India’s fossil fuel lessons for net zero

Source– The post is based on the article “India’s fossil fuel lessons for net zero” published in “The Hindu” on 3rd April 2023.

Syllabus: GS3- Infrastructure: Energy

News– India has faced many challenges in creating self-sufficiency. The same practices should not be repeated in the case of renewable energy.

What are the challenges India faced in the case of hydrocarbon and how can they be used as lessons for renewable energy?

1) Challenges in accessing indegenous resources– Although, India had the raw material of oil and gas. But the hydrocarbon resources are located in harsh terrain and complex geology. Which were difficult to locate and even if located, they were difficult to produce on a commercial basis. The reason is the high cost of drilling and development.

Similarly, it is difficult to create a world class hub for the manufacture of batteries, solar cells, wafers and modules, on the basis of availability of technical talent and capital. Process cost, due to land acquisition, erratic supplies of water and power and legal redress, needs to be minimised.

2) Issue with use of technology– The recovery rate of oil and gas from India’s producing fields has averaged between 25-30%, compared to world average of 40-60 per cent. it is not due to access to Enhanced oil recovery technologies. The reason is the utilisation of these technologies, which is not efficiently implemented.

Therefore, clean energy sector should not take the availability of tech as manufacturing competitiveness. China’s dominance in PV solar cell manufacturing is because, its engineers have been successful in implementation of the several technological steps, required to convert raw material into an end product, efficiently.

3) Incentive model– The exploration sector was leiberalised in the expectation of more foreign investment. But, international companies shown lack of interest, stating our geology as high risk. India fiscal and commercial terms were not internationally competitive for them.

A similar disappointment is possible in case of the PLI scheme for clean energy sector. This is because the incentives offered are small compared to the benefits provided by the US through the “inflation reduction act” and Europe through its “net zero industry act”.

The US offers, for instance, subsidies up to $10 billion or single factories. It is equivalent to total subsidy under PLI. Therefore, India cannot compete on the size of the incentive package with advanced economies. The focus should instead be to lower entry barriers, ease business conditions.

4) External dependence– Finally, India remains dependent on the external market for supplies of petroleum. There is no easy solution to reverse this imbalance and address its vulnerability to unexpected supply disruptions. However, The government has successfully diversified its supplies without involving in domestic or regional politics and conflicts.

Simlarly, clean energy minerals and components are internationally available. Instead of creating high-cost, domestic, clean energy hub dependent upon subsidies, government should stregthen the trading relationship with exporting countries.