India’s Fossil Fuel Lessons
Context:
- India has transitioned from the upstream (exploration and production) petroleum sector to clean energy over the past 40 years.
- PM Narendra Modi introduced the production-linked incentive (PLI) scheme in 2020 to promote investment, among other things, in the minerals, components, and equipment required for the creation and use of sustainable energy.
The main driving force behind it is the strategic requirement to reduce India’s sensitivity to external supply shocks:
- a switch from a fossil fuel energy system that is self-sufficient to a clean energy system that is independent (Atmanirbhar). The transition to an independent (atmanirbhar) clean energy system can benefit from four lessons learned over the past 40 years.
- The first is that the deregulation of upstream petroleum did not eliminate the gap between domestic demand and indigenous supply for petroleum.
- There are a number of reasons for this, but the one that pertains to clean energy is that there aren’t enough raw materials.
- The regional technological, economic, and operational ecology must enable their conversion into marketable products.
- The local technological, economic, and operational ecologies must be able to facilitate their development into goods with a marketable purpose. Oil and gas are available to India as a raw material.
- Yet, locations with difficult geology and climate are where hydrocarbon deposits are found. They are therefore difficult to locate, and even when they do, their commercial production is difficult.
- This is because drilling and development are so expensive. As a result, a sizable share of identified hydrocarbons have not been produced.
- Don’t think that having access to technical expertise and financing will be enough to create a world-class hub for manufacturing batteries, solar cells, wafers, and modules in the clean energy industry.
- The system will also need to cut back on wasteful costs associated with formalities like land acquisition, erratic water and power supplies, and legal remedies.
25 to 30 percent of the oil and gas recovered from India’s oil and gas fields:
- In other words, only 25–30 out of every 100 molecules discovered have been brought to the surface. The recovery rate varies between 40% and 60% in fields with comparable geology all around the world.
- This gap is not brought on by the availability of enhanced oil recovery (EOR) technologies. The majority of these can be bought off the shelf. The reason is the utilization of these technologies. They have not been used successfully.
- It’s crucial to understand that the competitiveness of manufacturing cannot be predicated on technology in the renewable energy sector. Effective utilization is required.
- China dominates the clean energy value chain, with a 90% market share in silicon wafers, 85% in PV solar cells, and 80% in PV solar modules. This is because its process engineers have mastered the use of the many technological stages required to convert raw materials into finished goods.
Finally, the deregulation of EP fueled expectations that there would be a surge in investment interest:
- This did not occur because foreign companies did not consider our fiscal and commercial arrangements to be globally competitive and did not consider our geology to be a big concern. They didn’t respond too much to the request for bids for exploration permits.
- In order to remove entrance barriers, simplify business conditions, and debunk the notion that India offers an expensive operating environment for the renewable energy sector.
Thirdly, as was already noted, India still depends on petroleum imports:
- This imbalance and its susceptibility to unforeseen supply disruptions cannot be resolved by a geological magic wand.
- There will therefore be less chance of disruption with more sources of supply, which is less of a problem now than it was when the Middle East had a lock on supplies.
Conclusion:
- As a result, the renewable energy sector can take away two lessons. One is that, like oil, minerals and components for renewable energy are traded internationally.
- On the international market, they are for sale. Thus, the country need to hold off on building an expensive, domestic, subsidy-dependent center for renewable energy.
- Second, given that China is the cheapest source of components for renewable energy, India should continue its two-track strategy. The other will likely strengthen our commercial relationships. The two paths will put us directly at odds with one another on the border. In addition to international cooperation, India and China may help one another meet their net-zero carbon obligations.
