India’s Investment In New Gas Infrastructure Should Be A Balancing Act: IEEFA.
Prioritizing new gas infrastructure over the infrastructure cost advantage of distributed clean solar and wind power, particularly in rural areas, can lead to stranded asset risks for the country.
India’s strategy to meet unmet energy requirements by creating dual gas and power connections requires a balancing act to avoid capital and environmental losses, according to a new report from the Institute for Energy Financial and Economic Analysis ( IEEFA).
This comes in the context of volatility in global gas prices, increasing the urgency to push for clean cooking alternatives and mobility.
Given the Indian government’s commitments to increase the share of gas in the country’s energy mix, the IEEFA report says vital questions arise about the fiscal risks of such a move, particularly with the volatility of global gas prices, as well as the place of fossil fuel in the scheme.
At the same time, a sensible investment in renewable energy is envisioned as a means to overcome legacy technology, generate economic benefits and limit emissions.
The government plans to expand the share of gas in the energy scene to 15% by 2030 from the current 6%, with a particular focus on increasing use in the cooking and transportation sectors.
Major investments have been initiated to rapidly increase the availability of this largely imported fossil fuel through infrastructure for import, transport and distribution. Domestic production is expected to increase thanks to new gas discoveries, even if the domestic price cap reduces the incentive for Indian producers to take this risk.
The recent amendment to the national gas price ceiling for new deepwater discoveries to $ 6.13mmBtu from $ 3.92mmBtu may temporarily incentivize private investment, but this may not be sustainable in the long term considering the increasing volatility of gas prices worldwide, according to which domestic prices are revised late.
With other countries committing to achieving net zero carbon emissions in the long term, India’s bridging move to achieving the goal of reducing carbon emissions with a gas push may not be the best long-term strategy.
In effect, the IEEFA report says that prioritizing new gas infrastructure over the infrastructure cost advantage of distributed clean solar and wind power, particularly in rural areas, can lead to stranded asset risks for the country.
The report’s author and energy analyst said optimizing the use of available gas and investing in greening the electricity grid can lead to better long-term results for the country.
“The top priority must be the existing commitment to achieve 450 gigawatts of renewable energy by 2030.”
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