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Highlights of NITI Aayog’s Draft National Energy Policy 2017

Oct 6, 2017 15:49 IST
    Highlights of NITI Aayog’s Draft National Energy Policy 2017
    Highlights of NITI Aayog’s Draft National Energy Policy 2017

    The NITI Aayog on 27 June 2017 released the Draft National Energy Policy. The policy seeks to replace the Integrated Energy Policy of 2008 by taking into consideration the present and future availability of resources and energy demand.

    For the benefit of UPSC Civil Services Exam (Mains) aspirant, we are providing the major highlights of the Draft National Energy Policy 2017 that will be helpful in the preparation of General Studies III Paper.

    The key objectives of the Draft National Energy Policy (NEP) 2017 are -

    i. Access at affordable prices

    ii. Improved security and Independence

    iii. Greater Sustainability

    iv. Economic Growth

    For the sake of clarity, the recommendations of NITI Aayog related to specific sector are segregated into separate section. They are as follows.

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    Oil and Gas Sector

    Due to a number of differentiators, including carbon content per unit of heat, more gas availability and lower cost in calorific terms, today gas is preferred to oil. In India, the shares of oil and gas in energy consumption in 2015- 16 were 26% and 6.5%, respectively. It is expected that in the medium term while the share of oil may not come down, share of gas would rise.

    A supportive regime for gas has to be put in place for the consumption to rise to 8-9% by 2040, which will translate into a large supply in absolute numbers. The NEP proposed following steps for this sector.

    • India has nearly 3.17 million square km of sedimentary area, out of which only 19% has been moderately-to well-explored. In order to quickly appraise the entire sedimentary area, there is a need to offer geological data to the prospective Exploration and Production (E&P) companies.

    • There is a need to migrate the existing hydrocarbons regime to the emerging framework of market-determined prices and marketing freedom.

    • Releasing cash directly on lines of DBT can meet the government’s aim of subsidising farmers in the purchase of gas-based urea.

    • Setting-up of 90-day consumption requirement of strategic and commercial storages, both for crude and petroleum products through innovative private investment strategies is needed.

    • In order to increase the penetration of natural gas, a National Gas Grid would have to be rolled out throughout the country.

    • Availability of petroleum products in rural areas needs to be enhanced for supply of clean cooking fuels on a sustained basis. The role of private traders in connecting these areas needs to be tapped by easing the licensing regime for petroleum trade.

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    Coal Sector

    Amongst fossil fuels, India is most well endowed with coal. Approximately 7% of the world’s proven coal reserves are located in India, which enhances its stature amongst the basket of fuels. Additionally, coal is important to us for other reasons — large thermal power capacity, a large employer and negligible price volatility.

    Coal based power generation capacity of 125 GW in 2012 is likely to go up to more than 330-441 GW by 2040 (192 GW in FY 2017). To achieve fuller coal resource assessment, optimum mining, efficient use, and appropriate reckoning of the role of coal in our energy mix, the NEP suggested following steps.

    • Sustained levels of high domestic production would greatly advance India’s energy security. Coal gasification technology and methanol economy also hold value for India to commercially tap our coal resources.

    • In the medium to long run, it is essential that we move away from the present opaque coal economy and introduce greater competition in it. This requires two key steps. First, we must corporatize the seven subsidiaries of Coal India Limited (CIL) into independent companies and allow them to compete against one another in an open coal market. Second, progressively fresh production from new mines ought to come from private sector.

    • The potentials of exploiting coal bed methane (CBM) and in-situ gasification of non-producible coal (Underground coal gasification or UCG for short) have not been exploited satisfactorily in India. The mandate for exploiting CBM should be placed fully within the domain of the Ministry of Coal, principally because the efficient concept of unified licensing policy demands that even CBM and coal ought to be commonly licensed.

    • Opening up the coal sector to encourage commercial mining and move towards market-determined prices, can only succeed if decision-making is at arm’s length. This makes the need for an independent statutory Coal Regulator even more acute.

    • The government’s announcement in 2014 forbidding power plants situated beyond 500 Km from coal mines from using coal with more than 34% ash content is a step in the right direction. It is proposed to further raise this bar in the future so that the fallout from transport of ash is minimized and the subsequent problem of ash/slag handling at power plants is avoided.

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    Renewable Energy Sector

    While a cumulative capacity target of 175 GW has been declared for the year 2022, by 2040 a likely capacity of 597-710 GW is expected to be achieved. To achieve these targets the following steps were suggested.

    • The project life of hydro projects will be considered for a longer time frame (60 years instead of the present 35 years), which will enable them to access long term financing.

    • The NEP advocates framing of a Bioenergy Policy that encompasses all forms of biomass-based energy (solid fuel, first/second generation biofuels and gasifying biomass).

    • Smart grids have already been taken up on pilot basis in the country. Now, this technology will be rolled-out across the country so as to provide an efficient electricity distribution system, which also supports Renewablfloating solar panels on reservoirs, lands held by government institutions and public buildings (including government housing) may diversify generation, and ease stress on land.

    • Islands, hilly areas and remote locations ought to be the prime candidates for application of off-grid renewable sources of electricity supply.

    • Small sized solar plants (up to 50 MWp) need to come up across the country in rural areas, especially at the end of the transmission lines. This will reduce the size of plots, which ought to be purchased on commercial basis, and will not be dependent on state intervention in making land available. The co-benefit would be lesser challenge to grid integration.

    • Over and above the grid/off-grid power generation potential, multiple applications of Renewable Energy in domestic, commercial and industrial segments also need to be encouraged. These applications can address energy demand for water heating, air conditioning, cooking, lighting, pumping etc. and supplement energy supply.

    • NITI Aayog will offer a platform to bring the Central Ministries and State Governments together to solve the inter-agency issues related to integration and growth of renewable energy in the country as per the Renewable Energy Integration Roadmap 2030.

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    Nuclear Energy Sector

    India has an installed nuclear power capacity of 6,780 MW (2016-17), which contributes to over 3% of total electricity generated. Construction of additional nine reactors is in progress, which will ramp up the nuclear capacity to 13,480 MWe of power.

    In the Intended Nationally Determined Contributions (INDCs), India has indicated its intention to ramp up nuclear power capacity tenfold by 2030 to 63 GW. In the light of India’s bold ambition, the National Energy Policy offered the following steps.

    • Presently, participation of private sector and foreign suppliers in nuclear arena is restricted to construction activity only and Atomic Energy Act will need major modification for them to be involved in operation/ownership of nuclear plants.

    • The capacity growth programme will be determined by availability of convenient sites, and be largely driven by PHWRs, LWRs and FBRs. The Government’s announcement of construction of 10 units (700 MWe each) of indigenously developed PHWRs and two more LWRs (1000 MWe each) at Kudankulam site are right steps towards rejuvenating the Indian industry and capacity addition.

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    Electricity Sector

    With electricity comprising only 17% of our final energy consumption in 2014 (against 23% in OECD), India ranks well below the global average in electricity consumption. In keeping with the global trend, NEP expects the share of electricity in energy consumption to rise in the coming years. To achieve this the draft policy suggested following steps.

    • India’s immediate way forward has to be a mix of the large and small, central and distributed, and fossil and renewables. While developing the new infrastructure, it will be ensured that the grid can absorb and distribute renewable electricity in the long run.

    • Technological advancement in mobility, including hybrid vehicles, electric vehicles and fuel cell vehicles are likely to be inducted in the transportation system of the future. An enabling environment for charging, grid management, two-way communication system and cyber security will need to be provided by municipalities and discoms.

    Conclusion

    Energy is acknowledged as a key input towards raising the standard of living of citizens of any country, as is evident from the correlation between per capita electricity (a proxy for all energy forms) consumption and Human Development Index. Accordingly, the NITI Aayog has come up with the Draft National Energy Policy at the right time to spur the development processes.

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