Energy policy - General and in India

Energy policy is the manner in which a given entity (often governmental) has decided to address issues of energy development including energy production, distribution and consumption. The attributes of energy policy may include legislation, international treaties, incentives to investment, guidelines for energy conservation, taxation and other public policy techniques.

Measures used to produce an energy policy

A national energy policy comprises a set of measures involving that country's laws, treaties and agency directives. The energy policy of a sovereign nation may include one or more of the following measures:

• statement of national policy regarding energy planning, energy generation, transmission and usage
• legislation on commercial energy activities (trading, transport, storage, etc.)
• legislation affecting energy use, such as efficiency standards, emission standards
• instructions for state-owned energy sector assets and organizations
• active participation in, co-ordination of and incentives for mineral fuels exploration and other energy-related research and development
• fiscal policies related to energy products and services (taxes, exemptions, subsidies ...)
• energy security and international policy measures such as:
• international energy sector treaties and alliances,
• general international trade agreements,
• special relations with energy-rich countries, including military presence and/or domination.

Frequently the dominant issue of energy policy is the risk of supply-demand mismatch. Current energy policies also address environmental issues. Some governments state explicit energy policy, but, declared or not, each government practices some type of energy policy. Economic and energy modelling can be used by governmental or inter-governmental bodies as an advisory and analysis tool.

Factors within an energy policy

There are a number of elements that are naturally contained in a national energy policy, regardless of which of the above measures was used to arrive at the resultant policy. The chief elements intrinsic to an energy policy are:

• What is the extent of energy self-sufficiency for this nation
• Where future energy sources will derive
• How future energy will be consumed (e.g. among sectors)
• What fraction of the population will be acceptable to endure energy poverty
• What are the goals for future energy intensity, ratio of energy consumed to GDP
• What is the reliability standard for distribution reliability
• What environmental externalities are acceptable and are forecast
• What form of "portable energy" is forecast (e.g. sources of fuel for motor vehicles)
• How will energy efficient hardware (e.g. hybrid vehicles, household appliances) be encouraged
• How can the national policy drive province, state and municipal functions
• What specific mechanisms (e.g. taxes, incentives, manufacturing standards) are in place to implement the total policy

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Energy Policy of India

The energy policy of India is largely defined by the country's burgeoning energy deficit and increased focus on developing alternative sources of energy, particularly nuclear, solar and wind energy.

About 70% of India's energy generation capacity is from fossil fuels, with coal accounting for 40% of India's total energy consumption followed by crude oil and natural gas at 24% and 6% respectively. India is largely dependent on fossil fuel imports to meet its energy demands — by 2030, India's dependence on energy imports is expected to exceed 53% of the country's total energy consumption. In 2009-10, the country imported 159.26 million tonnes of crude oil which amounts to 80% of its domestic crude oil consumption and 31% of the country's total imports are oil imports. The growth of electricity generation in India has been hindered by domestic coal shortages and as a consequence, India's coal imports for electricity generation increased by 18% in 2010.

Due to rapid economic expansion, India has one of the world's fastest growing energy markets and is expected to be the second-largest contributor to the increase in global energy demand by 2035, accounting for 18% of the rise in global energy consumption. Given India's growing energy demands and limited domestic fossil fuel reserves, the country has ambitious plans to expand its renewable and nuclear power industries. India has the world's fifth largest wind power market and plans to add about 20GW of solar power capacity by 2022. India also envisages to increase the contribution of nuclear power to overall electricity generation capacity from 4.2% to 9% within 25 years. The country has five nuclear reactors under construction (third highest in the world) and plans to construct 18 additional nuclear reactors (second highest in the world) by 2025.

Total Installed Capacity (December 2012) is: Coal- 120,873.38 MW or 57.29%, Hydroelectricity- 39,339.40 MW or 18.64%, Renewable energy source- 25,856.14MW or 12.25%, Gas- 18,903.05MW or 8.96%, Nuclear- 4780MW or 2.26%, Oil- 1,199.75MW or 0.56%. 

 Sector wise distribution is State Sector- 86,405.85MW or 40.96%, Central Sector- 62,886.63MW or 29.81%, Private Sector- 61,659.24MW or 29.22%,.

Energy conservation

Energy conservation has emerged as a major policy objective, and the Energy Conservation Act 2001, was passed by the Indian Parliament in September 2001, 35.5% of the population still live without access to electricity. This Act requires large energy consumers to adhere to energy consumption norms; new buildings to follow the Energy Conservation Building Code; and appliances to meet energy performance standards and to display energy consumption labels. The Act also created the Bureau of Energy Efficiency to implement the provisions of the Act.

Rural electrification

Some rural areas in India remain to be connected to the electricity grid. The key development objectives of the power sector is supply of electricity to all areas including rural areas as mandated in section 6 of the Electricity Act. Both the central government and state governments would jointly endeavour to achieve this objective at the earliest. Consumers, particularly those who are ready to pay a tariff which reflects efficient costs have the right to get uninterrupted twenty four hours supply of quality power. About 56% of rural households have not yet been electrified even though many of these households are willing to pay for electricity. Determined efforts should be made to ensure that the task of rural electrification for securing electricity access to all households and also ensuring that electricity reaches poor and marginal sections of the society at reasonable rates is completed within the next five years. 

India is using Renewable Sources of Energy like Hydel Energy, Wind Energy, and Solar Energy to electrify villages.

Particular attention would be given in household electrification to dalit bastis, tribal areas and other weaker sections.

Rural Electrification Corporation of India, a Government of India enterprise will be the nodal agency at Central Government level to implement the programme for achieving the goal set by National Common Minimum Programme of giving access to electricity to all the households in next five years. Its role is being suitably enlarged to ensure timely implementation of rural electrification projects.

Targeted expansion in access to electricity for rural households in the desired timeframe can be achieved if the distribution licensees recover at least the cost of electricity and related O&M expenses from consumers, except for lifeline support to households below the poverty line who would need to be adequately subsidized. Subsidies should be properly targeted at the intended beneficiaries in the most efficient manner. Government recognizes the need for providing necessary capital subsidy and soft long-term debt finances for investment in rural electrification as this would reduce the cost of supply in rural areas. Adequate funds would need to be made available for the same through the Plan process. Also commensurate organizational support would need to be created for timely implementation. The Central Government would assist the State Governments in achieving this.

The electricity industry was restructured by the Electricity Act 2003, which unbundled the vertically integrated electricity supply utilities in each state of India into a transmission utility, and a number of generating and distribution utilities. Electricity Regulatory Commissions in each state set tariffs for electricity sales. The Act also enables open access on the transmission system, allowing any consumer (with a load of greater than 1 MW) to buy electricity from any generator. Significantly, it also requires each Regulatory Commission to specify the minimum percentage of electricity that each distribution utility must source from renewable energy sources.

In general, India's strategy is the encouragement of the development of renewable sources of energy by the use of incentives by the central and state governments.