Climate change is increasingly becoming one of the most dominant areas of concern globally. With a growing shift towards embracing deep decarbonization, various countries are considering different energy options and transition pathways in moving towards low and zero-carbon economies. As countries evaluate their energy sources and look forward to adopting cleaner options, natural gas will play a very important role in the energy transition.
Interestingly, gas, basis availability and price, brings differentiated value to different economies. As gas become more competitive, it will help advance decarbonization by coal to gas switching in power and oil to gas switching in transportation/industry. Considering that renewables is zero emission, an interesting question is ‘would gas be the part of end game or would it play a transitionary role until renewables take over’?
Coal, which is the biggest energy source for India, is leading to high carbon and air pollutant emissions in the country with nine out of ten cities recording the highest levels of concentrations of fine particulate matter (PM2.5). This, coupled with the rising concern towards climate change and its impact, place a strong emphasis on adopting natural gas as a clean energy option to cut down emission levels.
Looking at India’s primary energy mix, gas constitutes only 6% of the mix and the key reasons for its limited share include high cost of gas, limited supply options and inadequate infrastructure. The government has already set the machinery in motion to achieve its ambitious plan to increase the share of natural gas in the country’s energy mix to 15% by 2030. Though the gas market in India is rapidly growing, its role keeps varying from sector to sector and is evolving over time. Moreover, it emerges as an exceptional option not only for minimizing the carbon intensity of sectors that are classified as hard-to-abate but is also standing out in serving as a complement to variable renewables.
Even after renewables take up major share, gas will still have a critical role in balancing intermittency and seasonal demand in enabling greater penetration of variable renewables.
While India has shown a firm ambition towards transitioning into a ‘gas-based economy’, its aspiration stands on the face of various challenges. The share of gas observed a decline from 10% in 2010 to 6% in 2017 owing various reasons that include limited availability, pricing, infrastructure, under-utilization of siloed capacities and regulations which are, now, being addressed by the government in a systematic manner.
The country’s energy mix is dominated by coal, which accounts for 56% of primary energy needs and the transition will have its own challenges in terms of economics and infrastructure. Other than the fuel cost differential, the case to switch from coal to gas will also be accelerated/constrained by the flexibility of plant infrastructure to switch from one fuel to another.
During the 2000s, offshore gas discoveries highlighted the need to strengthen the domestic supply infrastructure. Production from the KG-D6 field of the Krishna Godavari Basin, which is considered to be the largest natural gas basin in India began in 2009. However, the production could not match the expectations, leaving gas consumers looking for alternate options including expensive Liquified Natural Gas (LNG). On a positive note, production activities in the KG basin have picked up once again which is enhancing domestic supplies and will be a key factor in moving towards our ambition of increasing the share of natural gas in the energy mix.
There is a growing need to have a robust infrastructure to support the country’s endeavor to build a reliable domestic supply network to connect various sources to different markets (to meet the gas demand of Power, Fertilizer, and City Gas Distribution (CGD) amongst other sectors). This will not only facilitate widespread industrialization but also assist in substantial socio-economic changes in different parts of the country. The Government has been driving the development of cross-country Natural Gas Grid (NGG) to connect all the regions of the country through favorable policy framework.
Looking at the current and emerging energy landscape and the corresponding transition required in the country, it seems obvious that the role of gas in the decarbonization of India is not transitionary, but it will be part of the end-game.
[Tyagi is Partner, Climate Change and Sustainability Services (CCaSS), and Bhadu is Partner, Business Consulting and Gas Sub-sector Leader, EY India]
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