India’s new gas infrastructure investment must be part of a balancing act : IEFA Report

The need for pushing clean alternatives for cooking and mobility because of volatility of global gas prices is also pertinent, it said.

Major growth in fossil fuel, as a bridging measure to lower emissions

The Centre is planning to expand gas’s share of the energy scene from the current six percent to 15 percent by 2030, with a particular focus on increasing use in the cooking and transport sectors, the report said.

Major investments have begun causing a push to the availability of this largely imported fossil fuel via infrastructure for importing, transport and distribution.

The most recent amendment in the domestic gas price ceiling for new deep-sea discoveries from US$ 3.92 mmBtu to US$ 6.13 mmBtu may temporarily incentivise private investment, but this may not be sustainable in the long term considering the increasing volatility in gas prices globally, based on which the domestic prices are revised with a lag, it added.

The IEEFA report also said prioritising new gas infrastructure over the infrastructure cost advantage of distributed clean solar and wind, particularly in rural areas, may lead to stranded asset risks for the country.

Report author and energy analyst Purva Jain said optimising the use of available gas and investing in greening the electricity grid can reap greater long term results for the country.

“Top priority should go to the existing commitment to achieve 450 gigawatts of renewable energy by 2030,” said Jain.

The latest 69 percent increase in the price ceiling for deep-sea discoveries, including the recently producing Reliance-BP KG-D6 block would also translate to higher gas prices for consumers, said Jain, while adding that one fuel choice cant be enough for India.

“A more staggered approach would achieve economies of scale and make the cleaner electric sources cost-competitive without any support," the report author added.

Generated or renewable, electricity reduces reliance on energy imports

Increasing electricity use provides economic and environmental benefits alike while reducing India’s dependence on energy imports, thus, enables it to scale up.

Going electric, whether generated or renewable, leverages existing infrastructure and avoids locking in a second energy distribution network.

Gas on the other hand has failed to reach scale in India over the past two decades, remaining a cooking and mobility option in limited urban areas, and is not assisting in lowering carbon emissions.

As global cities start to shun gas and move to zero carbon emissions, the report said investing in this fuel of the past is a strategy that needs to be evaluated with a long-term vision.

“Government policies have made investing in gas very lucrative at the moment but, from a longer-term business case perspective, such policies may change as global investment accelerates its exit from fossil fuels,” said Purva.