Significant price differences between regional natural gas markets have driven many European countries to increase coal consumption while decreasing use of natural gas (Source: BP).

Coal, natural gas, and oil accounted for 87 percent of global primary energy consumption in 2012 as the growth of worldwide energy use continued to slow due to the economic downturn. The relative weight of these energy sources keeps shifting, although the change was ever so slight. Natural gas increased its share of global primary energy consumption from 23.8 to 23.9 percent during 2012, coal rose from 29.7 to 29.9 percent, and oil fell from 33.4 to 33.1 percent. The International Energy Agency predicts that by 2017 coal will replace oil as the dominant primary energy source worldwide.

The shale revolution in the United States is reshaping global oil and gas markets. The United States produced oil at record levels in 2012 and is expected to overtake Russia as the world’s largest producer of oil and natural gas combined in 2013. Consequently, the country is importing decreasing amounts of these two fossil fuels, while using rising levels of its natural gas for power generation. This has led to price discrepancies between the American and European natural gas markets that in turn have prompted Europeans to increase their use of coal for power generation. Coal consumption, however, was dominated by China, which in 2012 for the first time accounted for more than half of the world’s coal use.

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China, coal, Europe, India, natural gas, oil, Russia, shale gas, United States

Last month, the United States filed a complaint with the World Trade Organization (WTO) to challenge India’s domestic content requirements (DCR) for projects under the country’s Solar Mission – a national program aimed at reaching 20,000 megawatts (MW) of grid-connected solar power capacity in India by 2022, enough to power almost 30 million Indian homes at current average levels of consumption. According to U.S. Trade Representative Ron Kirk, the DCR provisions in the Solar Mission that require projects to use solar panels produced within the country, as well as subsidies to solar power producers using domestically manufactured equipment, violate WTO rules prohibiting discrimination in favor of domestic goods.

India's domestic content requirements for solar projects has prompted the United States to file a complaint with the WTO. (Source: Treehugger).

Phase I of India’s Solar Mission, which draws to a close at the end of this month, requires crystalline silicon (cSi) solar photovoltaic (PV) projects to use Indian-manufactured modules and concentrating solar power (CSP) projects to use at least 30 percent Indian-manufactured equipment. During Phase I, thin film solar PV panels were exempted from the DCR due to the lack of thin film manufacturing within India.

While the United States has long stated its opposition to India’s Solar Mission DCR provisions, the recent timing of the WTO challenge is likely due to the expectation that India will expand the DCR to cover thin film PV modules in Phase II, which starts next month. While there is significant competition in the global cSi PV manufacturing market, the United States is a dominant player in thin film manufacturing. First Solar, an American company, is by far the world’s largest thin film manufacturer. First Solar thin film systems currently make up more than 20 percent of India’s solar PV market. Conversely, solar projects in India accounted for eight percent of the thin film modules manufactured by First Solar in 2011, and the company continues to seek opportunities in the country. A DCR provision for thin film solar projects in India could deal a significant blow to U.S. solar manufacturers, in particular First Solar.

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energy, energy policy, green economy, India, renewable energy, solar power, solar war, trade dispute, World Trade Organization, WTO

In the wake of massive blackouts this past summer that spanned 20 Indian states and left half of the country’s population without power, the national cabinet approved a debt restructuring program for State Electricity Boards (SEBs) in September aimed at improving the functioning and viability of India’s electricity sector. SEB debt across all states is currently over US$35 billion, or about 2 percent of the nation’s GDP.

Overburdened power distribution lines and illegal grid connections contribute to India’s electricity shortages and blackouts. (Source: Flickr.com, user Sistak)

SEBs are state-owned utility companies responsible for operating the electricity grid and delivering electricity to customers. SEBs buy electricity from power generators at a price negotiated through a Power Purchase Agreement (PPA), which they in turn sell to electricity consumers. Lack of necessary investment to improve grid infrastructure, widespread electricity theft, and low electricity prices that result in SEBs often selling power to customers at a loss are among the systemic problems in many states. Electricity losses during transmission and distribution to customers—due to grid inefficiencies, electricity theft, and illegal grid connections—account for more than 25 percent of power generated in India.

The cabinet-approved debt restructuring package aims at addressing some of these problems. Under the program, state governments will take on 50 percent of SEBs’ short-term liabilities over the next two to five years. The remaining 50 percent of short-term loans will be rescheduled by lenders, providing SEBs with favorable interest rates and a three-year moratorium on principal payments. SEBs have until the end of this year to sign on to the program, which will apply to debts accumulated through March 2013.

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electricity, energy, India, renewable energy

India has yet to take a definitive step in the anti-dumping war that is currently raging in the solar energy sector; however, its policymakers may be guided by decisions made by U.S. and European Union regulators. An ongoing question is whether the Indian government should create a trade barrier against cheap imports from foreign solar manufacturers, primarily those from China. Options include levying an anti-dumping duty (such as a countervailing duty to offset the huge subsidies offered by China to its solar manufacturers) or offering preferential tariffs to domestic solar equipment manufacturers.

Solar power industry in India must overcome numerous development challenges in order to continue its rapid growth. (Source: Solar Thermal Magazine)

One reason why Indian solar manufacturers might be harder hit than those the United States is because India’s solar industry is relatively new, not more than a decade old. It lacks the same level of technical capacity that its foreign counterparts have. As a new entrant, the Indian industry is relatively small scale and fragmented, leading to higher production costs.

Production capacities for Indian module manufacturing range from only 10 to 20 megawatts (MW), compared to the global average of 75 megawatts. Countries such as China and Taiwan have a clear price advantage over Indian manufacturers because of their economies of scale. Both subsidies and economies of scale have helped Chinese manufacturers produce solar panels and equipment that are 25 to 30 percent cheaper than those produced in India.

What makes India’s case singular is that the Indian manufacturers have not only condemned the Chinese solar manufacturing industry as a cause for their trouble, but also accused U.S. financial institutions, such as the U.S. Export Import Bank (Exim) and the Overseas Private Investment Corporation (OPIC), of adding to India’s woes through their pro-U.S. solar equipment policies.

Indian solar panel manufacturers and the media have raised concern about the fact that both ExIm Bank and OPIC offer low-interest loans (with long repayment periods) to Indian solar project developers—under the mandatory condition that they purchase the panels from U.S. manufacturers. While the ExIm Bank and OPIC refer to these loans as “Fast Start Finance,” some Indian environmental think tanks, such as the Centre for Science and Environment, allege that these programs undermine India’s broader development goals by pushing Indian solar equipment manufacturers out of competition.

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energy, India, solar power

Jawaharlal Nehru National Solar Mission Timeline. (Source: Wikimedia Commons)

Over the past several years, India has swiftly developed its solar power sector. Not only has the country already reached its target of 1 gigawatt (GW) of installed solar capacity this year but the cost of domestic solar power is now on par with the cost of electricity from new coal-fired power plants.

For India, this is the first step toward achieving overall grid parity for solar, a goal that the consulting group KPMG projects will be attainable in the country by 2017–19. This estimate is based on two assumptions: (1) that the cost to consumers of conventional power generation will continue to increase, and (2) that the costs of solar power will continue to decrease.

Reaching grid-parity for solar has great significance for India for several reasons:

  • Greater reliance on solar power will boost the country’s energy security and loosen its heavy (and costly) dependence on coal. Contrary to the belief that India has huge domestic coal reserves, the country in fact must import coal to meet its energy demands. Currently, India’s top power producer, National Thermal Power Corporation Ltd, meets about 15 percent of its needs through imported coal, and it plans to increase coal imports to 16 million tons this fiscal year due to local shortage. Already this year, the company has called bids seeking 7 million tons of imported coal to supply its 16 power stations. This import reliance makes India not only politically vulnerable, but also economically shaky. Fossil fuel subsidies contribute to India’s mounting public deficit in the fuel sector—a deficit that has led rating agency Standard and Poor to consider downgrading India’s debt from “investment-grade” to “junk” status.
  • Cheaper solar power will help thousands of Indian homes gain access to electricity for the first time ever. According a 2010 report from the International Energy Agency, the government of India has pledged that the entire nation will have access to electricity by 2012. This plan appears to be ambitious, however, because India would need to install an estimated 200 GW of generation capacity to sustain economic growth of 8 percent.
  • Solar power at grid-parity can help address India’s 9 percent power deficit. The nationwide blackout that affected India this July, which has been attributed to poor grid management and over-drawing of the power supply, is still fresh in the country’s memory. Such problems will likely continue unless new power supplies are identified and connected to the grid.
  • Comparable costs for solar and conventional generation could lead to an increase in solar’s share of India’s power generation portfolio. This in turn would contribute to an associated decrease in the power sector’s greenhouse gas emissions.

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DCR, energy, India, renewable energy, solar power

Last month, the Indian Parliament devised legislation to replace the archaic Land Acquisition Act of 1894, the British colonial-era law that dictates terms for government acquisition of private land. The new law, which would be renamed The Right to Fair Compensation, Resettlement, Rehabilitation and Transparency in Land Acquisition Act, aims to address India’s chronic land disputes between developers and local communities (which I addressed in part in a previous blog on coal energy in India). The legislation is currently being reviewed by a Cabinet committee due to concerns expressed by several Cabinet ministers that the conditions stipulated for land acquisition are too steep for industry.

Industry interests hope that the new law will streamline the existing land acquisition process and resolve ongoing delays to project development. The legislation under negotiation would allow not only government but also private companies that provide “public” services to acquire land for industry and infrastructure projects, provided that they (1) obtain consent from at least 80 percent of affected landowners, (2) provide compensation at two to four times the market value for rural land and two times the market value for private land, and (3) assist displaced persons with resettlement.

Despite the more concrete procedure for land acquisition outlined in this draft legislation, some business groups, including the Confederation of Indian Industry, complain that the provisions will increase costs to industry and make some projects unviable. It is with these industry interests in mind that the Cabinet committee is reviewing the legislation.

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coal, development, India, land acquisition, land use, negotiations

Power Grid Failure in India (Photo: Times of India)

I am disappointed, sad, curious, and shocked as I read about this week’s grid failure in India which has caused the biggest power outage ever recorded in the world. Twenty states and 620 million people (nearly twice the U.S. population) were left without power on Tuesday, far exceeding the previous outage record in Indonesia in 2005 when 100 million people lost electricity for a couple of hours.

It all started in Agra, Uttar Pradesh, around 2:30 am on Monday, July 30, with a interconnect line failure in Agra that caused the near immediate collapse of the entire northern grid. The northern grid was restored on Monday after about 6 hours, but on Tuesday the northern, eastern, and northeastern grids all went out.

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grid collapse, India, outage, power sector

This segment of the blog will focus more on political factors and government reforms that have impacted India’s energy sector since the country’s independence.

Sardar Sarovar Canal Solar Pilot Plant of 1MW Under Construction

Late independence, globalization, and energy reforms.

India attained independence from Great Britain on August 15, 1947. By this time, most of the now developed countries were already several steps ahead in their energy policies and power sector technologies. The pre-liberalization era in India, which lasted until 1991, saw little progress in terms of either power sector reforms or upgrades in technology due to the independence struggle, partition, and restructuring of the constitution. However, since the opening up of the Indian economy in 1991, foreign investments in the power sector have been encouraged. Advanced technology and investments in the power sector therefore reached India only in the late 1990s and early 2000s.

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economic and political challenges, India, Indian power sector

“So far as I am able to judge, nothing has been left undone, either by man or nature, to make India the most extraordinary country that the sun visits on his rounds. Nothing seems to have been forgotten, nothing overlooked.” –Mark Twain, Following the Equator.

Electricity theft in India. (Photo courtesy: Hindu Business Line)

As an Indian and an enthusiast of the energy sector, I have always been fascinated by the Indian power industry. The country’s rapidly increasing population, decreasing fossil fuel reserves, and need for alternative energy sources make the Indian power sector an interesting case to examine. The seventh largest and second most populous country in the world, India has long been considered a country of unrealized potential. Currently, several factors, some of which are not straightforward, hinder the progress of the Indian power sector. I would like to take few minutes and summarize some of the many factors that come to my mind. In the first part of this blog I will discuss some physical and technical challenges facing the Indian power sector, while in the second part I will identify certain political challenges and the way forward.

Population explosion

A burgeoning population has created several problems in a country riddled with poor infrastructure and dependent on a primarily agro-based economy. The rate of increase in electricity generation is outpaced by population growth; therefore, it is difficult to meet growing demand.  While India ranks sixth in the world in terms of overall electricity production and consumption, its population of 1.2 billion means that per capita levels of electricity consumption remain low at just over 500 kWh per person per year, compared to more than 2,600 kWh in China and nearly 12,000 kWh in the United States.

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India, Indian power sector, technical challenges
U.S. Deputy Secretary of Energy Daniel Poneman promoted international collaboration on shale gas, CCS, and nuclear. Image source: doe.gov

U.S. Deputy Secretary of Energy Daniel Poneman promoted international collaboration on shale gas, CCS, and nuclear. Image source: doe.gov

Last month, I attended two events on U.S. international collaboration on energy issues, both of which involved presentations and panel discussions featuring high-level representatives from government, business, academia, and non-governmental organizations. Despite some discussion of renewable energy and climate change, U.S. government and business representatives centered the discussion largely on shale gas, “clean” coal, and nuclear power.

The first event was the third U.S.-India Energy Partnership Summit, co-convened by Yale University and The Energy Resources Institute (TERI) of India. Panelists discussed experiences and opportunities for collaboration on sustainable energy initiatives, from joint research and development of technologies to promoting policies and financial mechanisms that encourage clean energy investment. The Summit was chaired by Rajendra K. Pachauri, President of TERI North America and Chairman of the Intergovernmental Panel on Climate Change (IPCC).

A forum for sustainable energy collaboration between the United States and India is especially important in the context of stagnating international climate negotiations, where the two countries have often assumed adversarial roles. Although the Summit demonstrated the promise of mutual interests, I was disappointed by the focus of several of the high-level speakers on fossil fuels and nuclear energy.

The nature of the energy partnership described by U.S. Deputy Secretary of Energy Daniel Poneman centers largely on “clean coal” technology and shale gas exploration, as well as tighter standards for nuclear energy in India. Dr. Charles Ebinger, a Senior Fellow at the Brookings Institution, reinforced this position by highlighting the central role that the coal industry plays in the Indian economy, including as a large employer. Dr. Ebinger also took a rather pessimistic view of India’s ability to expand the share of renewable energy, claiming that renewable energy could not account for more than 20 to 25 percent of the country’s energy mix by 2030 or even 2040.

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CCS, Europe, India, nuclear power, shale gas, U.S. Department of Energy, United States