India has the world's second largest population of 1.24 billion and the world's seventh largest landmass. It has a seemingly unquenchable thirst for energy. One harsh result of its meteoric growth is the widening gap between energy demand and supply. Energy is one of the most important inputs for economic growth and human development. There is a strong relationship between economic development and energy consumption. On one hand, growth of an economy depends on the availability of cost-effective and environmental friendly energy sources, and on the other hand, the level of economic development is reliant on the energy demand.
India is the fourth largest consumer of energy in the world after USA, China and Russia. However, it is not endowed with abundant energy resources. Therefore, India must meet energy needs by using all available domestic resources of coal, uranium, oil, hydro and other renewable resources, and supplementing domestic production by imports. Meeting the energy needs for achieving 8 to 9 percent economic growth while also meeting energy requirements of the population at affordable prices is a major challenge.
The energy sector in India has been receiving high priority in the planning process. In the recent years, the government has rightly recognized the energy security concerns of the nation and more importance is being placed on energy independence. India’s energy-mix comprises both non-renewable (coal, lignite, petroleum and natural gas) and renewable sources (wind, solar, small hydro, biomass, co-generation, bagasse, etc.).
Demand - Supply Scenario
In the recent years, India’s energy consumption has been increasing at one of the fastest rates in the world due to population growth and economic development. India is well-endowed with both exhaustible and renewable energy resources. Coal, oil and natural gas are the three primary commercial energy sources. Coal was by far the largest source of energy. However, India’s primary energy mix has been changing over a period of time. Resource augmentation and growth in energy supply has not kept pace with increasing demand and, therefore, India continues to face serious energy shortages. This has led to increased reliance on imports to meet the energy demand.
India has the fifth largest reserves of coal in the world. Being the most abundant fossil fuel in India till date, coal is one of the most important sources for meeting the domestic energy needs. It accounts for 55% of the country’s total energy supplies. Coal production has increased at a five-year CAGR of 4.1% to 558 million tonnes in FY2013 making India the third largest producer in the world. States with major coal reserves are Jharkhand, Odisha, Chhattisgarh, West Bengal, Andhra Pradesh, Madhya Pradesh and Maharashtra.
Coal India Ltd (CIL), a Government of India enterprise, is the world’s largest coal company based on raw coal production and coal reserves. In India, it has over 80% market share. The power sector accounts for a large share of the consumption of coal in India.
Access to affordable and reliable electricity is critical to a country’s growth and prosperity. The country has made significant progress towards the augmentation of its power generation capacity. The Indian power sector consists of a mix of plants depending on different primary fuels, including conventional sources like coal, lignite, natural gas, oil, hydro and nuclear power; and non-conventional sources like wind and solar power, and agricultural and domestic waste. However, coal remains the dominant primary energy source used in power generation. The power sector is currently at a crucial juncture of its evolution from a dominantly public sector environment to a more competitive power sector, with many private producers and greater reliance on markets, subject to regulation.
Oil and Gas Sector
India’s consumption of natural gas has risen faster than any other fuel in the recent years. Natural gas demand has been growing at the rate of about 6.5% during the last 10 years. Industries such as power generation, fertilizer, and petrochemical production are shifting towards natural gas. The Government of India has enacted various policies such as NELP (New Exploration Licensing Policy) and CBM (Coal Bed Methane) policy to encourage investments across the industry's value chain. 100% foreign direct investment (FDI) is allowed in the exploration and production (E&P) projects and 49% FDI is allowed in refining.
Renewable Energy Sector
Renewable energy sources offer viable option to address the energy security concerns of India. India has one of the highest potential for the effective use of renewable energy from sources like small hydro, biomass, wind and solar. There are continuous changes in technology, market conditions and regulatory environment that have led to the emergence of new trends with in the renewable energy sector. National Action Plan on Climate Change (NAPCC) aims to achieve 15% share for renewable power in the total energy mix by 2020.
The Government has announced an ambitious plan to produce more electricity from renewable sources as a part of its target to add 10 GW of solar energy by 2017 and 20 GW by 2022. With the completion of the first phase of JNNSM by surpassing the target, India is set to embark on its second phase. In the first phase 1685 MW of solar energy was generated against the target of 1100 MW. In the second phase, areas for focus have been identified in Rajasthan, Kargil and Ladakh.
Generation of solar energy has come a long way since the start of JNNSM in 2010. Today, solar power generates 1.8 GW of electricity which is going to be multiplied in the years to come. Despite this, solar energy forms only a small fraction of power generation in the country. 65% of power from renewable sources comes from wind energy. Biomass accounts for 14%, small hydro-power projects contribute 13% and solar energy 5%. Other sources contribute about 3%.