general. However, correcting the distortion has proved to be a politically challenging task. h) Energy shortages: Because of distorted pricing policies and inadequate investments in supply infrastructure, the country faces a chronic problem of supply-demand mismatch. 12 The key to understand this issue is the investment-pricing link. Investment in energy essentially influences the cost of supply and given the lumpy nature of the investment, the prices tend to be volatile with investments. Prices on the other hand provide the signal to both consumers and the suppliers. Thus there is a two-way interaction between investments and pricing. The price charged to the consumers should be such that the investments are profitable and investors are attracted to the sector. Unless the investors are adequately remunerated for the risks taken by them, they would not invest in the country. At the same time, inappropriate prices tend to distort the demand as well, thereby requiring costly investments. As long as the prices are providing correct signals to both consumers and the investors, the balance is maintained. But any breaks in the loop create

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For example, Bhattacharyya (1994) indicates that in 1986, the energy deficiency in the power sector was about 9-10%.

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Shaping a sustainable energy future for India: Management challenges mismatches in investment needs and resources available for investment, causing problems for the sector (see fig. 6). Fig. 6: Investment-price linkage

The problem has been more serious in the electricity sector where the country regularly faces peak capacity deficits of 15% and energy deficits of 10%. 13 Shortages of petroleum products, especially LPG and kerosene where the price distortions were most noticeable, are also reported regularly. i) Inefficient energy equipment and appliance stock: The general quality of energy-using appliances and equipment is low in India. For example, Sathaye et al (2005) indicate that Indian cement plants use 95kWh/t of cement whereas the world best practice is 77kWh/t. Similarly, the same study suggests that the petroleum refining, chemical industry and textile industries also have significant potentials to save energy. Similarly, the stock of energy consuming appliances is increasing rapidly. For example, Letschert and McNeil (2007) report that 80% of Indian household electricity consumption originates from appliances like refrigerators, air conditioners, water heaters, electronic goods, fans and lights. De la Rue du Can et al (2009b) indicate that the TV ownership has doubled between 1993 and 2005 in rural India while the share in urban areas has changed from 49% to 66% within the same period. McNeil et al (2008) indicate that the energy efficiency of Indian electrical appliances is generally low and depending on the type of appliance, there is energy improvement potential ranging between 12 and 60% depending on the appliance type. Because of increasing affluence in the urban areas and the growing size of the middle class, the demand for white goods is increasing rapidly. For example, Letschert and McNeil (2007) indicate that the sale of air conditioners is growing at a rate of 20% per year while McNeil et al (2008) indicate that the refrigerator sale is growing at a rate of 6% per year. An accelerated growth of inefficient technologies is a source of major concern for Indian future energy sustainability.

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In 2007-08, the peak capacity shortage was 15% and energy deficit was 10% (Ministry of Finance, 2007).

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Shaping a sustainable energy future for India: Management challenges Clearly, the sector is not on a sustainable path at present. Its high reliance on fossil fuels and inefficient technologies cannot be sustained in the long-run. At the same time, the social aspects of energy use cannot be ignored. Providing affordable, reliable and clean energies to the entire population will remain a challenge for sustainable energy future of the country. At the same time improving energy supply security and reducing environmental damages arising from energy use assume greater importance in a changing world.

3. Review of energy demand forecasts: Is the future sustainable? Although a number of forecasts for India’s future energy demand is available, we consider two here: the report by the Planning Commission on integrated energy policy - IEP(2006) and the special study on India and China in World Energy Outlook of 2007 by IEA (2007). Clearly the projections made by the Government agencies are quite different from the IEA forecasts, essentially due to differences in the forecasting methods and the underlying assumptions. 14 Yet, these two alternative reports would serve our purpose in providing a picture of India’s energy future. Table 1 provides a summary of the forecasts and compares the results of the two studies. While the numerical values for energy demand vary from a low of 1083 Mtoe to a high of just above 2000 Mtoe under different scenarios, three aspects are common to all scenarios, which are: a) high reliance on fossil fuels over the next two decades. In all scenarios, fossil fuels are likely to supply more than 80% of energy demand, where a. Coal is likely to remain the dominant fuel of the Indian energy system contributing about 45% of primary energy demand in each scenario, excepting in the Policy-driven scenario of IEA where coal share falls to 38%. b. Oil share increases from 24% in 2006 to about 28% - essentially to fuel transport needs. c. Gas remains a constrained industry with a share with a share between 7 and 11.5% in different scenarios. b) Continued reliance on traditional energies - In all scenarios the quantum of traditional energy availability is considered to be quite similar – close to 185 Mtoe (except in two IEA (2007) scenarios). Although the share falls depending on the size of other energies in different scenarios, the absolute volume is higher than that used in 2006. c) The share of all renewable energies remains low – close to 5-7% in most scenarios. As this includes nuclear and hydropower, the new renewable energies are not envisaged to play a significant role in the next two decades. Table 1: Summary of IEP (2006) and IEA (2007) energy forecasts for India Unit: Mtoe IEP (2006) for 2031/32 GDP growth 8% GDP growth 9% 14

IEA (2007) for 2030 under different scenarios Ref Policy High Growth

See Bhattacharyya (2008) for further information on this.

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Shaping a sustainable energy future for India: Management challenges Coal 835 937 620 411 700 Oil 486 548 328 272 416 Gas 197 240 93 89 136 Other RE 133 133 64 100 74 CRW 185 185 194 211 183 Total 1836 2043 1299 1083 1509 Note: RE – renewable energies, CRW – Combustible renewable wastes. IEA (2007) provides this data while for IEP (2006) this represents the non-commercial energy. Source: IEP (2006) and IEA (2007).

Clearly, the energy scenarios as presented above do not change substantially from the present unsustainable path. a) First, the growth envisaged in the above scenarios calls for an enormous expansion of the energy system: about two times the size in 2005 in the lowest demand scenario to about four times the present size in the high growth scenario of IEP (2006). Such an expansion remains a daunting task. To put these numbers in perspective, let us consider the case of the power sector. IEA (2007) in its high growth scenario has suggested an average capacity addition of 20GW per year for 25 years. This requires more than 1.5GW a month; which works out at an average of one decent sized plant a week, every week for 25 years. The challenge is surely huge. No country other than China has achieved such a feat anywhere in the world. b) Second, to meet the forecast demand the country would have to rely more on the import of oil, gas and even coal, thereby making the country more vulnerable to external shocks. Although India has adequate coal resources, yet there are indications that the reserves may not last long with the expected growth in consumption (Ministry of Coal, 2005). In such a case, excessive reliance on coal does not appear to be a viable strategy in the long-term. c) Third, the environmental damage arising from continued reliance on coal and other fossil fuels will increase. India will emerge as the third largest CO2 emitter in the world by 2030 if the above pattern of growth is followed. More importantly, the local pollution will create more hot spots and deteriorate the ambient conditions of many urban areas. Clearly, the external costs related to such pollution will impose a high social cost. d) Finally, the level of clean energy access to the poorer section of the population may remain a concern. With high import dependence and skewed income distribution, it is not clear whether affordable, reliable supply of clean energies to the poor will be achieved. Thus the future depicted above is not sustainable. The pertinent question then is how to shape a sustainable future for India, to which we turn next.

4. Strategy to shape a sustainable energy future for India

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Shaping a sustainable energy future for India: Management challenges The idea of sustainability, as defined in the Brundtland Report, focuses on three pillars of development, namely economic feasibility, social desirability and environmental soundness but in recent times, the issue of security of supply has emerged as another concern. Accordingly, following Berrah et al (2007) an adaptation of the Brundtand Report definition is used: energy sustainability in this paper means access to reliable, affordable and adequate supplies of environmentally benign, socially acceptable but economically sound forms of energy to meet the present needs without compromising the energy needs of future generations. To achieve energy sustainability in this sense, India would have to consider a strategy with the following features to ensure a transition to a low-energy intensity economy: a) Manage energy demand carefully b) Adopt internationally best-practice technologies c) (Follow) good Governance and modern management practices d) Use Indigenous resources effectively e) Ensure access to Clean energies by deploying decentralised and distributed supply options This MAGIC solution strategy covers a number of essential areas as discussed below.

4.1 Energy demand management India needs a shift and break-away from the present unsustainable path at all levels and to adopt an energy efficient way of life so that the economic growth can be delinked from high energy use. As indicated above, reliance on the present style of economic development will not lead to a sustainable energy future. Although India’s GDP elasticity of energy demand of close to 1 is typical for any developing country and compares well with the GDP elasticities of industrialised countries, 15 energy sustainability will require a shift from such an inefficient way of life. Thus the focus has to change from a supply-side system expansion that meets a forecast demand to manage demand to the largest extent possible. India, being at the early stage of economic transformation, is in an advantageous position compared to developed countries. It can set a new development trend by adopting highly efficient, internationally best-practice technologies in all spheres of life where heavy investment in building new, long-lived assets are being made. Efficiency improvements are possible both in the production and consumption of energy. If the tendency of imitating energy-intensive western lifestyles by the richer section of the population propagates to the other sections of the population, the future energy demand could grow at a much faster rate than has been observed in the past. The country therefore urgently needs to adopt policies of deploying the internationally best technologies in all areas of life. It needs to be mentioned that India has made significant efforts in the past to rein energy consumption. Sathaye et al (2005) show that energy intensive industries have procured internationally best practice technologies for new plants since the 1990s. They note the Reliance refinery, India's newest, "ranks in the top 5% of participating 15

For example, GDP elasticities of energy demand of some developed countries are as follows: France 0.93, Italy 1.14, Japan 0.96, Spain 1.27, United States of America 0.59 (See p.47 of Berrah et al (2007)).

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Shaping a sustainable energy future for India: Management challenges refineries using the Shell Benchmark and Energy Intensity Index." (Sathaye et al (2005). Similarly, the Indian government has introduced the Energy Conservation Law in 2001 and created the Bureau of Energy Efficiency in 2002. India is also actively participating in the Clean Development Mechanism and offering carbon offsets through use of clean energy options. However, energy saving potential remains huge. India is also launching a scheme for replacing incandescent lamps by compact fluorescent lamps (CFL) taking credit from the Clean Development Mechanism (Ministry of Finance, 2007). This is expected to reduce electricity demand by 5-10 GW. There is huge potential for demand management in industry and agriculture. Delio et al (2009) and Natarajan (2008) indicate that India can save 183.5 billion kWh through energy efficiency initiatives. Lighting, agriculture and industrial electricity consumption are identified as the major potential areas for electricity conservation (covering more than 97% of the total electricity saving potential). Sathaye et al (2005) suggest that old inefficient plants which co-exist alongside modern, efficient installations also offer energy saving potential of the order of 15-35%. McNeil et al (2008) indicate that electricity saving potential ranging between 12 and 60% exists for household electrical appliances. Delio et al (2009) suggest that the growing demand for energy saving options offers huge investment potential in India in Energy Service Companies (of the order of USD 11 billion). Clearly, an intensification of the efforts to develop an energy conscious and energy efficient society is one of the main thrust areas for a sustainable future. Clearly, there are well-documented barriers to improving energy efficiency (Golove and Eto, (1996), Brown (2001), Reddy (2003): misplaced incentives, financing, market power, mis-pricing of energy, information and other barriers. Most of these are active in India. Energy price distortion and financing issues are at the core of the poor energy efficiency in India. While the Energy Service Company (ESCO) model is being attempted, its large-scale implementation is yet to materialise. Similarly, removing price distortions may not be forthcoming in the near future. Faced with these constraints, the command-and-control approach through legislation and mandatory labelling has received greater attention. Demand management however goes beyond energy efficiency improvements (or energy conservation efforts). In conjunction with the deployment of efficient technologies, the country needs to maintain its move towards less energy-intensive economic activities by properly utilising its talented pool of professionals in developing and enriching the service sector. While the service sector contributes to a high share of GDP at present, the growth in the value addition in this area needs to be maintained in the longer term. In addition, changes in the life-styles and models of urbanisation have to be considered to avoid an energy intensive path to economic development.

4.2 Adopt internationally best-practice technologies As a developing country with a large population base, India cannot avoid expansion of its energy supply system over the next few decades. To ensure a low-level of environmental damage, it is imperative that only the internationally best technology is

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Shaping a sustainable energy future for India: Management challenges deployed when any new investment decision is taken for long-lasting assets. The obvious priority areas are: a) Efficiency improvement of energy production infrastructure: The power sector is obviously a priority area in this respect, due to its operational inefficiency and its reliance on coal. The thermal efficiency of coal power plants in India is about 29-30% while in developed countries a much higher level is achieved (e.g. 42% in Japan) [Graus et al (2007) and Chikkatur (2008)]. Clearly, there is a huge potential for performance improvement. Any improvement in the power plant operation will generate multiple benefits: emission reduction, less investment needs, release funds for other economic activities, including providing energy access, etc. (IEA, 2007). While some initiatives have been taken in this direction through the induction of super-critical technology and renovation of existing plants, the process has been slow so far. Most of the new power plants to be added in the near term would also be of sub-critical type, which would set a long-term trend of environmentally unsound technology for the country. Accordingly, IEA (2007) suggests that even with new initiatives, India’s thermal power plant efficiency in 2030 will be inferior to OECD standards by 4%. Therefore, a quicker switchover to better technologies has to be achieved to avoid locking-in in a high carbon path of development. b) Improvement of supply infrastructure: While long-distance transportation of electricity and resources cannot be avoided altogether because of geographical locations of domestic resource centres and demand, the high level of technical and commercial losses can surely be acted on. A step change in this area with the use of high-voltage AC or DC transmission could help reduce some of the problems. Moreover, the distribution system needs greater attention where the inefficiencies are higher due to commercial and technical factors. As the distribution licensees typically deal with millions of consumers, spread over a large area, it is essential that they rely on: a) smart technologies, initially in urban areas with consumption beyond a threshold level. Smart meters providing two-ways information flows and remote data transfer possibilities would reduce theft and could be used to provide accurate price signals to consumers. b) Pre-paid meters for smaller consumers and for remotely located consumers. These options are worth considering given the strong information technology base and the improvements in telecommunication facilities in the country in recent times. 16 Simultaneously, as decentralised and distributed generation (as indicated below) catches up, the distribution network would require better management. Clearly, technology transfer, research and development (R&D) and international co-operation in R&D are keys to enhance energy sustainability. c) Promotion of efficient appliance stock: The rapid growth in electrical appliance stock expected over the coming decades clearly highlights the need for facilitating penetration of best available technologies in the household appliance segment. Studies show that even considering Indian market conditions, a faster growth of efficient appliances will reduce residential electricity demand considerably (McNeil et al (2008)). 16

See also Tongia (2004).

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d) Industrial efficiency improvement: de la Rue du Can et al (2009a) 17 indicate that the energy intensive industries, which accounted for 63% of industrial energy use in India, has seen a gradual improvement in average specific energy consumption between 1991 and 2005. But there is still scope for improvement as the average lags the world best levels. The small and medium sized industries in the Indian manufacturing sector often record a poor performance. The energy intensive industries have recorded a higher growth in energy demand in the post-reform era due to higher economic growth of the country. Consequently, it is crucial to attract best available technologies and practices in this segment to ensure efficient use of energy and resources in the country to sustain high economic growth. e) Efficient vehicles – Although the transport sector in India accounts for a smaller share of energy demand compared to many other countries, de la Rue du Can et al (2009b) 18 report that vehicle ownership is growing rapidly. Although India has introduced Euro III standards for new cars in major cities and extending the same to the entire country by 2010, the stock of old vehicles is huge. The problem is more acute with the two-wheelers and vehicles for goods transport. As the replacement is slow, the effect of new efficiency standards takes time to kick-in.

4.3 Rely on good governance and modern business practices As the energy sector is state controlled and because the state-owned enterprises (SOEs) do not necessarily follow commercial practices nor subjected to competitive pressures, they do not often follow modern management practices. In most cases, the top management team is composed of the bureaucrats and politicians and the decision-making is more politically driven rather than based on commercial principles. Because such a management style lacks a unified chain of command and is subjected to pressures from various constituents (politicians, bureaucrats, employees, and other interest groups), these companies pursue multiple and often conflicting goals. Consequently they lack pressure to achieve any clear targets or goals and they do not face the market discipline through the threat of bankruptcy (World Bank, 1995). Consequently, many of these entities would fail the tests of sustainability. In order to improve the operating performance and ensure long-term viability of the energy industry, better management practices have to be employed. While more private participation is likely to encourage better management practices, changes in the ownership structure in the entire industry is not likely in the short or medium terms. In addition, as more local-level entities are likely to be involved in the energy business, where the capability is likely to be greatly lacking, the problem will aggravate. Therefore, deliberate policies have to be employed to encourage modern management practices in the SOEs and make them commercially oriented.

17

De la Rue du Can, S., M. McNeil and J. Sathaye, 2009a, India Energy outlook: End-use demand in India to 2020, Ernest Orlando Lawrence Berkeley Laboratory, Berkeley (http://ies.lbl.gov/iespubs/india_energy_outlook.pdf). 18 De la Rue du Can, S., V. Letschert, M. McNeil, N. Zhou and J. Sathaye, 2009b, Residential and transport energy use in India: Past trend and Future outlook, LNBL 1753E, Ernest Orlando Lawrence Berkeley Laboratory, Berkeley (http://ies.lbl.gov/drupal.files/ies.lbl.gov.sandbox/LBNL-1753E.pdf).

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Shaping a sustainable energy future for India: Management challenges Interventions would also be required to promote knowledge transfer and training so that human resources with required skills become available throughout the country. ** The transformation of the energy sector is a challenging task. Given that the economy is changing and because the energy sector faces multi-dimensional influences from local, regional and international levels, the environment under which the transformation will take place will change over time. The dynamic process of transformation needs a governance mechanism that ensures organisational adaptation, encourages innovation and provides appropriate control and regulation of the sector. Simultaneously, the changing needs and focus of the sector demand a break-away from the present delivery systems to a more decentralised and locally organised system. The governance mechanism has to provide flexibility for accommodating such developments. It is unlikely that such a transformation will occur within the existing governance arrangement where the state plays a controlling role. Although the state has an important role to play in the energy sector, clearly the state cannot perform the entire set of activities. The global phenomenon of the 1990s was economic reform that placed emphasis on energy market reforms and right prices. India, which was not immune from these international influences, pursued some of these principles partially. Energy sector reform has not been a great success in India and has progressed quite slowly. Electricity reform has not produced much of the desired results yet and even the progress has been dismal in most of the states. Simultaneously, the state funding for electricity has been drastically reduced, without any concomitant participation from the private sector. Private participation in power distribution does not seem to be gaining momentum and it is quite likely that the privately-owned distribution companies will be least interested in undertaking a loss-making activity such as electrification of the poor. Reform efforts undertaken in India have embraced the principle of “getting energy prices right” - implying rebalancing the prices by removing subsidies and crosssubsidies. Accordingly, the electricity sector is striving to implement cost-based electricity tariffs by bringing transparency in subsidies and by requiring the state to bear the cost arising out of its policy decisions. Similarly, it is a stated policy of the government to eliminate price subsidies from petroleum products in a phased manner, although the actual phase-out has not yet been completed. Clearly price signals are important for a sustainable future. Non-remunerative prices for energy do not attract investments and lead to wasteful energy uses. Similarly, innovative supply arrangements would require less state control on the energy sector. Further, as the economy needs to search for local solutions, a decentralised system of energy market development will be required, which would change the supply business model to a great extent. The regulatory systems where regulators exert a lot of control will be incompatible with such a market development. This is true for fossil fuel based energies as well as other energies, and a comprehensive, end-use service oriented approach will be required rather than individual energy carrier approach being followed today. This remains a major challenge by any standard. The delivery of a sustainable, low-carbon energy future involves a transition that focuses on influencing decentralised decision-makers to adopt sustainable energy

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Shaping a sustainable energy future for India: Management challenges paths considering the economy-wide supply and demand issues, advance planning, adequate incentives, capacity building, project management and transition management plans. The governance mechanism should be such that at any given time it promotes decision-making in the right direction with possible demand- and supplypushes as appropriate. While the political governance system should provide the overall framework and set the aspired targets, ultimately most of the decisions have to be taken by the decentralised decision-makers. In the case of energy efficiency and energy use, the consumers, the appliance suppliers and retailers have to be bought-in. The builders and construction companies have to deliver energy efficient and zero carbon homes while the home buyers have to change their preference for a traditional home to an efficient home. The existing housing stock has to be upgraded. Similarly, the transport infrastructure development and management systems have to adapt to a sustainable path through rapid diffusion of alternative choices. Collectively, all such decisions will be required to reach the desired goal.

4.4 Utilise Indigenous resources effectively To ensure long-term sustainability of energy supply and to reduce the risk of macroeconomic disruptions arising out of high dependence on imported energies, it is imperative for the country to utilise its domestic resources effectively and judiciously. Although import dependence need not cause energy security problems, the exercise of market power and collusive behaviour of producers can impose external costs on the economy. Accordingly, improving resource exploitation and utilisation is of vital importance. This calls for improving the efficiency of India’s energy production. In line with the decentralised energy supply strategy indicated above, more emphasis should go to renewable energies and energy from waste. Despite having a sizeable renewable energy potential, India has had limited success so far. India’s hydropower potential is one of the world’s largest while she has significant wind, solar and biomass energy potential. Although India uses a large amount of biomass and waste, the current inefficient practice could be changed to more sustainable use patterns. This transformation can bring energy security and improve access while reducing environmental and social costs associated with inefficient energy use. In addition, India’s neighbours have huge renewable energy potentials and accelerated development of these resources through co-operation and policy initiatives would bring global climate benefits and local economic benefits. Simultaneously, the efficient use of fossil fuels cannot be overlooked either. India is not an efficient producer of coal and hydrocarbons by global standards. Coal being the most dominant source in India requires a special attention. Coal production is known to be inefficient – especially in the underground mines due to poor level of mechanisation. According to the Ministry of Coal, this neglect of underground mining is likely to affect the overall reserve situation of the country in the long-term when the country would exhaust the resources liable to open-pit mining (Ministry of Coal, 2005). In addition, the country is not prepared for exploiting extra-thick and thin

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Shaping a sustainable energy future for India: Management challenges seams of underground coal although technologies are available internationally. Moreover, the quality of Indian coal has deteriorated rapidly due to high dependence on open-pit mining, lack of quality control and poor quality of coal in deeper seams. Above all, the Indian reserve reporting system appears to misinform the coal potential of the country as the reported reserves do not consider the techno-economic feasibility of the resource extraction, mining inefficiency (i.e. coal not extracted due to mining technology issues) and are based on insufficient exploration information. 19 Consequently, the Ministry of Coal (2005) expresses doubts about the long-term sustainability of coal as the mainstay of Indian energy scenario. Clearly, such an important energy resource deserves a much better treatment.

4.5 Clean energies for all Energy sustainability cannot be achieved without ensuring reliable supply to the entire population. Energy demand in poor households normally arises from two major enduses: lighting and cooking (including preparation of hot water). Cooking energy demand is predominant in most cases and often accounts for about 90% of the energy demand by the poor. Clearly, rural electrification alone is not a solution to the energy access problem (Bhattacharyya, 2006) and the solution strategy has to promote innovative solutions as opposed to prescribing standard templates for adoption and that each rural area will have to search for its own solutions 1. by focusing on the creation of opportunities for higher income generation in monetary terms. Unless money flow increases to the poor, commercial energies stand little chance of competing with traditional energies. 2. by developing local energy markets taking into account the specificities of local energy situation, resources, needs, capacities, strengths and constraints, and adopting appropriate supply mechanisms and organizational structures to cater to the local needs. 3. by selective and judicious use of market interventions to make energy supply affordable but ensuring financial viability of energy supply. Unless the supply is financially viable, it cannot be sustained. 4. by ensuring local community participation in the decision-making and policy implementation process. Such a bottom-up policy is comes as a contrast to the existing top-down approach that is essentially imposed on the population. Implementation of such a policy would require development of a common framework that can be adapted to each situation, creation of a organizational set up to carry out the policy, building organizational capacity, adequate funding arrangements, and above all a complete review and perhaps an overhaul of the mode of functioning of the government, existing organizations and the economic activities to facilitate decentralized mode of functioning of the economy. In this regard, emphasis should be laid on hybrid, multi-functional technological platforms using innovative participatory delivery mechanisms (such as franchisees, licensees, co-operatives or other local enterprise models) and alternative funding options (e.g. micro-finance, capital grants, subsidies, fee-based systems). Moreover, 19

This is based on Ministry of Coal (2005).

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Shaping a sustainable energy future for India: Management challenges appropriate local solutions have to be found instead of universal or global solutions to the problem but it could be possible to scale-up, replicate and mainstream such local solutions (UNDP, 2006). Simultaneously, more hydropower, renewable energies and even nuclear power is required for diversification and greening of the system. Moreover, to ensure wider access to clean energies decentralisation of power generation has to be encouraged, where local level resources can be used to the largest extent possible. The above constitutes a strategy for a sustainable energy future for India but surely, it is not claimed that it addresses all issues related to energy sustainability. One crucial aspect that has not been considered in the above discussion is how to achieve the strategy elements. This is left for further research and subsequent publications.

5. Management challenges for transforming the sector Finally, we turn to the last theme of the paper – management challenges facing the sustainable energy future. We do not intend to produce an exhaustive list of challenges here but identify only a few major challenges. a) b) c) d)

Supply management Project management Resource Management Environment and Social responsibility management

5.1 Supply management Ensuring affordable, secure, environment-friendly and accessible energy supply in the future would require a diversified energy supply mix that places emphasis on locally available renewable energy resources alongside conventional fossil fuels. Managing the entire supply chain of such a diversified supply mix for its entire life cycle would be a challenge. Obtaining permissions from various authorities often take a long time and can act as a deterrent for any infrastructure project. This is not an Indian problem alone – in the United Kingdom, BERR (2007) indicates that it takes on average two years to get a planning permission for a wind project and 25 months for a gas storage project. As a consequence, 7.2 GW of wind projects were awaiting clearance in 2007 in the U.K. In India, a large part of the new capacity until 2030 could be coal based (as envisaged by various studies indicated earlier) but developing coal supply and transportation facilities would be a challenge due to long gestation period of coal projects (Indian coal mines require 8 years to develop), deteriorating coal quality and long overhaul distance of coal from mines to power plants. Similarly, despite new gas finds, the possibility of a “dash for gas” in India is quite unlikely unless the regulatory, pricing issues and geopolitical issues are resolved.

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Shaping a sustainable energy future for India: Management challenges In addition, the ability of the equipment supply industry to match the demand is doubtful. There are doubts about the capacity of equipment manufacturers of conventional energy to supply adequate plants. This market has seen the domination of state enterprises where preferential treatments act as an entry barrier, rendering the market anti-competitive. Even imported supply of equipment can pose problems of quality control, spare parts problem, non-standardised equipment supply, supply delays, transportation bottlenecks in ports and other facilities. The issue will be even more challenging for alternative energies. There are concerns about raw materials as well - as the raw materials required for the equipment supply has seen tremendous price increases, the entire value chain is getting affected, raising concerns of supply chain management of the equipment supply. There are concerns about the availability of materials for ensuring a transition to alternative energies as well. Increasing import dependence of fossil fuels in the future raises another concern arising from the inadequate transport infrastructure in the country, especially inefficient port facilities. JCC (2007) indicates that Indian ports have a longer turnaround time. Inadequate port capacity to handle the increased traffic of fuel imports can delay or disrupt supply or add additional cost to the supply system. Clearly, to ensure adequate supply in the future, it is essential to manage the supply chain more effectively. This in turn requires huge investments in infrastructure development and managing such projects effectively, to which we turn next.

5.2 Managing energy investment projects effectively As indicated earlier, various studies suggest that to meet the energy needs in the coming decades, India would require a huge expansion of its energy supply infrastructure. Although the development envisaged in these studies is not sustainable, there is no doubt that any transformation of the energy sector will require additional investments in new projects. Properly managing the energy projects to avoid time and cost overruns is a major management challenge. Severe delays in projects managed by the public sector are quite common in the Indian energy sector. For example, Morris (1990) indicated that 100 to 300% cost overruns were noticed in energy sector projects in the 1980. In the power sector, more than 12 GW of capacity could not be added between 2002 and 2007 due a wide range of factors, including lack of adequate local equipment supply capacity, delays in project approval and court cases have delayed some projects (GOI, 2007). In addition, fuel supply for power generation is emerging as a major issue due to inadequate gas resources 20 , transportation and other infrastructure bottlenecks for coal supply as well as delays in large-scale mine development. Further, the demand for land for power plant expansion is growing significantly and has to compete with other land demands, including that for expansion of settlements and agricultural needs. Land acquisition

20

While India has found some gas recently in the East Coast, the development of such resources is fraught with difficulties of adequate remuneration to the private sector for the infrastructure development and for gas supply.

20

Shaping a sustainable energy future for India: Management challenges related disputes are emerging as a major problem for industrialisation in general and power sector expansion in particular. Table 2: Major reasons for power project delays during 2002-07 Reasons Delays in environmental clearance Delays in MOU with the state Other (not specified) Natural calamities Delays in escrow cover Law and order issues Geological surprises Court cases Delays in awarding works Problems related to funding Delays in technology tie-ups Total Source: GOI (2007).

Thermal (MW)

Hydro (MW) 400 400 400 450

500 500

998 1500 3960 7458

510 675 823 1400 5058

Total (MW) 400 400 400 450 500 500 510 675 1821 2900 3960 12516

% of total 3.20% 3.20% 3.20% 3.60% 3.99% 3.99% 4.07% 5.39% 14.55% 23.17% 31.64% 100.00%

Similarly, the rural electrification projects under the newly launched electrification programme (RGGVY programme) faced delays and in 2006-07, less than one-half of the targets could be achieved. A number of factors explaining the short-fall were identified by the Power Ministry and include (LSS, 2007): - delay in finalisation of contract awards, - longer than expected pre-award lead-time; - unavailability of contractors, equipment and manpower; - delay in issue of tenders due to non-familiarity with turnkey contracts; - Delay in land acquisition in certain states, etc. As the infrastructure needs to be modernised and the transition from the conventional to newer technologies gain momentum, the problem of managing the timely and within budget completion of projects will emerge as a major challenge. The challenge will amplify considering the small size of alternative energy projects, involvement of local or decentralised administrations in the project development, and lack of infrastructure and difficulties in mobilising resources of the required quality at the length and breadth of the country. This dimension of the problem requires further investigation.

5.3 Resource management Resource management embraces a number of areas –natural resources, human resources, financial resources, capital assets, etc. In this section, only human resources and financial resources are considered for brevity.

5.3.1 Human resource management Finding adequately skilled personnel for the energy industry is becoming a challenging task globally. The changing industry needs expertise in various areas and as the experienced staff retires, the industry finds it difficult to recruit qualified staff and retain the skills. The Expert Committee on Coal (Ministry of Coal, 2007) reported

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Shaping a sustainable energy future for India: Management challenges that the coal industry is facing an acute shortage of personnel at various ranks and the problem will aggravate when existing staff retire over the coming years. Similarly, GOI (2007) has estimated that for the 11th and 12th Plan periods, the power sector would need more than 0.6 million additional manpower for operating the system. The requirement would increase if one considers the need for the construction work of power plants and networks. Moreover, the need will increase if renewable energies and decentralised mode of operation are considered. Similarly, the oil and gas industry is facing a shortage of manpower globally. Although India produces a large number of technically skilled manpower, retaining high quality staff is an issue due to poor incentive and remuneration packages. In addition, the academic knowledge from the universities provides the foundation but requires further training supplements for practical and industry specific skills. Moreover, as the industry evolves, new horizons appear both technically and otherwise. These require additional skills for adaptation to the new environment. This therefore requires proper education planning and quality control systems. Simultaneously, the demand for unskilled workers also increases as the construction and project activities multiply. It has been reported that contractors of rural electrification projects had difficulties in sourcing labourers for their projects implementation, leading to delays (LSS, 2007). Such problems are likely to aggravate with a higher level of activity. While attracting manpower is an issue, there are other human resource-related concerns as well. In a changing industry, where the centralised office-oriented works would yield room for jobs in more decentralised and remote areas, the deployment of staff can be an issue. Further, managing the change in the public utilities will be crucial to adopt a more commercially oriented culture and a transparent, open attitude to work rather than a common-and-control type of management. There is resistance for change especially in the organised public sector and overcoming such challenges tends to be a time-consuming process.

5.3.2 Investment and financial management Funding investments for future expansion and transition is another challenge. IEA (2007) has estimated an investment requirement of $1.25 trillion between 2006 and 2030 to ensure supply corresponding to its forecasts in the reference scenario. This increases to $1.7 trillion for the high economic growth scenario. On average, the IEA estimate for the reference scenario amounts to an investment of $50 billion every year for 25 years. Most of it is expected to go the power sector but it appears that between 2002 and 2007 on average just over $14 billion were invested in the power sector (Planning Commission, 2007). Therefore reaching the desired level of investment is surely a daunting task. The challenge becomes even more daunting with the deepening of the financial crisis in the Western banking and financial sector since late 2008. The credit crunch will surely affect the investment prospects in the short-term and can have a lasting impact on the long-term. The economy has slowed down as a consequence, and recession in the developed world will also reduce export demand, which in turn will put less

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Shaping a sustainable energy future for India: Management challenges pressure on the electricity system and ease off some pressure for capacity expansion. The credit crunch will affect risk perception of funds, especially for foreign market borrowing and through equity capital. The poor financial health of the Indian electricity sector will surely prove a disincentive here. The credit crunch is not only a bad news for the mainstream power sector but also for the renewable energy industries. These projects will face high cost of funds and as many foreign investors are active in this area, the effect could be worse here. However, the falling costs of goods and services will imply that the overall investment need will reduce to some extent. When the funding for conventional investment becomes difficult, the issue become even more difficult for investments in transition experiments and alternative pathways that are non-traditional. Limited knowledge about such investments and accordingly high perceived risks of such projects could deter investors and funding agencies. Clearly, alternative arrangements would be required to promote such experiments so that alternative future pathways can be explored. Therefore, financial management of the sector and ensuring funding for expanding the system will be a major challenge.

5.4 Environmental and social responsibility management Energy sector being a major anthropogenic source of environmental insult (UNDP, 2004), the search for a sustainable energy future in India cannot neglect the environmental implications of any energy system. Sustained economic growth and consequent energy use has affected the environment, especially in urban areas and the ambient air quality of many Indian cities far exceed the National Ambient Air Quality Standards (World Bank, 2005). Although environmental impact assessment and mitigation measures now form an integral part of any project approval process, the management issue is not limited to just projects only. Growing use of energy for economic activities and other purposes, along with poor technological asset stock and reliance on dirty fuels has damaged the local environment to unacceptable levels. The vulnerable sections of the population are disproportionately affected by such impacts and urban air pollution is believed to cause more than 40,000 premature deaths in India (World Bank, 2005). Although urban environment has received special attention in recent times through judicial activism (Greenspan et al, 2004), India’s record in restraining environmental degradation is not quite impressive. A World Bank Study (World Bank, 2006) indicates that the compliance ratio of monitored industries is only 50% and despite improvements in the air quality over the past decade in major cities, the quality has been deteriorating in medium and smaller cities across the country. The problem is likely to aggravate with higher economic growth and the adoption of westernised lifestyles in the future. At the same time, lack of access to clean energies by the poorer section of the population both in urban and rural areas and the increasing size of “environmental refugees” 21 as a consequence of the development process add a social dimension to the problem. In addition, the Indian poor are also considered to be a vulnerable population for forced migration due to climate change (NRC, 2008, IPCC, 2007). As the poor remain the most vulnerable section of the population, managing the issues 21

There is no agreed definition of the term but is commonly used to people who have been forced to leave their traditional habitat as a result of an environmental disruption. See Myers (1995).

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Shaping a sustainable energy future for India: Management challenges related to disaster, vulnerability and forced migration will be a very important challenge.

6. Conclusions India is at the crossroad of a major change in terms of economic development. As the country tries to maintain a high economic growth path to address poverty and other social issues, it is becoming clear that the country faces major energy-related challenges. Following the western-style energy intensive path to development is not an option for India in the long-run. Achieving a secure, affordable and environmentally benign energy supply requires immediate attention. Obviously, the Herculean challenge requires an out-of-the-box approach. There is no ready-made template as no country has resolved the problem yet. Therefore, each country would have to find its own solution through trial and experimentation. This paper suggests a strategy based on less energy, efficient use of energy, higher reliance on locally available energies, deployment of decentralised and distributed sources of energy, and better governance and management practices to reach a sustainable energy path. While the strategy provides some elements of a sustainable energy future, it is not an end in itself and aims to spur a serious debate on the subject. It is important to recognise the need for a transition to a sustainable path and initiate actions so that in the long-term a better future can be ensured for all. But managing such a change faces a number of major challenges – managing supply, involving better project management approaches, resource management in a broader sense, and environment and social responsibility management. The task is challenging and requires well co-ordinated efforts at all levels. India has to find its own road to energy sustainability and it requires an inclusive, open, co-operative solution that will benefit the entire country in particular and the world in general.

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References and further reading may be available for this article. To view references and further reading you must purchase this article. Energy Policy, 36(9), pp. 3467-76.

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