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Let us turn green: Role of natural gas and renewable in creating a green energy market in India
Updated:Mar 31, 2016
 
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By Sanjay Kumar Kar
 
India’s intended nationally determined contribution (INDC) commitment targets to reduce the emissions intensity of its GDP by 33 to 35 percent by 2030 from 2005 level is very ambitious but achievable. Further, India intends to achieve 40 percent cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030. India is poised for a rapid transition from fossil fuel driven economy to non-fossil fuel driven economy by 2030.
 
In 2014, the primary energy mix of the country dominated by coal (56 percent) and oil (28 percent). Contribution of natural gas declined from 9 percent in 2005 to 7 percent in 2014. Fall in domestic natural gas production and higher price of imported natural gas were the reasons for lower share of natural gas in the primary energy consumption in India. In the recent times, spot liquefied natural gas (LNG) price falling to $7-8/mmBtu from as high as $15/ mmBtu would boost import and consumption of natural gas in the country. In addition, terms and conditions, including price of long-term LNG contracts renegotiated and new price would be $6-7/mmBtu, instead of $12 mmBtu. All natural gas consuming segments like transport, industrial, commercial, and domestic are bound to benefit from lower natural gas prices.
 
The government is encouraging companies to develop LNG terminals and transnational pipelines to import natural gas from various available sources. By 2019-20, LNG terminal would double from existing capacity of 25 million metric tons per annum (MMTPA). New LNG terminals are coming up in the Eastern (Dhamra and Digha) and Southern (Kakinada and Krishnapatnam-Nellore) parts of India, which are expected to increase supply and consumption of natural gas in states like Odisha, West Bengal, Bihar, Andhra Pradesh, Telangana, and Tamil Nadu. Natural gas import of 38 MMSCMD to India through Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline is expected to start by 2019-20 and improve gas supply to north India.
 
Considering volatile nature of the international gas availability and price, optimization of domestic gas production is important to India. To increase domestic natural gas production from conventional and non-conventional sources in the country, the government launched new Hydrocarbon Exploration Licencing Policy (HELP) in 2016. 
 
City Gas Distribution plays a crucial role in enhancing gas accessibility at burner point of consumers. Currently about 67 geographical areas (cities/districts) had natural gas supply in the country and Petroleum and Natural Gas Regulatory Board (PNGRB) is committed to take natural gas to 240 geographical areas by 2022. Today, about 3.02 million domestic customers, 28,800 industrial and commercial customers have piped natural gas connections in the country. Currently over 1015 compressed natural gas (CNG) stations are serving about 2.55 million CNG driven vehicles in the country.
 
Currently a cross-country natural gas pipeline network of 16,065 KM with a total capacity of 387 million standard cubic meter (MMSCMD) is mostly catering to the demand centres in the West, North, and Central India. The Eastern part of the country has limited access to natural gas due to lack of natural gas infrastructure. Additional 11302 KM of natural gas pipelines with a designed capacity of 469 MMSCMD are under various stages of execution.
 
In future, with a fully functional national gas grid of close to 30,000KM with designed capacity of more than 856 MMSCMD, natural gas could significantly contribute to economic growth of the entire country. Industries like fertilizer, power, ceramic, chemical, refinery, and transport stand to benefit immensely. The domestic and commercial segments would continue to enjoy the advantages of natural gas. The PNGRB is bringing timely regulatory changes to protect interest of all stakeholders and establish fair competition.
 
The share of renewables in primary energy mix remained almost constant at 2 percent during 2005-2014. However, renewable energy market in India is growing steadily for last couple of years. By the end of February 29, 2016, the renewable installations reached 38.82 GW out of total power capacity installations of 288 GW, which means renewables reached 13.48 percent. Share of Solar power showing increasing trend and as of 31 January 2016, total grid connected solar power reached 5248.21MW, which is about 13.28 percent of renewable share and 1.8 percent of total electricity installation capacity in the country. India is expected to have 100 GW of solar power installations out of total 175GW renewable capacity by 2022. With a capacity installation of 25.19 GW, wind contributed about 63.75 percent of grid connected renewable energy in the country.
 
Key factors shaping renewable energy growth in the country are: commitment of the government for green and clean India, launch of the Jawaharlal Nehru Solar Mission, proactive renewable energy polices in states, tax incentives, feed-in tariff, renewable purchase obligation, and Renewable Energy Certificate trading etc.
 
Renewable market development faces some of notable challenges like increasing capacity utilization factor, attracting investment, lower cost of capital and easy access to finance, developing smart grid infrastructure, human resource capacity building, and training.
 
The government is taking necessary steps to mitigate challenges and facilitate renewable growth in the country. One of the important steps is the government moving away from traditional carbon subsidy regime to carbon taxation regime for funding clean energy projects. In the Budget (2016-17), the government announced doubling “clean environment cess” from Rs.200 to Rs.400 per ton of coal. In addition, the government imposed an infrastructure cess of 1% on small cars (petrol, CNG and LPG), 2.5% on small diesel cars, and 4% on luxury vehicles and SUVs (worth above Rs.10 lakh); the estimated revenue generation from tax will be 30bn rupees ($439m) in revenue for the government.
 
Power from renewable sources is increasingly becoming competitive and acceptable to consumers. Tariff of renewable energy has been showing declining trend in India. Price of wind energy (Rs.3.39-5.57/kWh) nearly achieved grid parity and solar is catching up fast, reaching as low as Rs 4.34/kWh in 2016.
 
I believe with the help of government, a robust and vibrant regulatory environment, natural gas, and renewables are going to help India to meet its INDC target by 2030. Let’s cheer for green, healthy, and prosperous India.
 
(Dr. Sanjay Kumar Kar is the Head of the Department of Management Studies, Rajiv Gandhi Institute of Petroleum Technology, Uttar Pradesh. He can be contacted at: skar@rgipt.ac.in)
 
 
 
 
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