Girish Shirodkar, Partner and MD, Strategic Decisions Group, and Naoki Shimoda, Director, Energy & Environment, speak to R Srinivasan, among other elements of the power sector, about the potential for shale gas in India’s future energy blueprint.Naoki and Girish spoke about the future of the nuclear industry globally and in India, the potential for shale gas in India’s future energy blue print and the potential of smart grids in helping India solve its energy woes. Excerpts of the interview: Your views about the future of the nuclear industry globally and in India.Naoki: Firstly, let us address the safety perspective. The reactors at Fukushima #1 plant are one of the oldest generation operating reactors in Japan. Both TEPCO and the Japanese government were aware of the shortcomings of its safety design and it was indeed planned to be retired before 2011, according to the record. The newer reactors have much higher levels of safety mechanisms, which significantly reduce the likelihood of the next Fukushima-type disaster. But social concerns and political decision-making have been affected by the incident. All the reactors in Japan are currently off-line for either regular or special inspection. Whereas the existing plants in Japan may be restarted after inspections, the enthusiasm for nuclear power has abated. China, Middle East, Eastern Europe are all likely to continue their expansion of nuclear capacity. The US has interest in nuclear expansion but the current natural gas price condition has been slowing down the new nuclear development. It is more of an economic reason, rather than a safety concern.Girish: In India, all investments will continue to be channelled through NPCIL. It is difficult to imagine involvement of the private sector in nuclear generation in India, at least over the medium term. The cost of nuclear power would tend to remain higher than grid parity, but it is also the ideal means to producing zero emission power and reducing the long-term dependence on fossil fuel. The government will have to resolve the issues around public protests and legal challenges, before the nuclear expansion plans can go forward. Nuclear energy should be an important component of our future energy mixWhat has been the impact of shale gas availability on the power scenario in the US? What is the potential for shale gas in India’s future energy blueprint?Naoki: Discovery of shale gas and technological improvements to economically access these deposits has dramatically changed the dynamics of the US power industry. One can argue that this is the biggest event or breakthrough in every sector for this decade. The wide availability of shale gas in large quantities has reduced gas prices in the US from about $13/million metric British thermal units (MMBTU) in the summer of 2008 to less than $3/MMBTU in 2012. Shale gas is projected to constitute 25 per cent of natural gas production in the US. Gas remains a primary source of fuel for power production in the US. The reduction of gas prices has led to reduction in the power prices as well. In terms of new development, today’s low gas price and stringent environmental regulation drive new coal-fired plants uneconomic. From a pure economic viewpoint, natural gas should be the primary fuel for development of future power plants at least for the near term.US shale has seen investments and merger and acquisition (M&A) activity remains strong with about 90 deals with a total value of over $46 billion in 2011. The current impact of shale gas has mostly been limited to the US markets. Some US producers are actively talking of exporting shale gas as LNG into the world markets. This could change some of the fuel dynamics even in gas-deficient regions like Eastern Asia and Europe.Girish: Preliminary geological studies indicate that India also has similar shale gas formations as the US. According to the National Geophysical Research Institute, India has 260 trillion cubic feet (TCF) of recoverable shale gas reserves which should place India among the top 10 shale gas reserve countries in the world. The Indian government is already mapping out the Indian geology and it should invite the private sector and PSU companies to participate in the exploration and production of shale gas. The setbacks in KG basin development have led to a number of stranded power plants as well as dependence on LNG and liquid fuels for a large number of manufacturing industry players. Shale gas prices (for developments in the US) are quite competitive ($2.5/MMBTU) as compared to domestic gas prices ($4.2/MMBTU) as well as imported LNG prices (which are three to four times the domestic gas prices). Development of shale gas assets would help India improve self-sufficiency in gas requirement and also lead to lower costs in terms of fuel and electricity which can benefit the entire economy.What will be the changes in India’s energy sector in the next 10 years, especially with regards to development of renewable energy?SolarNaoki: Solar technology has seen significant development over the last 5-year period. The support provided by various governments especially in Europe, Japan, US and China, has allowed manufacturers to improve scale economies and commercialise their products. Exciting improvements are being achieved across crystalline silicon, thin-film as well as concentrated solar technologies. The solar module costs have already almost halved since 2009 and could potentially help solar power achieve grid parity over the next 5-8 years.Girish: From a long-term perspective, solar has the greatest potential. India being a tropical country with ample sunlight, we have one of the highest solar power intensities in the world. Unfortunately, as of today, solar remains much more costlier than grid parity. The National Solar Mission has initiated private sector involvement in the development of the first 1,000 MW of solar capacity. As cost comes down further (maybe over the next 5-6 years), we should see a spurt in solar capacity beyond that time period.Wind energyNaoki: In terms of renewable energy options, wind energy is currently closest to grid parity. Hence, the government should maintain focus on promoting wind energy. Unfortunately, wind energy has high daily fluctuations and high seasonality. Hence there is typically a technical limit to the composition of wind energy in the overall power generation mix.Girish: India has been a leading player in wind energy installation. Earlier estimates had pegged Indian wind energy potential at around 100 GW but new research at Lawrence Berkeley National Laboratory estimates a potential of over 2,000 GW. Compared to these estimates we have currently installed only 15 GW of wind power capacity. With improved technologies and policy support, the government should strive for 15-20 per cent share of wind power by 2020.GeothermalNaoki: Potential for geothermal energy is very location-specific near the geographic fault lines. The key locations with large and economic resources exist in regions like Western US, Mexico, Philippines, Indonesia, New Zealand, etc. If the appropriate location is chosen, the project economics become viable as geothermal plants have ideal characteristics for base load power and there are no fuel costs involved. Global potential for geothermal is estimated to be 140 GW. But development of a geothermal plant carries substantial development risks and long lead times. In that sense it is very different from typical power plant development. Unfortunately, there seems to be very limited potential for geothermal energy in India.Girish: Taking a holistic viewpoint and given India’s increasing requirement for power, we are likely to remain significantly dependent on coal (both domestic and imported) to expand our generation capacity. Even with all our efforts, wind and solar will remain a smaller part of the power sector mix. Hydro has greater potential but faces significant environmental and social challenges. Solar could grow significantly beyond the 10-year period.What is the potential for smart grids in helping India solve its energy woes?Naoki: Smart grid has many different ‘faces’. A lot of attention has been paid to demand side transformation. However, lower hanging fruits may exist in modernising the transmission and distribution (T&D) side in most countries. The visible side of smart grids talks a lot about consumer side applications such as home energy management, automatic lighting, etc. But these solutions are as much a lifestyle choice as it is an economic choice, if not more. Whereas the backend improvements in T&D networks can give much greater benefits using a lot of existing technologies. Policy-makers need to focus on providing the right incentives to achieve highest value from the funds allocated to the smart grid concept.Girish: Realising the smart grid potential in India, the Ministry of Power has setup a Smart Grid Task Force combining public and private sector stakeholders. Five working groups have been constituted to explore various areas related to smart grids. The government has already started working towards seven-eight pilot smart grid projects. The Restructured-Accelerated Power Development and Reforms Programme (R-APDRP) will further bring about investment towards a quasi-smart grid. This should reduce the high T&D losses and provide efficient energy supply. Smart grid implementation will provide opportunities in smart metering, grid automation, communication, IT systems and hardware.
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