India’s high real GDP growth in the past decade has led to large increases in consumption of energy resources. As of 2006 India is among one of the top 5 consumers of primary energy(1) and in their emergence as an economic power, demand for energy can only increase. There is room for growth, India’s electricity consumption per capita is one of the lowest at 542kwh(2). The challenge for India for further economic growth, will be to power rural areas – 40% of the population are without electricity(3)- and improve existing infrastructure, as to stop irregularities- such as blackouts. So how will India deal with the future expected demand increases for electricity and service the whole population?

The supply of electricity in India, has increased at a rate of around 10% between 1970-2005(4) The make-up of resources in the production of India’s electricity sector in 2008 is primarily conventional, constituting of; 53% coal, 24.8% hydro, 10% gas, 8% renewables and 3% nuclear(4). Whilst coal is the most used resource, reserves are declining and India is having to look elsewhere. Current supplies are predominately in the west and north-west of the country. This leads to high transport costs, over journeys that can exceed 1000km- which makes alternatives more attractive. The cost involved of importing coal can be significantly high and coal carries negative externalities- such as pollution due to dirty ash- with it. Despite large initial costs, hydro power is an efficient and clean resource of which India is increasingly utilising. It also has low maintenance costs. India currently uses little in the way of nuclear power(4), but use is growing, with numerous projects in construction or planned stages(5). Construction costs are large, but maintenance fuel costs are low. India have a lack of fossil fuels, possibly causing the low use in electricity generation.

In terms of future mass generation, the expansion of nuclear power seems best fitted for India. Raising capital for this expansion may prove a stepping stone. Private invested may be needed. India is currently in cooperation with France and the United States- the two largest producers of nuclear power. Due to India’s exclusion from the 1970 Nuclear Non-Proliferation(6), they have had to be self sufficient in supplying necessary resources- a recent waiver has lead to Russia supplying uranium needed for production. Restriction on trade may lead to restraints on potential growth.

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Despite India possessing limited resources of the element, uranium is abundant elsewhere. The Nuclear Energy Agency(NEA), based on current rates of consumption, uranium will last for over 200 years- not allowing for new discoveries. Nuclear power, not needing transportation can reach rural areas with more ease than some alternatives, but in saying this, a better option would be for rural areas to be self sustaining, using renewable energy resources. These are the key to India’s economic development and there is growing pressure to use more environmentally friendly methods of production. Again they will face large initial capital outlays, but the long-run returns cannot be underestimated. India is abundant with sun hours, making solar power feasible.

At the moment India gives hugely subsidised electricity to the agriculture industry(7). This can be beneficially to the economy, but it means that they must raise tariff rates to other industries, which has led to many institutions into producing their own sources- common power cuts are also a cause. Most electricity production can benefit from economies of scale and the for high capital start-up costs for some sources- such as nuclear power- and has potential to significantly reduce the marginal cost.

Coping with the income effect on demand on electricity in the future, is one of India’s greatest challenges in development. It is clear they must improve on current inefficiencies and electricity network to meet the current and future demands.

References

(1) International Energy Statistics, Energy Information Agency(EIA), 2008

(2) World Bank, Development indicators

(3) India’s Growth and Economy, World Bank, 2006

(4) Sajal Ghosh, Electricity supply, employment and real GDP in India, Energy policy Volume 37. 2009

(5) India eyeing 63,000 MW nuclear power capacity by 2032: NPCIL, Economic Times, 11/10/2010

(6) India, China ; NPT, www.world-nuclear.org

(7) Cross-subsidy in electricity tariffs: Evidence from India, Volume 32, 2004

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