Round table Conference on Energy Security on 14-15 May, 2015 - Summary of Recommendations

1.The Round-table recognised that energy access is critical for energy security. It took note of the fact that 80 million households are still to be provided with electricity and energy. This denies them a fair share of economic growth, access to livelihood, education, healthcare, transportation, entertainment etc.

It was strongly felt that we would, as a nation be energy secure only when we are able to meet the basic energy needs of the entire population on a sustainable basis and at affordable prices.

2. Coal, the primary fuel accounting for over 60% of electricity generation, will continue to remain a mainstay and the principal source of primary energy in the short to medium term. Per capita consumption of India, estimated at 614 kg of oil equivalent (kgoe)) is a third of the world average (1890 kgoe). While it is imperative to protect the environment, we cannot lose sight of the fact that we are far behind the developed and even some developing countries, in terms of providing basic access to usable energy to our populace. Efforts to enhance domestic coal production in the country cannot be allowed to flag and must be complemented by those to use it most efficiently and minimize adverse environmental and social impacts.

3. Given India’s population and growth of its economy that will be the third largest in the world within a generation, pervasive energy efficiency across the economy is critical to our ambitions and must be pursued relentlessly in all sectors of activity. Pursuit of energy efficiency is not only the most obvious way to enhance our nation’s energy security but also demonstrably one with the highest economic return. As important as equipment and technology converting primary energy sources into usable heat, light or motion, if not more so is the need to systemically minimize the demand for such forms while maximizing economic value and human welfare. The Government (national and state) already has many programs to promote energy efficiency. These efforts should be substantially strengthened, complemented by suitable policies, incentives and mandate, based on rigorous evaluation of evidence in India as well as important lessons from other countries, both developed and developing, that can be customised to India.

4. Transport, a critical factor of economic well-being and of national security, is a major consumer of energy, especially petroleum the demand for which is growing rapidly in India. High Speed Diesel and Petrol together account for 49% of energy consumption of all petroleum products, thereby making the transport sector one of the major consumer of all forms of energy in India. Efficiency gains in this sector would surely lead to saving to the exchequer. Therefore, newer methods be employed to achieve efficiency and substantial saving in consumption of energy per unit distance of transport. Addressing this dimension of energy security involves measures to shape the nation's evolving economic geography and requires a common understanding with about a dozen ministries as well as state and local governments.

5. It has been widely recognized that within the field of transportation mass rapid public transportation system provides for an exceptionally clean, energy-efficient form of mobility for the people. In India, urban transport is one of the big components of the total consumption by the transport sector. Establishment of energy efficient mass rapid transportation systems in major urban centres would not only decongest the traffic, but also lead to substantial saving in consumption of energy and providing clean way of travel to the people.

6. The fastest growing mode of transportation in India is aviation, the expansion of which is driven by the evolving structure of the economy, an aspirational middle class seeking mobility across a vast national geography as well as internationally. Energy efficiency in the aviation sector could also make a large contribution and thus be a key factor in government policy.

7. The Roundtable noted that “renewable energy” provides the key to the future. The potential for RE generation in India is very large and provides the answer to our search for sustainable energy and supply. Although issues of variability and cost of generation with regard to RE generation are still to be completely resolved, in the long-term renewable energy is likely in any case to be more competitive than conventional fuel sources. Presently, the country has a total renewable energy generation capacity, (incl. small hydro, solar, wind, bio-mass, waste to energy etc.) of 32 GW, i.e. 12% of the total generation capacity of 268 MW.

8. The Roundtable was firmly of the view that, keeping in view the larger objective of energy security, it is advisable to identify locally available renewable energy sources and focus on developing them to integrate with distributed off-grid generation based on a community-led approach. Such an approach not only addresses to some extent, the issue of providing sustained access to electricity to remote pockets of the country, but also may contribute to changing an “entitlement mindset” that is a major hindrance to reforms.

9. India was the fourth largest consumer of crude oil in the world and the third largest in the Asia-Pacific region after China and Japan. The estimated consumption of crude oil has witnessed a steady increase over the past four decades with CAGR of 5.99%. The transport sector is the pre-eminent user of oil while natural gas is used both for energy (58%) and non-energy (42%) purposes. The biggest use of Natural Gas is in power generation (44 %) followed by fertilizer industry (25%) and 6.2% of natural gas consumption was domestic fuel.

10. Petroleum imports as a share of gross imports during FY 2013-14 stood at 34.5% and total import dependency on petroleum products was 77.6%. There can thus hardly be any need to underscore the salience of mphasizing exploration of oil and gas in India.

11. The entire world depends upon reliable supply of oil for the major part of its energy needs. Approximately 56 million BBL per day is transported through maritime routes for ensuring uninterrupted supply. Security of energy supply lines thus assumes paramount importance. Price volatility as well as supply disruptions are two important issues.

12. India receives its oil imports, all transported through sea-routes, on its west coast that is strategically vulnerable. As most of the oil supplying nations are located within 2000-3000 km radius, India should seriously consider building pipelines for uninterrupted supply of oil. In this context, the Chinese strategy merits study..

13. Currently, India has just 5.2 MT of strategic oil reserves, and in case of any supply disruptions, this capacity may not suffice for more than a week. As per IEA standards, countries should have at least two months of oil reserves. Therefore, we need to urgently build additional strategic storage capacity .

14. Pan-India Transmission & Distribution (T&D) Losses by the end of FY 2012-13 stood at 23% and Aggregate Technical & Commercial (AT&C) losses were over 25%, which indicates that one-fourth of the power generated is lost primarily in terms of revenue recovery. During the same year, some distribution utilities have incurred AT&C losses of more than 45%, resulting in recovering cost for just one unit for every two units supplied. Transmission and Distribution loss of energy is chiefly due to lack of maintenance and timely up-gradation of network. Any reduction in these losses would directly result in increased availability of electricity for consumption. Restricting such losses would also help in generation of revenue through sales to the consumers. Therefore, immediate measures be taken to address the twin-issues of continuous maintenance and upgradation of distribution network to restrict T&D losses.

15. The aggregate book losses (on accrual basis) for all the power distribution utilities continue to increase steadily. With a gap between cost of supply and revenue recovery amounting to almost Re. 1.00 per unit supplied (kwh), financial health of the electricity distribution sector can hardly be called sound. The problems are further compounded by non-payment of subsidy arrears by many state Governments. The Financial Restructuring Plan of the Government of India was not availed by many of the States, owing to multiple reasons. The distribution sector provides last mile connectivity for the consumers and restoration of its financial health is key to progress in the electricity sector.

16. The Roundtable recommends that all necessary measures should be taken to ensure timely payment of subsidies to the distribution utilities, independence to the regulators to determine cost reflective tariffs, separate mechanism to ensure flow of funds for periodical maintenance and timely upgradation of distribution network etc. In this context the active involvement of the states is critical not only to the implementation and operation of programs but in the actual design of schemes and choice of investment strategies.

17. So far, the country has been depending upon energy technologies imported from other countries especially related to hydrocarbons such as shale gas, gas liquefaction, as well as energy storage and renewables such as solar photovoltaics, wind turbines, etc. Unless we carry out basic research and development we will always be dependent on imported technologies and in the process weaken our energy security. Domestic research and technology development is also key to cost reduction and effective deployment in the country. Moreover, experience in India and worldwide has shown that domestic technological capability is necessary to maximize the benefits of technology that is imported as well.

18. India's investment in science and technology was much less than that of China, South Korea and the US. Not surprisingly our research output lags as well; per million population, patents filed in India is 17 as compared to South Korea (4451) and China (541). We have a huge qualified human resource and yet we remain heavily dependent on import of technologies which in any case need substantial adaptation efforts. A dramatic revamping of the energy innovation ecosystem will yield high payoffs both in terms of national security as well as economc and social welfare. Technology development deserves much stronger effort than hitherto both in terms of hardware (e.g. solar devices, wind equipment) as well as software for digital transformation of the energy producing (e.g. renewables), transmission (e.g. smart grids) and using sectors (e.g. buildings, urban transport).

19. Energy is vital for all sectors and all sections of the society and critical to our national security. As such the Roundtable recognized the cross-cutting nature of policies that impinge on this area. Therefore, an Energy Commission, under direct leadership of the Prime Minister, encompassing not only the “supplying” sectors of petroleum, natural gas, coal, renewable energy and power but also the “levers of demand”, namely policies, regulatory frameworks, standards and knowledge systems, should be established and charged to carry out overall policy formulation and strategic oversight of execution of programs and initiatives.

20. One of the biggest barriers to articulating sound policy is the absence of sound reliable information. Myths and confusion abound -- not only are there major differences in the data available within different government departments but the difficulties are exacerbated by outdated compilations, unreliable estimates and uncertain projections, coupled with motivated (biased) reasoning and advocacy by vested interests. A national energy information repository of scientifically vetted data (and associated analyses) that is regularly updated, should be put in place and the data quality/integrity assured through open public scrutiny

21.Finally, the Roundtable was of the firm view that the debate on “energy security” must be a continuous one and any platform that provides this should be actively encouraged either through a formal or an informal structure. A coherent analytical framework is urgently needed to develop an actionable strategy. It should subsume a risk management approach (possibly scenario planning) that includes assessment of specific vulnerabilities in the national energy system and their relation to global energy markets as well as geopolitics. <The initiative by the VIF was highly appreciated as a step in the above direction.