Can Natural Gas play a role in India's path to clean energy?
The ongoing debate around climate change and its impact and India’s focus on smooth transition to clean energy has argued that India must first “green” its fossil fuel energy basket.
- The argument is that rather than focus only on the endgame of decarbonisation, India should focus on the role of natural gas in India’s road to clean energy.
Why India needs to focus on natural gas for transition to clean energy?
- Growing focus on decarbonization: Policy wonks, climate negotiators, academicians, corporates and NGOs are currently fixated on the concept of “net zero carbon emissions” and the appropriate target year for achieving it.
- Increase in demand for fossil fuels: With the population growing by about 1% each year, the demand for fuels like oil, natural gas and coal is also ever-increasing in India.
- The entire economies survive on these non-renewable sources of energy.
- Low share of natural gas consumption in India: Natural gas contributes to about a quarter of global energy consumption but in India, it constitutes only 6% of the energy consumed, while crude oil and coal dominate.
- The Indian government has promised to raise the share of natural gas to 15% by 2030.
- India is a fast growing economy: It needs more energy consumption that will lead to the increase in emissions causing climate change & concern for public health.
Role of Natural Gas in India’s road to clean energy
- Promising source of energy: It is a cleaner fuel with low emission of particulate matter, ash and greenhouse gases for the same energy output.
- It is considered as transition fuel due to its availability, affordability, environment friendliness and ability to support renewable in pick demand time.
- Energy Security: It is defined by using four A’s as, in order to meet energy demand;
- The energy should be Available in required quantity;
- The energy should be Accessible in most economical way;
- The energy should be Affordable to consumers; and
- The energy should be Acceptable by the consumers for Sustainable future
- The sustainability should be kept at the centre of a framework and performance of natural gas on key parameters like availability, accessibility, affordability, and acceptability should be evaluated.
- Industrial Fuel: The LNG is used as replacement fuel for liquid fuels in industries and from current market scenario and authors observed that LNG is competitive against all liquid fuels used in India.
- These industries are contributing to reduce the emissions and address the climate change issue with business sustainability.
- Addressing public health and wealth issues: The low-carbon or carbon-free energy can help to address a major public health problem in India because the country's rural population still relies on firewood, dung and charcoal for cooking.
- Propane (liquefied petroleum gas) is the primary solution to the problem in the short term, and the expansion of the gas pipeline network is key to a longer-term solution.
- Transportation: The use of Compressed Natural Gas (CNG) is economical and the cleanest alternate fuel for transportation.
Challenges ahead of India’s transition to clean energy
- Lack of global consensus on emission targets: The effort to secure a global consensus around “Net Zero” target has led the discussants losing their sight of the immediate.
- They are not spending enough time and effort to lay out the stepping stones because it is necessary to take one step at a time but best take a short first step in the right direction than strive for a longer but unsteady stride.
- Increase in dependence on import of natural gas: The researchers have suggested that the government will need to rely heavily on imported liquefied natural gas (LNG) brought in through cargo ships in order to counter fuel shortages.
- India’s clean energy transition will take decades: In India, the transition to a new energy system could take even longer because the existing grid infrastructure is not robust enough to absorb and manage the intermittency of electricity flows from renewables.
- Coal remains the most competitive source of energy: The coal sector is a major source of revenue for states and the central government.
- While renewable energy capacity is dramatically increasing, coal still provides around 70 percent of the country’s electricity.
- Presence of multiple mechanisms for regulation: The institutional mechanisms for driving the transition are not in place because there are many governmental bodies engaged with energy, but they all operate within disaggregated and impermeable silos.
Concerns associated with use of Natural Gas in India
- Multiple pricing formulae for natural gas: The pricing of natural gas is a potpourri of complexity because there are multiple price formulae.
- One for gas produced from domestic fields by the public sector companies;
- One for gas produced by private companies;
- One for production from deep waters offshore under high temperature etc.
- Regressive taxation structure on natural gas: It is a cascading structure so that the tax rates increase as the gas flows from one zone to another.
- It implies that customers located at a distance from the source of gas pay a higher price than those closer to the source which results in dampening of demand.
- Monopoly in natural gas production: The Gas Authority of India Ltd (GAIL) is currently engaged in the production, transportation and marketing of gas.
- It allows GAIL to leverage its ownership of the bulk of the gas pipelines to deny its competitors access to the market.
- Lack of coordination between centre and state governments: One reason why India has not yet constructed a national pipeline grid is because the Centre and state have clashed over issues like land acquisition, pipeline routing and royalty payments.
- The centre-state differences have also delayed the construction of import facilities and the creation of gas markets.
- Environmental impact of natural gas production: The impact in terms of individual environmental problems such as ozone depletion, particulate matter, acidification and global warming.
- Unavailability of infrastructural facilities for transportation and storage: The land acquisition for laying gas pipelines is a difficult challenge in the country.
- The subsidised rates of liquefied petroleum gas and cheap coal also offer tough competition to the adoption of natural gas in the Indian gas market.
Measures to be implemented for successful transition of India to clean energy
- Increasing the share of natural gas: is a feasible prospect because this increase will not generate the headwinds that the alternative of shutting down coal mines might.
- It will allow the government to meet its objective of providing secure and affordable energy to everyone without degrading the environment.
- Authorities must prioritise natural gas: They must recognise its versatility because it is a competitive fuel.
- It is abundantly available in and within the Asian/ME subcontinent and it has multiple uses and it is the “greenest” of all fossil fuels.
- Authorities must correct the current disincentivising policy distortions: The government should introduce policies to increase domestic production of natural gas.
- The taxing structure in the natural gas industry should be revitalized in order to stop the dampening of demand of natural demand in areas far from source.
- Authorities should revamp the structure of natural gas industry: It is necessary to de-monopolize the domestic production of natural gas so that other competitors of GAIL to access the market.
- The conflict-of-interest situation can be tackled by separating the upstream (production/import) and downstream (marketing) interests from transportation.
- Better coordination between the central and state governments: It is necessary to have the institutional mechanism should be created to enable better coordination between the central and state governments.
Road ahead
- India stands a better chance of reaching the destination of a predominantly clean system if it moves forward incrementally i.e. if it makes natural gas the “next stop” in its energy journey.
- Natural gas has played a role to date in addressing local air quality problems and reducing carbon dioxide emissions in many jurisdictions around the globe.
- In the longer term, the natural gas sector will need a credible decarbonization strategy that addresses the inherent opportunities, challenges and limitations of the current technological pathways on offer.
- Without greater industry leadership and collaboration with governments, green gas may never become a commercial reality, and ultimately there may be little room left for natural gas in low carbon energy systems around the world.
- The researchers suggest that India needs to take certain policy decisions to induct natural gas in the fuel market in India which should include:
- Changes in the process of urea production to restrict the use of natural gas in the process;
- Subsidising gas-based power plants to encourage the use of natural gas in the power sector; and
- Levying a carbon price to support all the subsidies.
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