The National Energy Policy (NEP)

The Government’s think tank, NITI Aayog has released new draft National Energy Policy (NEP). The NEP focuses on four major objectives: Affordable energy access for all; reducing dependence on fossil-fuel imports; becoming a low carbon economy through growth in renewable energy; and sustaining economic growth.

• The policy will replace the Integrated Energy Policy(NEP) framed by the erstwhile Planning Commission in 2008.
• It aims to chart the way forward to meet the Government’s recent bold announcements in the energy domain:
  • All the Census villages are planned to be electrified by 2018.
  • Universal electrification is to be achievedwith 24x7 electricity by 2022.
  • The Ministry of Petroleum is targeting reduction of oil imports by 10% from 2014-15 levels by 2022.

Need for the New Energy Policy (NEP)

• Energy is handled by different Ministries.
• All Ministries have the primary responsibility of setting their own sectoral agenda.
• A common energy policy is required to achieve the goal of energy security through coordination between these sources.
• NEP will mainstream emerging energy technologies.
• It will provide consumer energy choices.

Some External Factors

Changes in the Energy Mix

• The world is moving away from overwhelming dependence on fossil fuel.
• Within the fossil fuels, gas is preferred over coal.
• The share of oil has fallen from 36% in 2005 to 33% in 2015.
• Share of natural gas has increased from 23% to 24% during the same period.
• Renewable energy (including nuclear and large hydro) too has gone up from 12.5% to 14% in the period 2005-15.

Supply of Natural Gas

• The success of horizonal drilling combined with the technology of hydraulic fracture, has led to increase in the production of natural gas.
• The price of gas is lower than that of oil.
• It is also one-third lesser as carbon emitting than oil.
• This is why gas will continue to be preferred over oil.

Prices of Oil and Gas are falling

• Oil and gas prices have softened, and this is triggering energy policy reforms across the world.
• The prices of oil and gas have fallen by 50% and 70%, respectively over 2014.
• Many oil importing countries including India have been able to attempt bold petroleum pricing reforms.
• Countries including India are in a sound fiscal position to attempt larger energy policy reforms.

Maturity of Renewable Energy Technologies

• Prices of wind and solar technologies have declined sharply in the recent years.
• This has led to a change in the relative importance of energy sources.
• Tropical countries, including, are richly endowed with wind and solar energy sources.
• With the help of technologies, India is in a position to harness renewable energy sources in an innovative manner to meet energy requirements at decentralized locations.

Climate Change Concerns

• The world has come to realize that there is a relationship between energy use and poor environmental outcomes.
• There is a heightened consciousness of the need to fix poor air quality standards in Indian cities.

Objectives and Strategy of NEP

In the light of the energy challenges faced by the country, and the global energy related developments, the NEP proposes to set out the national energy objectives and the strategy to meet them.

Objectives

• There are four key objectives of the New Energy Policy (NEP):
  • Access at affordable prices
  • Improved security and Independence
  • Greater Sustainability
  • Economic Growth

Objective 01: Access at Affordable Prices

• India is yet to provide electricity to nearly 304 million people.
• 500 million people still depend on Biomass.
• The NEP aims to ensure that electricity reaches every household by 2022 as promised in the Budget 2015-16.
• It proposes to provide clean cooking fuel to all within a reasonable time.

Objective 02: Improved Energy Security and Energy Independence

• Improved energy security means less dependence on import
• India is heavily dependent on oil and gas imports.
• India also imports coal.
• Imports undermine energy security of the country.
• Energy security may be enhanced through both diversification of the sources of imports and increased domestic production and reduced requirement of energy.
• Given the availability of domestic reserves of oil, coal and gas and the prospects of their exploitation at competitive prices, there is a strong case for reduced dependence on imports.

Objective 03: Greater Sustainability

• The goal of sustainability assumes importance and urgency in view of the threat of climate change and the detrimental effects of fossil fuel usage on local air quality.
• India’s fossil fuel requirements are increasingly being met by imports.
• It means that cutting fossil fuel consumption will promote the twin goals of sustainability and security.
• The New Energy Policy (NEP) lays emphasis on de-carbonisation through the twin interventions of energy efficiency and renewable energy.

Objective 04: Economic Growth

• The energy policy must support the goal of rapid economic growth.
• Efficient energy supplies promote growth in two ways.
• First, energy is an important enabling factor of growth and its availability at competitive prices is critical to the competitiveness of energy-intensive sectors.
• Second, being a vast sector in itself, its growth can directly influence tshe overall growth in the economy.