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Renewables: India's magic pill for energy demand?

India may not meet all its ambitious clean energy targets, but renewables will play a vital role, alongside hydrocarbons, to help meet the country's burgeoning electricity consumption

In the coming decades, India will contribute more than any other country to the rise in global energy demand.

In the International Energy Agency's New Policies Scenario (NPS), total primary energy demand in India will almost triple in the next quarter century, rising from 0.775bn tonnes of oil equivalent (toe) in 2013 to 1.908bn toe in 2040.

The NPS forecasts that India's crude oil demand will reach 10m barrels a day by 2040, up from 4.5m b/d last year. Its gas demand will also triple by 2040, reaching 175bn cubic meters, though still only taking up 8% of the overall energy mix.

But it's not just fossil fuels which will meet the country's soaring demand for power. India will also be the world's second-largest market for renewables, surpassed only by China.

Meeting this demand is a challenge because of India's dependency on imports, a situation the government is determined to change. It will also be tough to meet ambitious green targets while expanding GDP growth in a country where millions still live in rural poverty, unconnected to the grid.

Going green

India, the world's third-largest emitter of greenhouse gases, has committed to reducing them by 33-35% by 2030, compared with 2005 levels.

Renewables make up almost 18% of the power mix in India as of June this year, with a target of 40% by 2030 which is likely to be exceeded. Coal makes up the mainstay of India's power mix at 59%, while gas comprises about 7%, and oil less than 1%.

Two years ago, the government set the target of expanding its renewable energy capacity to 175 GW by the year 2022—about five times what it is now-which includes 100 GW from solar, 60 GW from wind, 10 GW from biopower and 5 GW from small hydropower.

State-run firm Oil and Natural Gas Limited (ONGC) chairman Dinesh Sarraf told Petroleum Economist on the sidelines of the World Petroleum Congress that the target for solar capacity expansion is an enormous challenge, but not insurmountable.

"India requires a huge intake of energy. We can't say we require only one type of energy. That's the way you can bring affordable energy for all," Sarraf said.

Oil minister Dharmendra Pradhan isn't worried about the challenges.

"Our sector is well prepared to meet energy demand for the next two decades, from upstream to downstream," he told Petroleum Economist , also at the World Petroleum Congress.

Reducing imports

Pradhan said India, the third-largest oil consumer after the US and China, aims to reduce hydrocarbons imports by 10% (from 70-75% of the country's total consumption) by 2022—its 75th anniversary of independence.

But the consensus among many in India's oil industry is that it will be difficult to reduce the dependency on imports, at least in the short-term, given the country's high demand.

The minister has outlined a four-point government strategy designed to increase India's self-sufficiency focusing on energy access, efficiency, sustainability and security. "We need to attract more foreign investment," he continued. This is difficult to do at a time when many oil majors are cautious about exploration and production due to lower oil prices since 2014, and subsequent capital spending cuts.

Pradhan stressed that a $6bn investment from BP in a partnership with Reliance for the development of the KG D6 offshore gas block, announced in June, was a positive sign that attempts to attract investment are working. "We used to talk about security of supply, but now market security is the new paradigm," he said.

Sarraf said that ramping up exploration of India's oil and gas reserves and reducing production costs would both help meet surging domestic demand.

He added: "by 2022, no discovery should be undeveloped. We want to boost our exploration, but we are very focused on getting value for money out of it."

Sarraf said that over the past year ONGC's drilling rigs have increased their efficiency by 25%.

"If we increase efficiency, our costs go down," he said. "The same machine can do five wells. We want to do the same thing in areas other than drilling."

Sarraf added that there was scope to triple current oil production in India in the coming decades.

"The oil industry has made a blueprint plan of how to achieve this, and we are committed to implementing that," he said." But with production in 2016 at just 856,000 b/d, he conceded that imports will continue to make up a large share in the short to medium term.

Gas, he added, makes up just 6-7% of India's energy mix, compared to an average globally of around 23%. By 2030, natural gas' share in India's energy mix will be 15%, he said, adding that deregulation of gas prices would help to stimulate investment.

India is also investing in expanding its refinery capacity with a new plant in western Maharashtra state which will initially have a capacity of 40m tonnes per year (0.8m.barrels).

Coal phase-out

India has pledged to build no new coal-fired power plants from 2022, but it won't be eliminating the fuel entirely from its dominant place in the power mix just yet.

"We have abundant coal in our country, and cannot turn a blind eye to our need for low-cost power," oil minister Pradhan said. "We will continue to use coal, but we will not go back on our commitment to the Paris Agreement."

But Pradham said that "a substantial quantity of our power will come from renewables in the future".

He added: "India is very focused on a technology-based, renewables-based model, including biofuels and biogas."

Lait Kumar Gupta, chief executive of Mumbai-based firm Essar Oil, said India would reach its emissions reduction targets by means other than reducing coal. "The use of coal-fired plants has been reduced already and coal use will not increase," he said. "We have the third-largest coal reserves in the world, but our demand is so huge, that there is room for everybody."

Electric avenue

Government targets to make India's energy system greener are not only ambitious when it comes to power generation. The country has pledged to sell only cars which are electric (EVs) by 2030, a decade ahead of similar pledges from some European nations.

Yet there's scepticism about how achievable this target is because of the cost, and what the impact of such ambitions on the country's oil and gas consumption will be.

"It will be difficult unless there is a technological breakthrough where existing cars can be transformed into electric cars," Gupta said. "Some 80-85% of car owners have been able to buy a car only by investing their life savings. Those people can't afford to buy an electric car. If it were $500-$1,000 to convert the engine, only then would it be possible."

Gupta said there was a risk that the government would become deeply unpopular if people were forced to forgo having a car because they could not afford to buy an electric one.

"But there is no problem in having a dream," Gupta said.

Pradhan said many other sectors, such as manufacturing and heavy industry, will still consume such a large volume of oil and gas that electrifying the transport fleet will not significantly dent India's fossil demand, at least in the short-term.

Getting connected

Access to electricity is a major roadblock to the uptake of electric vehicles in India.

Around 61% of India's poor—more than 200m people in country of 1.3bn—have no access to electricity, according to World Bank data. But the government has pledged to connect everyone to the grid by 2019, when Indians vote in a general election.

That's a big challenge, said Gupta, (who was formerly chief executive of power company JSW Energy) because of a dearth of power distribution infrastructure in remote, rural areas: "The government needs a big final push to improve it," Gupta said. He added that it has already started installing smart meters in Uttar Pradesh.

Prime Minister Narendra Modi comes from Gujarat state, where there's now a government scheme to bring farmers a guaranteed eight hours of electricity a day.

"They are happy, because they have electricity assured and at the desired voltage, and they don't have to keep workers on the farm for 24 hours waiting for the unknown time electricity comes online," Gupta said.

Renewables will increasingly play a role in bringing electricity to such areas in India over the next two decades, but the government has huge challenges ahead to meet all its targets.

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