‘On way to energy transition, oil & coal are here to stay’

Unlike the developed world, India will have a longer expansion runway for traditional fuels like oil and coal on the road to energy transition, said KPMG
‘On way to energy transition, oil & coal are here to stay’

New Delhi: Unlike the developed world, India will have a longer expansion runway for traditional fuels like oil and coal on the road to energy transition, as the economy continues to be set for growth over the next two decades, KPMG India said in a report that emerged out of its annual energy conclave 'ENRich 2019.' However, this period must be productively utilised and India has to deploy the right investment strategies in renewable and cleantech research and manufacturing along with project development, it added.

At the 10th anniversary of its annual energy conclave 'ENRich 2019,' KPMG also launched a report titled, 'The electric future and its implications for India,' on the core trends that are likely to influence the structure and operations of the ENR sector, various facets and the future of the global energy transition and implications of accelerated electrification in the sector, globally and in India in the coming decades.

'India is putting in place enablers to ensure energy transition'

Speaking at the event, Minister for Petroleum and Natural Gas Dharmendra Pradhan reiterated how the government is putting in place the right mix of enablers, to ensure that the energy transition is secure, affordable, reliable and sustainable. He also talked about the initiatives and investments made by Indian energy companies to effect the transition to clean energy and create a strong delivery infrastructure. He reiterated the commitment of the government to open up the energy economy in India.

'We are in the midst of a massive global energy transition'

Sharing his views at the event, Anish De, Partner and Head of Energy and Natural Resources, KPMG in India, said, "We are in the midst of a massive global energy transition and our actions as a country in the ENR sector have deep ramifications. In the past few years, some of the government initiatives have transformed energy access. Now and in the future, our next wave must focus on economic development using energy, and electricity, as a principal resource lever."

Sharing his views on the theme of ENRich 2019 and the KPMG in India report, Santhosh Jayaram, Partner and Head, Climate Change and Sustainability, KPMG in India, said, "The sector is definitely transcending through the electric future. The entire theme of a circular economy will be integral to the electric future as resources are becoming scarcer and environmental consciousness has matured. In India, the sector needs to evolve simultaneously rather than as an afterthought."

The electric future: India imperatives

The imperatives for India as a country go well beyond carbon, said KPMG. In its report, KPMG identified four imperatives from an energy standpoint for spurring economic transformation. It said, "Energy goods must be substantially produced in India to take advantage of the large consumption base. Energy prices for the producing sectors must be lowered and artificial cost build-ups removed. Energy services must be modernised to allow for efficiency and innovation in consumption. Energy markets must be furthered to allow for flexibility and lowering of transaction costs.
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India must aim for technological leadership

"As new energy products like battery storage and hydrogen come into play, India must aim for technological leadership ab-initio; government's priorities must be clear in this regard," KPMG said. Energy markets must be opened up and deepened to allow for greater flexibility and lower transaction costs. Authorities in governance and regulatory roles in the sector must define their charters aligning to the overall economic and sector agenda and act accordingly.

'Since coal is here to stay, it will need to become flexible'

Coal-fired plants will need to become flexible. Flexibilised coal-fired generation's new role will be akin to storage, having energy content available on tap for balancing grid variability when the need arises rather than its erstwhile role of being the bulwark of supply.

A new wave of energy efficiency measures will be needed. Improving energy efficiency in many large energy-consuming countries has led to a decoupling of energy consumption with growth in output.

'Circular resources economy needs to evolve simultaneously'

Circular resources economy will need to evolve simultaneously rather than as an afterthought. The transition from take-make-waste model of virgin, non-renewable sources across all strata, needs to be redesigned from a circularity hierarchy perspective to bring in resource efficiency.

Businesses within and outside energy sector will be impacted and will need to transform. In the wave of a rapid switch to a low carbon economy, traditional major energy providers have begun to plan their strategic response to the growth potential in the renewable energy sector.

New institutions capable of delivering change will have to evolve. Organisations will also need to develop capabilities and up-skill their employees to survive and grow in an exceedingly complex business environment.

Governments will need to work to facilitate energy financing. The requirements also need to be seen in the context of the prevailing political economy that has deep influence on private investments.

Macroeconomic impacts on imports, remittances, employment, taxation structures will need attention. The transition to a low-carbon global economy is a system-wide change which will impact most countries significantly. Countries like India with high oil and gas import bills will obviously stand to gain with electrification and a shift to renewables.

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