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Energy at threshold – Imminent role of Infrastructure as energy carriers.
Megha Jain
conomic growth, increasing prosperity, a growing rate of urbanization and rising per capita energy
consumption has widened access to energy in the country. One common cognizance
is that 85% of the total energy requirements are met by fossil fuel
(non-renewable energy sources) in India despite of unlimited growth potential
for the solar photovoltaic industry. Energy consumption is closely correlated
with the size of a country’s economy. Transport predominantly relies on fossil
fuel based energy[i] resources. Fossil fuels
account for over 79% of the primary energy consumed in the world, and 57.7% of
that amount is used in the transport sector and are diminishing rapidly[ii]. The World Energy Forum has predicted that fossil-based
oil, coal and gas energy reserves will be exhausted in less than another ten
decades (et al. 2010). Figure-1 provides energy usage (kg of oil equivalent per
capita) for India from 1991 to 2012.
Fig-1: Energy use (kg of oil equivalent per capita) for India
Source: Author’s
Representation from World Development Indicators[i] (WDI) databank
The above figure represents the eminent rising movement in energy usage (per capita) for India
from 1991 to 2012. India witnesses 68.5% increment in the energy disposal in
2012 over 1991 (post industrialisation). The trend seems to be positive in years
to come.
Transport is a crucial infrastructure needed for the developmental process.
Effective modes of transport - including quality roads, railroads,
ports, and air transport - enable entrepreneurs to get their goods and services
to market in a secure and timely manner and facilitate the movement of workers
to the most suitable jobs. The progress of human race has followed closely the
growth and development of transportation[i].
It accounts for a major share of energy consumption in India,
especially the petroleum products.
The road transport sector is the
largest consumer of commercial fuel energy within the transportation system in
India and accounts for nearly 35% of the total liquid commercial fuel
consumption by all sectors. One of the major reasons for increased energy
consumption in the road transport sector has been the rapid increase in both
passenger and freight traffic due to growing urbanisation.
Ripple effect of Infrastructure in economic growth as energy carrier
The concept of connectivity
through the development of regional infrastructure that links one country to
another is not really new to Asia. History shows that transport connectivity in
Asia started with the Silk Road in 13th century[ii]. Better infrastructure would also
support market conditions that are conducive to growth by improving
competitiveness, productivity, and environmental sustainability, and would
therefore support social and economic progress.
Conceptually, infrastructure may affect aggregate output in two main ways:
first, directly because infrastructure services enter production as an
additional input, and second, because they raise total factor productivity
(transition impacts) by reducing transaction and other costs thus allowing a
more efficient use of conventional productive inputs[iii]. In the short-run, a dollar spent on infrastructure
construction produces roughly double the initial spending in ultimate economic
output[iv]. The biggest effects of infrastructure spending occur in the
manufacturing and business services sectors which are energy intensive.
Furthermore, the more systemic development challenges[v] of today’s world - from social stability, to rapid
urbanization, climate change, technological changes and globalized issues such
as food and energy crises - call for more complex and interconnected
infrastructure solutions (Figure 2).
Figure-2: Infrastructure Engagement (energy intensity)
in a Changing World
Transformational Engagement
Source: World Bank Group report on Transformation through Infrastructure (2011)
The above figure depicts the transformational engagement of the changing world
through infrastructure as the epicenter. Tackling these second-generation energy
related issues (climate change, social stability, globalisation, growth, access,
technology and urbanisation) will require actions by and across sectors. These
actions can potentially accelerate growth and shift clients towards a more
sustainable development trajectory. For example, adaptation to climate change is
feeding demand for infrastructure that is more resilient to natural disasters,
while mitigation calls for an infrastructure that is less energy intensive and
therefore less environmentally damaging. Mitigating the effects of climate
change requires a certain type of investment in transport and energy. Investment
decisions in the energy sector have implications on water use and therefore on
agriculture and the environment. Construction expense for infrastructure such as
energy and transportation sector is enormous and construction period is also
long.
Key concerns of Infrastructural
development in an Energy Secure Economy
The success of physical infrastructure (transportation) is highly dependent upon
the level of energy in the economy. In fact, transport sector is the largest
user of energy in the economy[i]. The consumption of
energy is likely to grow up further with economic growth, population growth,
rapid industrialization, urbanization and agricultural modernization[ii]. The key question is
that whether transport promotes energy consumption in the
economy, particularly in India. Theoretically, transport and energy are well
integrated. On the one side, energy is a component to transport and on the other
side, transport is a key determinant to energy.
Conventional approaches to long-term ‘energy security’, especially economic
modelling approaches, tend to zoom in – in part or at best in full – on the
supply side of primary energy sources (PES) or energy carriers. Before the
advent of liberalisation long-term energy security responsibility resided with
the large multinational oil companies and mainly public companies in other
energy domains. Both the scale factor of supply, conversion and transport
infrastructure and length of supply chains appear to be inversely related to
energy services security.
A key question of how to achieve a secure
energy economy on longer timescales is: how can the population in a defined area
achieve, at lowest long-term social cost, an acceptable level of certainty of
meeting its needs for end-use energy services? In assessing this question, a
given level and distribution of
overall living standards and compliance with given standards for environmental
impacts are points of departure. The insecurity related long-term social
cost would be in terms of reduction in overall material living standards,
increase in global socio-economic inequity and/ or an increase in environmental
cost. In the current infrastructural energy economy of the developing countries,
end-use energy services are mainly energized – directly or indirectly – by oil,
natural gas, and coal. This fossil fuel based energy sources are responsible for
two third of the carbon emissions (one of the major contributor of greenhouse
gases pollution). Figure-3 furnishes the fossil fuel based energy consumption
(in % of total).
Figure-3: Fossil fuel energy consumption
(% of total) - India
 Source: Authors’ representation from WDI databank
The above radar graph stipulates the increasing size of oval from 1995
onwards till 2012. The fossil fuel based energy consumption (as % of total) has
increased for India, crossing 70% figure post 2007. The trend remains positive
in future years, describing the proliferating reliance on fossil fuel based
energy sources (prone to environmental degradation).
Some of the significant obstacles in the energy contained (climate
constrained) infrastructural development are listed below:
A) Reliance mainly on non-renewable energy sources, it is astonishing
that 80% of the world’s total energy requirements are still met by non-renewable
energy sources (mainly fossil fuels: coal and oil). Transport sector is the one
of the major user of the same.
B) Identifying the sustainable energy systems, although experts debate
the sustainability of global fossil
fuel-based energy infrastructure, it seems clear that current generation is
extracting energy resources (to meet infrastructural requirements) and filling
the earth’s atmosphere with the combustion products of fossil fuels faster than
they can be recycled by natural processes.
C) High energy intensity and poor energy efficiency, the physical
infrastructure is highly energy intensive and ironically, the fuel (energy)
efficiency still remains poor due to demographics of the country (poor road
conditions, obsolete technology etc.). In this context, society must decouple
its demand for energy from its need for continued economic growth. Improving
energy efficiency offers an excellent opportunity for transport Green House
Gases (GHGs) mitigation.
D) Eco-efficiency, for individual consumer items (soaps, plastics,
packaging, etc.) the introduction of such eco-efficient products can proceed
rapidly. However for energy this is a greater challenge. Therefore the design
and implementation of a sustainable or eco-efficient energy infrastructure needs
to look not only at the mix of energy resources and technological components,
but how to develop new components and introduce them over time.
E) Technology and Resource initiatives, at present, market demand is
limited by the relatively low cost of fossil fuels and the relatively high cost
of most alternative energy sources in most regions. In addition to R&D on
alternative and efficient technologies, there is still an unmet need for R&D on
energy systems.
F) Taxes and Subsidies, in addition to the high cost of capital,
transport operators have to bear a high dose of taxation. Over the years, the
tax incidence per vehicle in India has been rising steadily. It is now the
highest in the world. Tradable permits are of course not the only economic
instrument available to promote sustainability in the energy sector.
G) Paucity of alternate energy resources, currently there is
shortage of alternative energy sources, including oil sands, shale oil,
coal-to-liquids, biofuels, electricity and hydrogen based renewable energy
resources. These alternates are far too expensive. Large purchase-price
differential exists between conventional and energy fuel-efficient vehicles such
as hybrids.
H) Insufficiency of institutional reforms, there is absence of
institutional regulations relating to strengthening of agencies responsible for
the energy infrastructure to implement, monitor and evaluate effectively.
Integrated transport and urban planning pose abundant energy related issues.
Conclusion
Energy is an essential component of economic development, and energy sector
decisions and practices will play a central role in determining the
sustainability of development in every country, region and sector. At the same
time, decisions and practices in other sectors have a very direct effect on
energy supply and demand options. Energy sector policies and investments must be
coordinated with those in the key energy end-use sectors: transportation,
housing, construction and manufacturing. A sustainable energy infrastructure
will ultimately utilize an extensive range of energy resources, distribution
systems and end-use technologies. Progress towards a sustainable society is not
a sprint, but a marathon. The development of a sustainable energy infrastructure
will happen as a result of continuous improvement by individuals and
organizations who have the knowledge and the incentives to take a long-term
view.
Key Policy Implications
The transport sector remains one of the most challenging areas for improving
energy efficiency. It is the fastest-growing energy consuming sector in the
Asian Region. Energy Consumption is driven by rapid urbanisation as well as
rising living standards and the presence of transportation fuel price subsidies
in many countries. To achieve significant energy savings in physical
infrastructure (transportation), following policy implications could be
beneficial:
·
Transport system efficiency:
Governments could enable policies that increase the overall energy efficiency of
national, regional and local transport systems and promote shifts of passengers
and freight to more efficient modes. To attain these, the transport policies
should ensure – users pay the economic, environmental and energy
security-related costs of the transport system, the transport infrastructure is
built and maintained to support the most energy efficient, economically
efficient and environmentally benign transport modes and urban and commercial
development planning takes into account the likely implications for transport
and energy demand.
·
Shift from Non-Renewable to Renewable Energy
resources:
there could be considerable
efforts to diversify energy usage to
renewable sources of energy/ low carbon fuels (like alternate fuel usage,
solar and bio energy usage, hybrid technologies) including the
development of infrastructure for the supply and distribution of different types
of energy.
Motor-vehicles powered by electricity or hydrogen hold the potential to solve a number of
challenges that relate to automobile use for climate change (deterioration of
local air-quality, security of energy supply, and high fuel prices).
Substituting alternatives for fossil fuels holds the potential to solve prime
climatic issue.
Techno-diversity shall be promoted.
·
Mandatory vehicle fuel/ energy efficiency
standards: Government could adopt and regularly update
fuel-efficiency standards for vehicles on roads. These standards shall introduce
and regularly strengthen mandatory fuel-efficiency standards for light-duty
vehicles, establish testing procedures for measuring fuel efficiency of
heavy-duty vehicles and adopt fuel-efficiency standards for those vehicles and
harmonise or increase the comparability of vehicle fuel-efficiency test methods.
·
Measures to improve vehicle fuel/ energy
efficiency: Government could adopt measures such as
labelling, incentives and taxes to boost vehicle efficiency and accelerate the
market penetration of new efficient vehicle technologies. That shall include
vehicle fuel economy labels, vehicle taxing to encourage more fuel efficient
vehicles and infrastructure support incentive schemes for low carbon emitting
fuel efficient vehicles.
·
Improving vehicle operational efficiency through
eco-driving and other measures:
Governments could adopt a range of measures to improve vehicle operational
efficiency, including: making
eco-driving a required element of driver training and requiring manufacturers to
provide in-car feedback instruments in new cars. Energy use reductions can be
achieved by minimizing the energy demand, by rational energy use, by recovering
heat and the use of more green energies.
·
Public transport and low energy modes: 23% fewer vehicle kilometers, and a reduction
in 27,000 square kilometers of parking is possible by 2050 by applying shift and
avoid polices to reduce the need for energy intensive modes[i]. The returns from energy
efficiency offset costs and enable governments maintaining close control of
budgets to advance public transport projects. Engaging the many stakeholders
that are involved in urban transport is critical to policy success.
·
Transformation of energy grid: Revolutionizing the transportation market by
electrification and transforming the energy grid by widespread adoption of
renewable energy sources will require innovative new ideas for energy storage
systems. Lithium based systems provide considerable headroom for improved energy
densities.
·
Long term sustainable energy development
efforts:
Governments can use performance standards and
economic instruments to direct private investment and behavior in the energy
sector, even when competition, privatization and deregulation are limiting
governments’ ability to use more traditional policy tools. As in other aspects
of energy policy, governments need to ensure that private sector decision makers
consider long-term social and environmental goals when making major energy
infrastructure investments.
Notes:
[i]
http://www.iea.org/W/bookshop/463-Energy_Efficiency_Market_Report_2014
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The author is Sr Manager (Tata Motors)/ PhD Scholar
- Faculty of Management Studies, Delhi University
[email protected]
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