Strategy for India’s Optimal Energy Mix

Since the onset of economic liberalization in the early 1990’s coupled with fundamental electricity regulatory reforms in the late 1990’s, India has emerged as one of the most promising and dynamic economic powers next only to China. Today, India’s policymakers have been and continue to target economic growth in excess of 7-8% GDP annually. Based on India’s Integrated Energy Policy, considering energy security and independence, this can translate to increase in primary energy supply of 3-4 times and electric power demand of 5-6 times current estimates.

The country’s real GDP has grown by over 6.5% in the last five years, however, electricity generation has grown only 3.8%, resulting in large-scale power shortages for wholesale, retail, rural and remote consumers.

Source: Govt. of India, Ministry of Power

Increased energy demand is synonymous with economic growth. More energy demand typically translates to more greenhouse gas (GHG) emissions, but converts into increased economic prosperity in terms of manufacturing, services, and employment.

There is a global consensus on India’s promising economic future and this in turn is critically linked to its energy sector. Today, India is the 5th largest energy consumer and its demand is growing. In order to meet its growing power deficit, it is estimated that additional power generation capacity of over 150,000+ MW must be added in the next five years. India’s optimal energy mix to meet future growth is critically dependent on commercial market fundamentals; supply-demand, unmet gap, price, elasticity, as well as other key macro and micro economics factors. A commercial market driven optimal energy mix coupled with comprehensive and integrated policy consists of addressing key fundamentals. In addition, there must be a fair and balanced approach in addressing “all of the above” forms of energy (conventional / alternate / renewable). Assessment of market and business fundamentals ensures there is a level playing field in order to arrive at an optimal energy mix as shown in the below diagram(s).

Source: Pat V. Sonti, Mentor & Author