As India builds more gas-fired power plants and infrastructure to supply natural gas, this investment must not be allowed to crowd out investment in greener technologies such as renewables, green hydrogen and storage capacity, experts tell IndiaSpend.
Natural gas, though less polluting than coal, is not as clean as renewables. Experts say over-capacity in the natural gas sector could lead to assets being stranded, but a solution lies in planning in such a way that gas infrastructure can be repurposed for renewables such as green hydrogen – which will make India’s energy systems truly emissions-free in the longer term.
In the immediate future, the use of natural gas in industries, transport and in homes will enable the move away from highly polluting coal, but it must only be used as a “transition fuel”.
“India should plan specific policies on natural gas that will make it a bridge leading to a renewables-based economy. Otherwise, we are stuck with one more fossil fuel which we will have to battle 10 years-15 years down the line,” Hemant Mallya, senior programme lead at the Council on Energy, Environment and Water, a New Delhi-based think-tank, told IndiaSpend.
‘Transition’ fuel
Under the 2015 Paris agreement, India has committed to reducing the greenhouse gas emissions intensity of its Gross Domestic Product by 33%-35% by 2030 relative to 2005, for which it must quit burning coal that causes global heating. Using natural gas reduces GHG emissions as the combustion of natural gas emits about half as much carbon as coal.
In addition, India has also said it will install 450 gigawatts of renewable energy capacity by 2030, of which 100 gigawatts had been installed as of August. Eventually, India plans to use renewable energy as the predominant fuel source.
In 2017, the Indian government announced that it would increase the share of natural gas in its energy mix to 15% by 2030. As of September, natural gas made up 6.5% of India’s energy mix.
India is promoting natural gas as a “transition fuel” as it moves towards using renewable energy as the main power source, as other countries in Southeast Asia and Africa are doing.
This is because renewable energy production, such as that from wind and solar, is intermittent and dependent on weather conditions. For a completely renewable-energy based economy, India would need capacity to store power but battery storage is currently expensive, said Mallya of Council on Energy, Environment and Water.
The demand for natural gas globally is projected to increase by 3.6% by 2021 and by 7% in 2024 compared to pre-Covid19 levels in 2019, according to a July report by the International Energy Agency, an intergovernmental organisation working to shape energy policies. The growth in demand is largely because gas can replace other more polluting fuels such as coal and oil in sectors such as electricity generation, industry and transport, the report noted.
“Almost half of the increase in global gas demand by 2024 is expected to come from the Asia Pacific region, driven by China and India as well as by emerging markets in South and Southeast Asia,” the International Energy Agency report said.
In February 2020, the Ministry of Petroleum and Natural Gas released a draft LNG policy to grow India’s LNG infrastructure, including expanding the capacity of regasification plants that convert LNG back to natural gas, from the existing 42.5 million tonnes per annum to 70 million tonnes per annum by 2030.
Earlier, in 2020, the ministry had announced a “One Nation One Gas Grid” programme to expand the country’s LNG infrastructure. More than 15,000 km of gas pipelines, covering 407 districts, is scheduled for completion by 2023 under this programme.
Half of India’s natural gas is produced within the country while half is imported from Qatar, Australia and the United States, among other countries. India is also trying to diversify sources of natural gas by partnering with countries such as Russia that can supply a stable flow of natural gas, the government said in October 2020.
Challenges of transition
The role of natural gas in bridging between more polluting fossil fuels and zero-carbon technologies can only be temporary because natural gas is also a carbon dioxide emitting fossil fuel. It should be used only until renewable power supply expands and clean alternatives, like green hydrogen, become commercially viable as fuels.
Green hydrogen is produced by splitting water into hydrogen and oxygen using renewable energy. While green hydrogen produced from renewables could eventually replace gas for industrial use, it is at present too expensive for widespread use, we reported in September.
But “gas power infrastructure built today will be around for decades, threatening to impede the shift to renewable-based energy, because contracts required for gas investments often involve long-term commitments’’, said Purva Jain, an energy analyst at the Institute for Energy Economics and Financial Analysis. For instance, the average lifespan of a gas pipeline is 40 years, which means the infrastructure will last into India’s renewable energy transition.
Natural gas also requires considerable investment to develop the infrastructure for its transportation, said Rahul Tongia, a senior fellow at the Centre for Social and Economic Progress. But, if we can innovate the infrastructure, it can be used for natural gas in the short term and for green hydrogen in the long run, he added.
The length of the transition phase also depends on how quickly green power storage options become economical, said Mallya of the Council on Energy, Environment and Water. “We do not see large scale storage becoming economical at least in the medium term, say 10 years. Till then gas is required.”
Others emphasise the importance of relying less on natural gas. Greg Mutitt, a senior policy advisor at the Canada-based International Institute for Sustainable Development, has called natural gas a “wall” and not a bridge for renewable energy as it competes for the same investments.
Given the low cost of renewable power, the urgency of climate action and the possibility of methane leaks from gas infrastructure, there is no reason to push another fossil fuel, he wrote in June.
In order to hasten domestic manufacturing of storage batteries, the government approved a Rs 18,100 crore production-linked incentive scheme in May that incentivises manufacturers of advanced chemistry cell battery storage and reduces India’s dependence on imports.
Going beyond gas
India’s natural gas infrastructure should be planned in such a way that it can be repurposed for renewable and green hydrogen technologies eventually.
“At present, India’s plans for gas are more pronounced for the short term but what it aims for in the long term is not clear,” said Tongia of Centre for Social and Economic Progress. India’s focus for gas should be where it displaces coal, especially dirty coal, followed by where it offers value against other fossil fuels, he suggested.
“It should also plan for a hybrid future, where hydrogen will grow, and India’s gas ecosystem enables a shift to hydrogen, perhaps initially through blending both natural gas and green hydrogen,” he added.
Blending green hydrogen in natural gas in select sectors like LNG and green steel can make it commercially viable and help in the smooth transition to 100% green hydrogen, several studies (here, here and here) have shown. In India, the National Thermal Power Corporation has invited companies to set up a pilot project, as per this August press release, for such blending. The Gas Authority of India Limited is also reportedly expected to draw plans on transporting hydrogen-blended natural gas.
“If we plan a natural gas-based production of steel and innovate technology, we can ultimately use the same technology but replace natural gas with green hydrogen so there is no discarding of technology or infrastructure,” said Mallya of Council on Energy, Environment and Water.
We sought comments from the Ministry of Petroleum and Natural Gas on the long-term plans for natural gas infrastructure on October 14. We will update the story when we receive a response.
Already, cost barriers are slowing down natural gas expansion. Prices in Asia for LNG have reportedly increased from $2 or about Rs 150 per million metric British thermal unit (mmBtu) in May 2020 to $30 or Rs 2,258 per mmBtu in October 2021.
This poses “a big financial risk” should gas-based infrastructure remain under-utilised in the near future due to prohibitive prices, said Jain of the Institute for Energy Economics and Financial Analysis, who authored an October 2021 report on gas infrastructure. This investment in gas infrastructure could result in stranded, unused assets if these are not constructed to be repurposed for renewables, the report said.
An alternative could be to build small-scale LNG systems, which use road, rail or waterways instead of transmission pipelines.
“India must also step up cost-effective transitions because natural gas is expensive,” said Mallya. “Historically natural gas has grown because of government intervention in the form of subsidies. Public sector companies like Oil and Natural Gas Corporation and Oil India Limited have borne the brunt of subsidised gas.”
One alternative for rural areas is small-scale solar micro-grids, which “become extremely cost-effective with increased electricity use,” the Institute for Energy Economics and Financial Analysis report said. The report suggests using electricity for cooking using existing infrastructure, rather than setting up new gas pipelines.
Similarly, setting up infrastructure for electric vehicles would be cheaper than a gas pipeline network, the report estimated. India has a “massive opportunity to move parallel to the developed world in decarbonising the transport sector by promoting EVs while cleaning the electricity grid”, the report added.
“Creating dual connections of gas and electricity can lead to an environmental and capital loss for the country,” the report said, adding that natural gas should be used for sectors where there are no other alternatives, such as for managing intermittent power from renewable sources until better storage options are available.
This article first appeared on IndiaSpend, a data-driven and public-interest journalism non-profit.