Can natural gas play the role of a ‘bridge’ fuel in India’s energy transition?

Fuel could also be non-zero carbon however can coexist in a high-RE future, particularly till India achieves net-zero emissions, which is probably going a number of a long time away.

By Rahul Tongia, 

A number of years in the past, the Indian authorities introduced its ambition to nearly triple the share of pure gasoline in its vitality combine to fifteen p.c by 2030. India’s share of gasoline stands at simply over 6 p.c, low in comparison with the worldwide common, and solely aggressive progress in gasoline can convey India nearer to its goal. Many international locations view pure gasoline as a ‘bridge’ gasoline within the gradual transition to a low-carbon economic system. Nonetheless, for India, there are a number of features to think about with regards to the feasibility of pure gasoline as a transition gasoline, each from an financial and decarbonisation perspective.

At a latest seminar organised by the Centre for Social and Financial Progress on the way forward for pure gasoline and coal in India, which was constructed on IEA’s India Power Outlook 2021, the final consensus was that whereas gasoline has the potential to play an more and more vital function for India’s future, affordability stays a key difficulty. One other difficulty is that whereas gasoline is superior to coal from an environmental perspective, it nonetheless stays a fossil gasoline, and never an endpoint for zero emissions.

India at the moment imports half of its gasoline. International locations that made the shift from coal energy to pure gasoline relied on cheap pure gasoline provide, which India doesn’t have. Whereas spot costs for gasoline have been till lately low, they’ve risen after August 2020, and lots of analysts say future costs gained’t be as little as a lot of 2020, which had an ideal storm of demand falls, beneficial climate that muted demand spikes, COVID-19, and many others. Extra importantly, India’s delivered value is far increased attributable to a mix of infrastructure prices (for regasification and home pipelines) and a steep taxation regime. States at the moment set their very own tax charges which might be over and above import or federal taxes. The state’s taxes can range from, for instance, 15 p.c in Gujarat to 25 p.c in Chhattisgarh (as of 2019). Admittedly, oil merchandise could have increased taxes than pure gasoline has. Nonetheless, each fall exterior the Items and Companies Tax (GST) regime.

If sustainability is the target, from carbon and different views, is pure gasoline the most effective gasoline to realize it? It’s true that the clear benefit of gasoline over coal is actual, although modest. From the cleanliness perspective, renewable vitality (RE) seems to restrict the value-proposition of pure gasoline, particularly for electrical energy. India’s said goal of reaching 450 GW of renewable capability by 2030 has spurred funding in renewables. Opportunistic or variable RE, which doesn’t require storage, has already turn into the bottom price choice for brand spanking new electrical energy capability.

One other drawback is that pure gasoline doesn’t present excessive home employment, particularly whether it is imported. Nonetheless, RE doesn’t present large-scale jobs domestically both, till manufacturing will increase. Most photo voltaic cells and even modules are imported in the present day. China dominates the availability of each cells and modules (the latter are typically assembled in India). Solely coal disproportionately gives home jobs, albeit with excessive environmental prices of mining added to the externalities of coal combustion.

Pure gasoline does have a non-trivial function in niches or choose segments, together with trade, which might drive progress in India. However the problem is one in every of infrastructure to the end-user. That is deliberate, however this funding ought to ideally be used for a lot of a long time. Will that be practical, both due to carbon issues or as a result of an alternate like inexperienced hydrogen catches up?

India’s focus for gasoline must be the place it displaces coal, particularly “soiled” (and inefficient) coal, adopted by the place it presents worth in opposition to different fossil fuels. It must also plan for a hybrid future, the place hydrogen will develop, and India’s gasoline ecosystem permits a shift to hydrogen, maybe initially by way of mixing. India should additionally step up its R&D efforts, last-mile implementation, and manufacturing efforts at unprecedented scales to allow a number of seamless and cost-effective transitions, particularly coal to gasoline, and gasoline to hydrogen (or, if required, coal to hydrogen). This is applicable within the industrial sector not like for energy, the place renewables plus batteries squeeze pure gasoline.

India wants a holistic strategy to vitality, which spans a number of fuels, as an alternative of silo-based targets that always battle. Coverage readability and certainty are vital for trade and end-users, who need to spend money on capital inventory that lasts a long time. This holistic strategy should lengthen to the broader vitality transition, which is able to create winners and losers, as effectively a heavy localized impacts on areas which might be coal heavy in the present day.

Fuel could also be non-zero carbon however can coexist in a high-RE future, particularly till India achieves net-zero emissions, which is probably going a number of a long time away. Nonetheless, it seems troublesome for using pure gasoline to develop both to the deliberate 15 p.c of portfolio combine introduced by the federal government or to a stage the place it accounts for a significant downward shift in India’s carbon emissions, particularly by 2030. On the intense facet, carbon emissions are already reducing due to renewable vitality, along with different shifts within the economic system and elevated effectivity.

(The creator is a Senior Fellow with CSEP in New Delhi, the place his work focuses on know-how and coverage, particularly for sustainable improvement. He’s additionally a non-resident Senior Fellow on the Brookings Establishment, and Adjunct Professor at Carnegie Mellon College, and was the founding Technical Advisor for the Authorities of India’s Sensible Grid Job Power. Views expressed are private and don’t mirror the official place or coverage of Monetary Categorical On-line.)