In 2001, the Kutch District of Gujarat, India was struck by a magnitude 7.7 earthquake which killed around 20,000 people and destroyed nearly 400,000 homes. The total property damage was estimated at $5.5 billion and had a disastrous effect on what was already an ailing economy. In the aftermath of the earthquake, Narendra Modi, a member of the right-wing, Hindu nationalist Bharatiya Janata Party (BJP), became the Chief Minister of Gujarat and led the region out of darkness and into economic growth and prosperity. By 2007, Gujarat contained 5% of the total population yet accounted for 25% of total bank finance in India and continues to outpace growth in other states. Indeed, when I visited Kutch in January, it was clear that there was a growing and aspirational middle class population. Modi was recently elected Prime Minister of India, triumphing over Rhaul Ghandi, a member of the centre-left India National Congress (INC) Party, and with it became one of the most powerful players in the fight against climate change. So what does the future hold for the Indian energy sector?
Previous examples suggest that Modi wants to embrace the clean energy model. As Chief Minister of Gujarat, Modi bankrolled the largest single-location solar plant in Asia with an operating capacity of 55 megawatts and launched the first Asian governmental department dedicated to climate change. Before 2012, Gujarat had the highest share of renewable energy sources in India (~14%) and as Prime Minister, Modi plans to use solar power to supply energy to approximately 400 million people who still lack basic access to electricity. Yet some have accused Modi of losing interest in his solar revolution following his failure to submit an action plan for the Prime Ministers National Climate Change Action Plan in 2013.
Despite the solar revolution, India still generates 60-70% of its energy from non-renewable sources. The dominant non-renewable resource is coal which accounts for 40% of total energy production. Yet, output from Coal India Ltd, the largest coal producing company in India, has stagnated over the past few years and has consistently missed targets. If Modi is to revive coal production in India he has to address a number of issues including infrastructure, corruption and a lack of pricing power. Failure to meet last years target was also partly attributed to cyclone Phaline and monsoon flooding. This is also likely to affect future coal production; all IPCC models and scenarios predict an increase in both the mean and extreme precipitation of the Indian summer monsoon.
Although sitting on huge reserves of coal, India also has to import a staggering amount of coal. Last year, 152 million tons of coal were imported, an increase of 21% on last year, while only China and Japan imported more. In order to decrease their dependence on coal, India have began hunting for domestic oil reserves. Alternatively, Modi has spoke of strengthening ties with Russian President, Vladimer Putin, with the possibility of developing a Russian pipeline through the Altai region into northwest China and, eventually, to northern India. Although this would be a costly procedure, it may be easier to forge a relationship with Russia rather than China, who are India’s closest competitors in the energy market.
So what does this mean for India’s energy sector? Ultimately, coal will likely remain the backbone of India’s energy sector. This is problematic because coal generates nearly twice as much carbon dioxide for every megawatt-hour generated when compared to a natural gas-fired electric plant. In his rush for economic prosperity, will Modi forget about his solar revolution? On Monday, President Obama will unveil a plan to cut carbon emissions from power plants by as much as 25%, with an emphasis on reducing emissions from coal. If this is achieved, the US will have greater leverage over India and other heavy polluters such as China. Will this encourage Modi to reduce India’s reliance on coal? For now, I remain somewhat optimistic.
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