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India in Transition

Consumption Not Production: Reimagining Indian Energy Planning

Radhika Khosla
September 12, 2016

The provision of energy has long been central to India’s development planning. In most cases, this has taken the form of generating and making available the supply of energy in the form of increased coal, gas, nuclear, renewables, etc. The salient elements of current energy plans highlight this trend: through a focus on coal (with a domestic production target of 1.5 billion tonnes by 2020) and a growth in renewables (with aspirations to produce 175 gigawatts of renewable power by 2022). This view of energy planning with its supply-oriented solutions, however, is built around a narrative of chronic and ongoing energy scarcity. Specifically, it assumes constantly rising energy needs and a resulting pursuit of all available energy options—often without a complementary consideration of the uses to which the energy is put and the costs of procuring that energy.

The broad approach of emphasizing the supply-side is consistent with the history of Indian energy planning, evidenced in the 11th and 12th Five-Year Plans and in a majority of national modeling studies. But there is also the lesser recognized history of an alternate approach which focuses not only on how energy is supplied—but also on how it is consumed. Such a narrative break was originally promoted in the mid-1980s in the work of Amulya Reddy, who moved the conventional emphasis on “energy sources” to that of “energy services.” From this perspective, the objective of the energy system—and its supply and utilization activities—is to provide energy services such as lighting, comfortable indoor temperatures, refrigeration, transportation, etc. to achieve development outcomes. While Reddy’s interventions remained unimplemented, in part, because they required re-envisioning how energy policy is made, various government initiatives are now re-focusing on energy demand through end-use energy efficiency programs. These efforts are promising, even if not yet fully conceptualized. But transformational change will require recovering the broader conception of energy planning, which accounts for the linkages between energy supply and demand.

There are three reasons why it would be more productive for India’s energy narrative to consider not only how energy is supplied, but also explicitly consider how it is used and distributed. First, the Indian economy is undergoing various transitions, which make the implications for its future energy needs not only immense, but also uncertain and potentially malleable. Demographically, India is expected to add on the order of 10 million people to the job market each year for the next two decades, with consequences for energy use, especially from manufacturing. At the same time, urbanization will lead to about 200 million more people moving into urban spaces and demanding more resources for improved lifestyles. Infrastructure transitions are as imminent, and estimates suggest that two-thirds of India’s buildings that will exist in 2030 remain to be built. In energy terms, these transitions pose a real risk of accidental “lock in” to consumption patterns, since the bulk of development is yet to occur. If end-use technologies with poor energy performance (e.g., inefficient buildings and appliances) or cities with high energy demands (e.g., through private transport) become the standard in yet-to-exist infrastructures and lifestyles, it can lead to a series of path-dependent outcomes, which will make it extremely difficult to reduce consumption for many decades to come.

Second, incorporating the demand-side as central to energy planning not only makes managing energy supply easier, it also has a substantial impact in reducing the amount of supplies needed and, subsequently, the carbon emissions released. In fact, sectors such as buildings, transport, and industry can form the bulk of reduction in emissions intensity, up to 23-25 percent from 2005 levels by 2020, as estimated by the erstwhile Planning Commission. More so, understanding demand is necessary for sensible supply-side planning. Take for instance India’s international climate pledge to increase its share of non-fossil fuel based electricity to 40 percent of its total capacity by 2030. India must plan for fossil and non-fossil based energy sources to achieve this target. But the magnitude of supply in any plan will depend on the size of the grid or the total capacity in 2030, which is ultimately a function of future demand. We do not yet have a rigorous forecast of India’s future grid size, and study projections range anywhere between 650-1000 gigawatts, which could lead to a very different set of supply requirements at either end. Inaccurate demand estimates could thereby risk energy security, or result in a series of stranded assets—both issues of concern. 

Finally, the traditional supply-dominated orientation has simply not been enough to fix the pathologies of Indian energy. The sector is rife with a range of structural inefficiencies and financial losses in spite of increasing electricity production and the slew of policy targets. Lack of energy access remains an overarching characteristic: more than 400 million people have no access to electricity (according to the 2011 Census) and there are serious challenges of fuel quality even when there is supply. Power shortages continue to plague the system and are increasingly compensated for by polluting diesel generators. Systemically, coal-based thermal plants are often used to meet peak load demands, leading to economic and resource wastage and their associated environmental consequences. Instead of responding to these complexities with the lens of a supply-side crisis, policies could use the demand-side as a way to understand how much supply is actually needed—by whom and when—thereby managing power in a more effective way.

There is a strong case for India to challenge its current imagination of energy planning, which is mainly driven by the incomplete narrative of scarcity and its associated solution of more supply. An alternate conceptualization would instead emphasize understanding consumption trajectories as an input to supply requirements. It would, ideally, also account for the larger ultimate objectives of an energy strategy such as energy security and socio-environmental benefits. Such a shift will not be easy or automatic—especially because demand-side solutions are often embedded in a complex network of social institutions and practices and can involve explicit normative positions. Yet, shaping alternative narratives is a first step to creating new avenues and institutional opportunities, through which our sustainable development goals can eventually be met.

Radhika Khosla is a Fellow at the Centre for Policy Research, New Delhi.

India in Transition (IiT) is published by the Center for the Advanced Study of India (CASI) of the University of Pennsylvania. All viewpoints, positions, and conclusions expressed in IiT are solely those of the author(s) and not specifically those of CASI. IiT articles are re-published in the op-ed pages of The Hindu: Business Line. This article can be read here.

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