What are India’s strategic energy options? Part 1: The energy demand

So far, in its process of industrialization, India has been relying heavily on its own coal reserves and on imported oil (mostly from the Middle East). Attempts to build a strong nuclear industry based on domestic Thorium reserves have so far been unsuccessful. Despite the shale gas revolution in the US, it seems like fossil fuels will become more and more expensive in India. At the same time, the potential for wind and solar is just beginning to be tapped. India is just at the beginning of its industrialization. In order to drive it, should the country develop a predominantly non-fossil strategy to energy supply? And what would that imply? This is part 1, looking at the energy requirements of India.

  • India’s per capita energy consumption is still only a fourth of the global average
  • If India were to consume at the global per capita average, it would need to add the equivalent of the entire European Union’s annual energy consumption
  • Procuring such amounts of energy will be very difficult for India, given its limited resources and difficult geostrategic location

India is still a largely unindustrialized country. I am convinced that it needs to industrialize on a vast scale, comparable to China, to lift its citizen out of poverty and provide the millions of jobs needed for its young and growing population. This will require an equally vast surge in energy supply.

Currently, an Indian citizen consumes only about one-fourth of the amount of energy of a Chinese citizen. This is well below global average and, of course, far less than inhabitants of developed countries consume (see chart 1 below). India currently consumes 563 MTOE of energy. If the country would – on a per-capita basis – consume the global average, this would rise by a factor of 4 and an additional 1,613 MTOE (the equivalent of the demand of the entire European Union) to 2,176 MTOE. For the power sector alone, this would mean an additional 1,000 GW of installed capacity. If India were to have the same consumption as the US, energy demand would even increase 15-fold (see chart 2 below). Over the past 10 years, India’s economic growth has been driven by the service industry, which is less energy intense than manufacturing. This will likely change in future as India needs significant growth in manufacturing to provide the required jobs.

It is currently quite unclear, where even a four-fold rise in energy supply could come from, let alone the amount required for lifting India to the level of developed economies. India’s internal resources are limited. Coal is available but of low quality. More and more power plants rely on coal shipped from abroad (South Africa, Indonesia, Australia). India needs to import over 90% of its oil and gas. Pipelines from Central or West Asia need to cross unstable or hostile countries such as Afghanistan or Pakistan. India’s neighbor in the east, China, is as energy hungry and competing for fuel sources. In the international markets, the developed countries have the advantage of existing relationships and infrastructure. So where does that leave India?

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The next part of the blog will look at what India can learn from other countries that are comparable in size.

Tobias Engelmeier is the Managing Director at BRIDGE TO INDIA.

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