India’s strategy to meet unmet energy requirements by creating dual connections of gas and electricity requires a balancing act to ward off environmental and capital loss, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA). This comes in the backdrop of volatility in global gas prices which increases urgency of pushing clean alternatives for cooking and mobility.
Given the Indian government’s commitments to increase the share of gas in the country’s energy mix, IEEFA’s report says vital questions emerge about fiscal risks of such a move, particularly with the volatility of global gas prices, as well as the fossil fuel’s place in the scheme. At the same time, judicious investment in renewable energy looms as a means of leapfrogging legacy technology, delivering economic benefits and limiting emissions.
The government is planning to expand gas’s share of the energy scene to 15% by 2030 from the current 6%, with particular focus on increasing use in the cooking and transport sectors. Major investments have begun in rapidly increasing the availability of this largely imported fossil fuel via infrastructure for importing, transport and distribution. Domestic production is tipped to rise thanks to new gas discoveries, even if the domestic price cap reduces the incentive for Indian producers to take on this risk.
The recent amendment in the domestic gas price ceiling for new deep-sea discoveries to $6.13 mmBtu from $3.92 mmBtu may temporarily incentivise private investment, but this may not be sustainable in the long-term considering the increasing volatility in gas prices globally, based on which the domestic prices are revised with a lag.
As other countries commit to net zero carbon emissions in the longer term, India’s bridging measure to meet the goal of lowering carbon emissions with a push for gas may not be the best long-term strategy.
In effect, the IEEFA report says that prioritising new gas infrastructure over the infrastructure cost advantage of distributed clean solar and wind, particularly in rural areas, may lead to stranded asset risks for the country.
Report author, energy analyst Purva Jain said that optimising the use of available gas and investing in greening the electricity grid can reap greater long term results for the country.
“Top priority should go to the existing commitment to achieve 450 gigawatts of renewable energy by 2030,” says Jain.Share This