With one sixth of the world’s population, India is one of the largest emerging markets of the world. Its economy has been growing at about 8-9% for the last 5 years. To fuel such a large economic machine vast amounts of energy is needed. India depends heavily on imported oil. It is estimated that by 2012 this dependence will grow from 70% in 2007 to 85% by 2012.
It is the sixth largest energy consumer accounting for 3.7% of the world’s consumption and eleventh largest energy producer according to the World Coat Institute.
Domestic Resources and Demand
India has proven reserves of 5.6 billion barrels of oil which is only 0.5% of the total world’s reserves as compared to 2.5% of the US and 1.3% of China. India does not have significant natural gas deposits either, totaling only 0.5% of world’s proven reserves. The only energy source that India can bank upon is coal of which, India contains 5% of world’s total reserves. It is now the third largest coal producing nation in the world.
These resources are meager when compared with the increase in demand for energy in India in the last decade. The International Energy Outlook 2008 estimates that India’s oil consumption will double from 2.2 million barrels/day (mb/d) in 2001 to 4.9 mb/d by 2025. The International Energy Agency projects that India’s total energy demands will more than double by 2030.
This is the most daunting task facing the Indian government. The central challenge depends on technology adaption and research and development. Decisions are made by bureaucrats and there is hardly any real data collection or synthesis before making crucial decisions.
Coal currently makes up 50% of India’s energy production. At the same time, most Indian coal is of poor quality. Even though per capita emissions are significantly smaller than the US or China, India might face deteriorating air quality and pollution. It must invest heavily in developing clean coal technologies. Currently there is no research and development in the field of renewable energy.
It must also simultaneously work towards adopting cleaner technologies developed elsewhere. The recent nuclear deal is a unique opportunity for India to install nuclear energy generation units. This deal enables India to receive both state of the art nuclear technology and fissile fuel for reactors. It is imperative that India adopts and installs this technology rapidly.
There are a whole set of policy challenges as well that I will try to focus on in the next blog entry.