1.

25 MW Wind Capacity Installed in Tamil Nadu

The Energy Crisis: Future Directions for India¶s Energy Policy
Systems Research Institute
sri@pn1.vsnl.net.in Pune, August 2004

Prepared by: Gireeja Ranade
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Objective of this Presentation
‡ As India¶s oil consumption is increasing, world oil supply will soon stabilise and then start dwindling while oil prices are bound to rise further ‡ For economic as well as environmental reasons we need to shift to alternative non-polluting sources of energy. ‡ The aim of this presentation is to raise questions and provoke discussion regarding the future of India¶s energy policy and to consider various possible solutions
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Sections of the Presentation
1.
2. 3. 4. 5.

Global facts on Oil
Our Oil Obsession World Oil Supply World Oil Demand India¶s Energy Demand

6.
7. 8. 9. 10. 11. 12. 13. 15. 16. 17. 1. 2. 3. 4. 5.

The Oil Peak
Peak Oil Contradicting Optimistic Views Oil Economy Future Exploration Future Extraction Illustrating Oil Extraction process ERoEI Non-conventional Oil to the Rescue? After Oil ± Natural Gas? SOS ± The Energy Emergency!

24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 24. 25. 26. 27. 29. 30. 31. 32. 33.

Tackle the Transport Industry ± Urban ± 1 Tackle the Transport Industry ± Urban ± 2 Energy Reduction in Industry GNP reductions after Oil Price rise The transition toAlternative Energy Sources Electricity From Renewable Sources More Renewable Energy Hydrogen ± Not a Feasible Fuel Watts From the Winds ± 1 Watts From the Winds ± 2 Super Solar Power ±1 Super Solar Power ± 2 Renewable Energy Policy

14. Future alternatives

Formulating a Strategy ± 1
Formulating a Strategy ± 2 Formulating a Strategys ± 3 Formulating a Strategys ± 4 Formulating a Strategys ± 5 A Smooth Transition? ± 1 A Smooth Transition? ± 2 A Smooth Transition? ± 3 References ± 1 References ± 2

The Way to a New Tomorrow
Sorry ± There are Limits to Supply Reducing Our Requirements The Population Predicament ± 1 The Population Predicament ± 2 Tackle the Transport Industry

28. The Transition

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Our Oil Obsession
‡ Our civilization has evolved based on an abundant supply of cheap oil ‡ The transportation industry and agricultural fertilizers heavily depend on oil ‡ The current world oil production and consumption rates are almost equal ‡ World oil consumption grew 2.9% from 2003 to 2004 (projection from Quarter 1, IEA, 2004) ‡ Oil demand is projected to rise to 121 million barrels per day by 2025 (International Energy Outlook, EIA,
2004)
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2004 5 .World Oil Supply 90.00 0.00 80.00 30.00 60.00 70.00 40.00 Million Barrels per Day Total OECD Total OPEC Former USSR China Other Non-OECD Total Supply 2000 2001 2002 2003 Source: EIA.00 50.00 10.00 20.

World Oil Demand 90 80 70 60 50 40 30 20 10 0 2001 2002 2003 2004 6 Source: IEA.8 %p. Brazil India China Europe (OECD) US World .a. 2004 Million Barrels per Day World Demand 2001-2004 Growth Rate: 1.

disastrously .33% from 2003 ± 2004 (projection from Qtr 1.India¶s Energy Demand Oil Demand 7 6 5 Mb/d 4 3 2 1 0 2001 2002 2003 2004 China India ‡ From 2001 ± 2004. 2004) ‡ Oil and gas represent 38% of India¶s energy consumption (IBEF. 2004) ‡ (In fact.68% but it will grow by 6. India will be the fourth largest consumer of oil and gas in the world (IBEF. China¶s demand growth is even more .rapid) 7 . India¶s oil demand has been growing by 2. 2004) Summary of Global Oil Demand (Mb/day) ‡ By 2010. IEA.

.Peak Oil PRO UCTION ‡ ASPO (Association for the Study of Peak Oil and Gas) predicts 8 world oil production will peak around 2007. as shown above.

³Higher prices will bring in larger investments. ³Oil shale and tar sands will replace conventional oil´ 4.Contradicting Optimistic Views ‡ The Energy Crisis is often overlooked based on the following misconceptions: 1. Fudging of reported reserves by oil companies and countries for political/economic reasons 5. ³Many previous µcrisis¶ predictions proved wrong ± this one will too´ 9 . ³Rise in prices will lower consumption´ 3. which will lead to more production´ 2.

shipments. There is a large time lag before consumers shift to alternatives or reduce demand ‡ In fact.Oil Economy ‡ The world market can be said to depend on OPEC almost entirely since it has 77% of the current world oil reserves ‡ The day-to-day market prices of oil reflect many factors like the current stocks.g Oil and natural gas demand growth rates in China have been in the range of 7-15% per year since 1999. and not so much the size of reserves of oil ‡ We have now reached a stage in the exploitation of the earth where trying harder to produce more oil can have only limited results ‡ Oil consumption on a short-term basis does not depend on the price of oil. economic situation. some experts believe that a rise in oil prices increases demand on a short term basis. speculative investment. E. despite the tripling of oil prices since then 10 . as is the case for other goods. etc.

Caspian Sea oil is not likely to become a significant factor in the world oil scenario.Future Exploration ‡ The major oil fields in the world have already been discovered ± the largest fields are always found first ‡ Except for some parts of the China Sea and of the western desert in Iraq. major regions in the world have been fully explored. 11 . ‡ Advances in geological technology allow us to predict promising areas for oil ± we now know reasonably well where new oil will be found ‡ Oil in the Caspian Sea has high sulfur content which corrodes the pipes and is expensive to extract and refine.

this would give us about 4 years more supply. though at world consumption rates. motivation and discipline.Future Extraction ‡ The best known extraction techniques are already in use in many of the giant fields in the Middle East ‡ Increase in the fraction of Oil-in-Place which is actually recovered will require diligent field management. At current Indian consumption rates.g. advanced recovery from Indian fields could amount to 4 MMM bbl more (Narayanan. technical knowhow. 1999). e. as well as capital investment. this will last for less than 2 months 12 . which may not always be feasible ‡ Oil which can be recovered using these techniques could give us only a breathing break.

clearly. it is not a mineral resource ‡ A certain amount of energy must be invested to recover oil from wells ‡ ERoEI (Energy Returned on Energy Invested) must be greater-than-one for the extraction to be useful ‡ Oil is not like gold ± the energy invested to extract the gold is irrelevant ‡ If enhanced extraction requires more energy input than the output oil contains.ERoEI ‡ Oil is important to us as a source of energy. that oil will never be extracted 13 .

2 trillion bbl of oil (mixed with heavy metals and sulfur) (Campbell. Venezuela has 1.g.(e.Non-conventional Oil to the Rescue? ‡ ³Non-conventional´ oil produced from oil shale and tar sands may become economical as oil prices skyrocket ‡ Canada and Russia may have 300 billion bbl of tar sands and shale oil. 1998) ‡ Extraction from oil shale and tar sands is slow. expensive. even when it is economical 14 . water) and time-consuming ‡ It may not be possible to achieve the necessary rates of production to meet demand by processing oil shale / tar-sands. heavily polluting and resource.

hence it is only a temporary solution (Goodstein) ‡ Delhi has shifted to running all its public transportation buses on gas.g.After Oil ± Natural Gas? ‡ Natural Gas cannot be a permanent replacement for oil ‡ Use of natural gas in daily life. (e. but a gas pipeline across Baluchistan (Pakistan) may have significant security liabilities 15 . greatly reducing the levels of air pollution ‡ India does not have large gas reserves. The best option for India is to obtain gas from Iran. as transport fuel) requires extensive infrastructure build-up ‡ The production of natural gas will peak between 2020 2030 as well.

SOS ± The Energy Emergency! ‡ We seem to be running out of the cheap sources of energy. ‡ We need to refocus our attention to the more practical question of µWhat next?¶ rather than debating µWhen?¶ 16 . ‡ No solution is immediately apparent ‡ The date of the oil peak is widely debated in geological circles around the world.

The Way to a New Tomorrow ‡ Three approaches to solution ± Increase supply (Scientists/Technicians/Managers) ± Reduce demand (Economists / Policy makers) ± Alternative sources (Scientists and Economists) ‡ Efforts are required in all three arenas 17 .

18 . technical and economic constraints limit supply growth ‡ With advanced technology. optimistic predictions (of such increases) should be viewed skeptically ‡ Possibility of production improvements from exploration and extraction are useful but limited ‡ Increase in supply will only postpone. but not alleviate the problem. we are aware of most of the new discoveries which will be made ‡ Increases in the ratio of recovered oil to Oil-in-Place are also limited.Sorry ± There are limits to Supply ‡ Geological.

on a large scale.Reducing Our Requirements ‡ Curbing demand and wanton use of energy resources is a much more effective and practical strategy ‡ Energy conservation efforts must be taken up by Government bodies ± and private agencies . ‡ Energy prices should be graded to punish wasteful behavior and reward efficiency ‡ The three major areas to attack are ± Energy reduction in industry ± in Transport -. Very large savings are possible.by the Population 19 .

33% faster from 1979-1999 than did world energy production 20 . but it is increasing (Europe-Japan-US consume 12-25 barrels/capita-year. McKillop. 2004) ‡ Large population growth will itself cause an increase in energy consumption ‡ World population grew 0.5 barrels/capita-year.The Population Predicament ± 1 ‡ India has a comparatively low per capita energy consumption of 1.

This makes effectively implementing a birth control policy much harder. ‡ A one child policy must consider sociological and cultural issues.The Population Predicament ± 2 ‡ Policies to reduce population could be oriented towards high energy consumption groups ‡ Indian society is based on large families with many children. but« ‡ Efforts to reduce population will go a long way towards reducing demand for energy 21 .

Trains running on electricity are more environment friendly as well as more energy efficient.Tackle the Transport Industry ‡ 90% of the transport industry is fueled by oil ‡ Improve public transportation ± quality of vehicles and comfort of journey .use specialised bus-bodies for different services. since the frictional force of steel on steel is the lowest 22 . ‡ Major obstacle ± Convenience of private vehicle v/s that of public transportation ‡ Encourage railway use for long distance goods transport.

regular buses etc. Point-to-point Express buses for the business traveler at peak hours. luxury buses.g. to suit the convenience of the passenger 23 . but also frequent buses with more stops for shoppers / casual travelers ± Gradation in quality of buses ± a/c buses.Tackle the Transport Industry ± Urban 1 ‡ Unified ticket/pass valid along all routes could make the journey more comfortable and viable ‡ Have a shuttle service in residential areas to enable the commute to bus station ‡ Have different types of bus routes serving different customers ± E.

g. restaurants«and parking ‡ Involve employers to encourage use of public transport (e. with facilities like bookstores. Bus-passes through employer etc) ‡ Provide late night service and early morning services ‡ Etcetera 24 . cafés.Tackle the Transport Industry ± Urban 2 ‡ Private contractors could operate large bus stations.

‡ Japan has shown that it is possible to drastically improve its GNP:Energy ratio ..and penalties for failure. with many more incentives and bonuses for energy reductions in processes. 25 . product design and product user -. ‡ There are many energy-efficiency engineers ‡ Now we need a Crash Programme.Energy Reduction in Industry ‡ Indian Industrial associations have had energyconservation programmes for a long time.

4%. according to the IMF (2004). By way of contrast.. which stood at 77% around the time of the first oil crisis of 1973. ‡ Japan's dependence on oil for its energy needs. ‡ The Philippines¶ GNP would lose 1. As a direct result of these efforts .8%. Japan¶s GNP would lose 0.6 % ‡ India¶s GNP would lose 1.GNP reductions after Oil price rises ‡ Although Japan imports virtually all of its oil.0 % 26 . according to Japan's Agency for Natural Resources and Energy. ‡ China¶s GNP would lose 0. has now dropped below 49%.. ‡For a $10 increase in oil price.. rising crude prices do not hurt as much as they have in the past because Japan's economy has now been made less oil-dependent. ‡ This decline reflects the progress of efforts in industry to reduce the amount of oil and energy used.

and preferably to renewable sources of energy ‡ A smooth transition to the new sources of energy is also crucial and the importance of this may be overlooked.The transition to Alternative Energy Sources ‡ Demand can only be reduced in limited amounts ‡ To sustain our population. even if the oil peak may not be immediate 27 . We need to start this transition mechanism soon. we must make an effective shift towards alternatives.

on a large scale. etc« Rechsteiner.2004) ‡ Hydel Power has been explored in our country. ‡ Wind farms are still very underdeveloped in India. regenerative braking. but not yet tapped . like wind and hydro. battery losses of 20%. they can be linked to grids based on long distance transmission of electricity at HV-DC which has very low losses ‡ Electricity is an environmentally friendly option. as its use does not result in any emissions ‡ Electric vehicles could become economical with rising oil prices (Efficiencies of 50% are envisaged assuming renewable sources.Electricity From Renewable Sources ‡ Maximal generation of electricity from renewable sources. is one direction India could move toward in the post-peak era. the 28 potential in Nepal has been explored.

2003.) 29 .) ‡ Biomass potential could be about 19. 2003.) ‡ Solar power for purposes of cooking and drying has been used for many years in our country. Larger cookers for 40-50 people can save up to 30 LPG cylinders / year (MNES.More Renewable Energy ‡ Energy from biomass and household use of solar energy can effectively be implemented at a more local level ‡ Biomass today generates about 468 MW (MNES. ‡ A box solar cooker for small families can save 3-4 LPG cylinders / year. 2003.500 MW of which 16.000 MW could be grid quality power (MNES.

2004) 30 . storage. 2004) ‡ Many friends of hydrogen fuel cells fail to consider all the processes involved ± compression.Hydrogen ± Not a Feasible Fuel ‡ Hydrogen is not a means to generate energy ± it is an energy carrier ‡ Conversion of energy from one form to another always involves a loss of energy ‡ The breakdown of water to obtain hydrogen for fuel cells and convert it to electricity will necessarily result in a loss of net energy. while calculating the practicality of hydrogen fuel (Rechsteiner. re-expansion etc. hydrogen will always be more expensive per unit energy than the energy source used to produce it (Rechsteiner. liquefaction. transport.

2003) ‡ Locations having annual mean power density of 150 MW at 30 meter height can be considered suitable for projects (Bakthavatsalam. 2003) ‡ Even so.700 MW (MNES.Watts From the Winds ± 1 ‡ India¶s wind power potential has been assessed to be 45. India is the fifth largest wind powerproducing nation in the world (MNES.000 MW but the installed capacity is only 1. 2000) ‡ Wind energy will prove to be one of the main sources of renewable energy in the future ‡ The ERoEI for wind energy is very high ± in the range 80 ± 100 (Wind Power Note. the zero fuel costs make them economical on a life-cycle31basis . IREDA. 1997) ‡ Despite high initial energy and monetary investment.

the economics are. in fact. 2004) ‡ Other advantages include no emissions. 2000). improving every day with larger generators (currently upto 3 MW per unit!) ‡ Wind farms have short building times of 2-20 weeks (Rechsteiner. an investment of USD 1 million & annual maintenance cost of USD 15. IREDA.Watts From the Winds ± 2 ‡ A 1MW wind farm required. pumped 32 hydro) to store energy . no fuel or disposal costs and low maintenance requirement ‡ Wind energy is one of the largest contenders to build our energy future ± we need to realize this and act! ‡ Fluctuation in power output with wind-speed requires either a largish grid or a mechanism (e.000 with a payback period of 5-6 years and FIRR (Internal rate of return) of 29% (Bakthavatsalam.g. in 2000.

‡ The main obstacle in utilizing solar power is the high technology cost involved and low energy density ‡ Solar energy can be exploited using two methods: ± Solar photovoltaic ± Solar thermal 33 .000 trillion kWh solar energy per year.Super Solar Power ±1 ‡ India has the advantage of being a tropical country which receives more than 5.

Super Solar Power ± 2 ‡ Solar water heaters are being commercialized and the pay back period varies from 2±6 years (MNES. 2003) 2500 lpd Solar Water Heating System at Teachers' Training Center at Bellary. 2003) ‡ Solar Photovoltaic power projects of an aggregate of 2.5MW have been established in the country (MNES. Karnataka 34 .

2003) ‡ Solar power development has the largest budget of all renewable energy sources ‡ The budget for wind energy development is much smaller in comparison.Renewable Energy Policy ‡ Renewable energy currently accounts for 3700MW. about 3. In addition to this. The potential for large scale power generation from wind appears to be much higher than that of solar. we need to focus now on replacing electricity from fossil fuels by 35 solar and wind on a larger scale . and is also less capital intensive. Wind energy deserves more attention.5% of total installed capacity from all sources (MNES. ‡ The current policy seems directed towards increasing use of renewable energy sources for remote and rural areas where grid power is not available.

but it does not matter.Formulating a Strategy ± 1 ‡ We are not sure when oil is going to peak ± we cannot predict the oil peak accurately because of uncertainty of data and technique -. and each must be coordinated with the other two for the effort to be successful. Isolated implementation will be ineffective. These aspects are: Who is involved? ± Increase of supply (Scientists / Technicians / Managers) ± Reduction of Demand (Economists and Policy Makers) ± Alternative energy sources (Scientists and Economists) 36 . ‡ There are three aspects to consider in our energy outlook. We need to start action NOW.

Formulating a Strategy ± 2 ‡ We should endeavor to increase supply. therefore . but not rely on any significant increase.implementation of alternative sources 37 is imperative for our survival . the Transport sector and Industry have the most significant impact on our energy consumption and improvements here will have far-reaching effects ‡ Tax and Incentive Policy decisions to encourage conservation and check carelessness should be implemented ‡ Control of supply and demand has limited scope. and plan for the worst ‡ Our growing Population.

and proven techniques of improved oil recovery from existing wells 38 . to determine their potential. researching and evaluating various new possibilities. and many needs for investment. such as methane hydrates and hydrogen fuel cells.Formulating a Strategy ± 3 ‡ Research and Development money may be spent on studying. but ‡ Given that India is a developing country with limited resources. but under-exploited. we must be very conservative when making decisions about large operational investments in such new technologies ‡ India should channel operational investments towards more proven. energy resources such as wind energy.

Solar ‡ Policy is currently focused on use of renewables where conventional power supply does not reach. RENEWABLES!!! They will help us answer all the questions about the future of energy ‡ Localized applications ± Solar and Biomass ‡ Large scale applications ± Wind. We need to start pushing for renewables to replace other power sources ‡ Wind Energy is the most promising ± Nonpolluting. Hydro.Formulating a Strategy ± 4 ‡ Renewables. Renewables. economically feasible 39 . great potential. or is impractical.

but not the least. This transition period could be as long as 20 years. ‡ Effective planning and diligent application will take us towards a bright tomorrow 40 . we should also direct attention to facilitating a smooth transition between the current energy sources and the next generation of energy sources.Formulating a Strategy ± 5 ‡ Lastly.

Systems (a consultation process? an organization?) must be established to coordinate their policies and develop a unified energy policy for India. Nonconventional energy. 41 ‡ ‡ . Electricity. It will involve changes in lifestyle for everyone Therefore. Petroleum. Such a policy should take into account petroleum depletion. such as pollution-control and global warming (which constrain many options. There is today a lack of coordination between the various ministries dealing with Coal and Hydro. or to the dot-com era. such as using more Coal). and the transition to renewable sources.A Smooth Transition? ± 1 ‡ Any transition to alternative energy sources will be a massive world wide event ± comparable to the extinction of dinosaurs. India needs a unified energy policy. conservation efforts. and Scientific energy research. as well as other relevant issues.

42 .Political recognition. as well as other incentives. and administrative facilitation. solar thermal: covering issues such as subsidies v/s buyback v/s tax rebates v/s simplified licensing. micro-hydel power plants. such as wind farms. methane hydrates) ± Implementation of effective and transparent politico-economic policies to encourage the setting up ± and profitable survival -.A Smooth Transition? ± 2 ‡ The transition to the next generation of energy includes -. of the importance of this transition ± Accumulation of (our own) reserves of extractable oil through technological innovation ± Time-targeted set up of plants for alternative and renewable energy ± Time-targeted and sector-wise reduction in our petroleum consumption and CO2 generation (which leads to Global Warming) ± Anticipation of geo-political and economic changes that will occur in the world as related to energy issues ± Identification of specific sectors where reforms need to be implemented ± Prudent decision making regarding investment in research and development in newer energy sources (e.g.of renewable power plants. at the highest level.

A Smooth Transition? ± 3 ‡ The transitional changes must be gradual and will involve long term planning and policy. collaboration with other nations to introduce global rationing is definitely an idea to consider 43 . our economy is not yet as locked into petroleum as some others . starting from today ‡ India as a developing country may have an advantage over more developed countries.and has a low percapita consumption. we have the opportunity to set up infrastructure with a broader outlook. ‡ Renewable sources of energy are preferable in many ways to the use of fossil fuels. we don¶t need to wait till we run out of oil to change over ‡ Global policy needs to be considered so that we can continue importing oil till we can sustain ourselves with other energy sources ± thus.

March 2003 www. www. India Wind Energy Development Incentives in Selected Countries. India Report. The Netherlands o IIASA. Newsletter 42. 2001-2002.teri. Bakthavatsalam. Austria Wind Power: experiences and future direction. Louise Guey-Lee.techo-preneur.org Viable Alternatives. Campbell & Jean H.peakoil.net Energy Information Administration (EIA). Scientific American.. TERI. EIA Wind Energy in India. TERI.doe. Colin J. Annual Report 2003. India Power Generation from Wind Energy in India. Mar 98 44 ‡ ‡ ‡ ‡ ‡ ‡ ‡ .net Potential for use of renewable sources of energy in Asia and their cost effectiveness in air pollution abatement o Tata Energy Research Institute. India Ten Steps to a Sustainable Energy Future. India o Energy Research Institute.gov EIA website data.References ± 1 ‡ ‡ ‡ ‡ ‡ ‡ Ministry of Non-Conventional Energy Sources. Rudolf Rechsteiner rechsteiner@rechsteiner-basel. World Oil Supply 2000-2004 The End of Cheap Oil. V. Arcot Ramchandran. Laherrère.eia. China o Wageningen Agricultural University. India Notes on Demands for Grants. June 2004 www. MNES. India www.ch The Association for Study of Peak Oil and Gas. Indian Renewable Energy Development Agency Ltd.

2004 Challenges and Opportunities for Re-development of Mature Fields.N Jatar Interview ± Dr. Colin Campbell. Guinness Atkinson. 1999 Oil market report. March 2004 Indian Energy Strategy and Central Asia.C.oilmarketreport. Institute on Energy and Man United States Geological Survey data Predicting the World Oil Peak.com Worldoil. Kottilil Narayanan. David Goodstein ICFAI Questionnaire.com . April 2003 45 Asia Times Online Ltd.net The Future of Energy. 2004 Energy Trends.References ± 2 ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Nationmaster. August 2004 www. Technology and Climate: Running Out of Oil. Replies and Comments.peakoil.org Oil Strategy and Energy Economic Considerations for India. June 2004 www. Maj.com Radovic Oil. Oil Shock v/s Global Economy. Gen S. 2004 India¶s Quest for Energy. Petroleum Geologist. Cavallo. Andrew McKillop. Dr.atimes. IEA. Petrotech. Country Profiles. Richard C. India Brand Equity Foundation. Dec 2002 www. Andrew McKillop March. Duncan. 1999 Energy. India 2000 Three World Oil Forecasts Predict Peak Oil Production.

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