Lydia Powell and Akhilesh Sati, Observer Research Foundation
India is compared with China as a matter of routine on almost everything. Except when political models are compared, India rarely comes out ahead. The energy sector is no different. The Chinese energy basket is roughly four times the size of the Indian energy basket (if non-commercial energy is included) and six times the size of the Indian energy basket (if non-commercial energy is excluded). Even though China and India have comparable population numbers, India is a distant second or third to China on most energy parameters. This may be about to change, at least in terms of rate of change (albeit from a smaller base) if not in terms of absolute levels of change (Chart 1).
Source: BP Statistical Review 2015
BP’s Statistical Review of World Energy Markets for 2015 that captures energy developments at the national, regional and global level for the calendar year 2014 observes that India posted an all time high in energy consumption growth in 2014 and that India regained the number two position in energy consumption growth from the United States. India’s energy consumption increased by 7.1 percent in 2014 compared to China’s 2.6 percent, China’s slowest since 1998 and less than half the ten year average growth rate of 6.6 percent. On the other hand, Indian coal production increased by 6.4 percent while China’s coal production declined by 2.6 percent. India’s coal production reached a high of 644 million tonnes (mt) with output growing by 38.9 mt, the largest increase in the world for 2014 and the largest ever increase for India.
Despite the speed of change, India accounted only for 4.9 percent of global energy consumption while China accounted for 23 percent. But India accounted for over 34 percent of global consumption increment which is more than half of China’s contribution of net increment in consumption in 2014.
Source: BP Statistical Review 2015
India did not score well in the production of hydrocarbons. India produced only 23.2 percent of its gross oil consumption in 2014, the lowest proportion ever according to BP. Natural gas production and consumption continued to decline with both much below their peak levels in 2011. In contrast fossil fuel consumption growth in China was led by natural gas at 8.6 percent.
The fastest growing fuel in India in 2014 was renewable energy which is now six times larger than it was ten years ago. Surprisingly bio-fuels recorded the fastest growth of a staggering 29 percent among renewables. One would have thought that it would be solar energy, given the heavy push that it is receiving. India emerged as the largest contributor to global carbon emissions in 2014 with 8.1 percent growth in carbon emissions compared to China’s 0.9 percent. India’s energy intensity decreased by 0.2 percent, much lower than the ten year average of -1.1 percent. In contrast China’s energy intensity decreased by 4.5 percent.
BP’s long term projections for 2035 which presents only one ‘most possible’ scenario puts India in the lead but only in terms of growth (Chart 2). By 2035, India’s energy production led by coal is expected to increase by 117 percent compared to 47 percent growth in China. Energy consumption in India is expected to increase by 128 percent compared to 60 percent in China. China’s share in global energy demand is expected to increase from 22 percent to 26 percent by 2035 while India’s share in global energy demand is expected to double to 8 percent.
India’s dependence on fossil fuels is expected to decline to 87 percent from 92 percent today. India’s oil imports are expected to increase by 161 per cent, coal imports by 96 percent and gas imports by 270 percent by 2035. BP expects natural gas to lead fossil fuel growth in demand with an expansion of 145 percent (compared to 270 percent expansion in China) by 2035, followed by oil at 117 percent (compared to 67 percent expansion in China) and coal at 112 percent (compared to just 21 percent in China). Overall renewable energy is expected to expand by 564 percent (compared to 580 percent in China) followed by nuclear at 363 percent (compared to 910 percent in China) and hydro at 98 percent (compared to 50 percent in China).
Source: BP Statistical Review 2015 & World Energy Outlook 2014
A surprising projection from BP that differs markedly from projections by the International Energy Agency (IEA) as well as projections by domestic agencies is that it expects ‘oil’ to ‘remain’ the dominant fuel with a share of 36 percent followed by gas at 30 percent and coal at 21 percent (Chart 3). Even the most pessimistic scenario of the IEA does not give oil and gas higher shares than coal.
For example the 450 scenario of the IEA which minimises expansion of fossil fuels and maximises the expansion of renewables projects a share of 32 percent for coal in 2040 followed by a share of 24 percent for oil and 11 percent for gas. BP also appears to be far more optimistic on the prospects for gas demand growth in India compared to other projections. The assumptions behind BP’s projections are not specified. Three observations can be made at this point.
The first is that projections only reflect assumptions made today not reality that will unfold tomorrow. India’s energy basket may look very different from what is projected by IEA or BP by 2040. No agency projected that more than two thirds of Indians will get their first mobile phones before they get their first light bulb. Something similar could happen in the energy sector if there is a break-through technology that rivals the mobile communications technology of the last decade.
Second it would be incorrect to conclude that China is deliberately moving away from coal and other fossil fuels to clean itself up while India continues to indulge in using fossil fuels. China embarked on a path of high-investment, high-energy growth over a decade ago. This growth is winding down naturally. This growth phase not only lifted more than 500 million out of poverty but has also given China the wealth to indulge in other forms of energy. India has barely begun its growth spurt.
Third it would be unwise to get carried away by India’s energy demand taking off. India’s energy take-off is not necessarily because it has ‘taken-off’ the way China’s did in the last decade. India’s energy demand is growing at a more or less steady phase but India’s growth appears larger because China’s growth is not as large as it used to be (Chart 4 a & Chart 4 b).
Source: World Energy Outlook 2014
India’s energy take-off may be an ‘optical illusion’ caused by China’s slow-down. This casual remark must be tested against hard data on changes in India’s energy consumption patterns. We shall begin with the electricity sector.
Source: Central Electricity Authority 2015
Chart 5 shows sector-wise changes in consumption of electricity since 1947. In the last six decades, residential and commercial sectors have doubled their share of electricity consumption (from 10 to 24 percent and from 4 to 9 percent respectively) but the share of industrial consumption has declined from 70 percent to about 42 percent in 2014-15 after peaking at 74 percent in 1960. The share of electricity in traction has declined from about 7 percent in 1947 to about 2 percent in 2014-15 while the share of agriculture in electricity consumption has grown from about 3 percent to about 18 percent after peaking at 26 percent in 1997 (end of the 8th plan period).
Data on sector-wise ten year average compounded annual growth rate (CAGR) is more informative (Chart 6).
Source: Central Electricity Authority 2015
Overall electricity consumption has grown by 7.24 percent in the period 2007-2015 compared to 5.65 percent in the period 1997-2007. The sector that has shown significant spurts in electricity consumption growth is agriculture. The ten year period between 1956 and 1966 recorded the highest ever growth rate of 19.6 percent. The reason is well known. When Pakistan was separated from India, it removed access to water for irrigation from the Indus canal system almost overnight. India with 82 percent of the population of undivided British India got only half the canal system carrying 400,000 cusecs of water and less than half of 24 million acres of land irrigated by state owned canals. Consequently the 3rd and 4th plans allocated almost a quarter of the budget for the power sector for electrification of pump sets for irrigation of agricultural land. The result was an unprecedented increase in agricultural consumption of electricity. Agricultural consumption continued to show double digit growth rates in the subsequent decades. The significant decline in growth rates of agricultural consumption was recorded during the 9th and 10th plan periods (1997-2007) when the average CAGR of agricultural consumption was only 1.6 percent. The period 2007-2015 has recorded a growth of 7.24 percent but this cannot be labelled a growth spurt. It is lower than the average growth of 11.34 percent and less than half the peak growth rate. Across all consuming sectors, growth-rates are below or close to historic average growth rates. This does not necessarily constitute a growth spurt.
The 18th power survey projects a demand of 3710 billion units corresponding to a peak load of 514 GW at bus bar in 2032. The survey assumes the following: 8-9 percent growth up to the end of the 12th plan and around 7-9 percent beyond that period; full electrification by 2017; high growth rate for electricity consumption in states with low per person electricity consumption but with policies in place for T&D loss reduction; restructuring and reduction in overall T&D loss levels to 15 percent barring the North East region and J & K. For a three-fold increase in power consumption (from 938 billion units in 2015 to 3710 in 2032) in the next 17 years, a CAGR of 8.4 percent in power consumption is required. This is roughly the average CAGR of power consumption since 1947.
Source: Petroleum Planning & Analysis Cell
In petroleum products particularly that of petrol (MS), LPG, Kerosene (SKO) and diesel (HSD) that account for 69 percent of petroleum product consumption in India, there is no appreciable sign of a growth spurt, except in kerosene whose consumption is showing a consistent negative growth since 2002 (Chart 7). This may be attributed partly to increase in electrification rates because kerosene is a major source of lighting in un-electrified rural India. The absence of a corresponding increase in LPG consumption growth rates is surprising because kerosene is also a major source of cooking fuel in rural areas. The absence of a significant growth of LPG consumption may be attributed to the limits imposed on subsidised LPG consumption.
Among transportation fuels, the growth of petrol consumption (almost entirely consumed by the transportation segment) has exceeded the growth of diesel consumption (70 percent consumed by the transportation segment) during the 11th and 12th plan periods. About 61 percent of petrol is consumed by two-wheelers and about 34 percent by personal vehicles such as cars. The growth in petrol consumption may be interpreted as a sign of growth in personal vehicles which could in turn mean growth in consumption by middle class households.
Source: Society for Indian Automobile Manufacturers
The trend in sales of vehicles shows a significant growth for personal vehicles as opposed to commercial vehicles (Chart 8). Between 2009 and 2015 personal vehicle sales grew at 4.9 percent compared to a growth of 2.4 percent for commercial vehicles. While three wheeler sales grew at 3.2 percent, two wheeler sales grew at 9.3 percent. Long-term projections by the IEA do not show a significant departure from this trend where personal vehicle sales is dominated by sales of two wheelers.
On the whole data from the recent past does not indicate clear signs of a growth spurt in energy consumption. India’s growth rates in energy consumption may be higher than that of China in the next two decades but India’s growth is likely to be in line with past trends with no significant spurts. This is not necessarily good news. Even at economic growth rates of 8 percent or more a year in the next two decades India is unlikely to achieve per person energy consumption levels that represent decent quality of life. If we go by projections by the International Energy Agency, even by 2030, 20 percent of the Indian population will have no access to electricity and 46 percent of the population will remain dependent on traditional fuels for cooking. Perversely, this will limit the perceived threat posed by the scale of India’s energy transitions on global boundary conditions such as the global carbon budget.
Views are those of the authors
Authors can be contacted at firstname.lastname@example.org, email@example.com
 Growth as used here is the CAGR
Courtesy: Energy News Monitor | Volume XII; Issue 4
Courtesy: Energy News Monitor | Volume XII; Issue 6