As India reels from a perfect storm of increasing fossil fuel import bills, capital outflows, and a stagnating economic environment, attention to its current account deficit (CAD) has grown exponentially. I’ve written on the threat coal imports pose to energy security and CAD in the past, but the biggest threat from fossil fuel imports is clearly oil.
Currently the country imports 70 percent of its supplies at a staggering cost. The situation is only going to get worse, which has prompted high-profile calls from people like Akhil Ghupta and Blackstone for innovative solutions including a dramatic expansion of solar power. I recently caught up with Anand Gopal of Lawrence Berkeley National Lab (LBNL) to discuss how India tackles this oil import crisis.
If you’re wondering why you should care what Anand and his colleagues have to say, it might be useful to give you a sense of their past work. Their team at the LBNL led a study that recalculated India’s wind potential and found 20 to 30 times more potential than the 102 gigawatts the government had officially reported. Their findings have spurred a new wave of investment and interest in wind power in India. As they turn their sites on new challenges, it’s worth understanding where they think India’s energy future lies.
Here’s my interview with Anand.
Justin Guay: Can India do without oil?
Anand Gopal: India has great opportunities to substantially reduce, or at least, stabilize oil consumption. Road transportation, which will be responsible for most of the growth in oil demand in the coming decades currently still accounts for a small share of total Indian primary energy demand. This is because the current vehicle fleet is a fraction of the expected fleet size in 2030 and most of the urban and road infrastructure that will support this growth has not yet been built. Therefore, India, unlike China or Brazil and many other emerging economies, presents us with the opportunity to leapfrog directly to a clean transport future with little need to change existing vehicles or infrastructure. The best part is that as advanced clean vehicle technologies get cheaper through deployment in the West, they can be deployed in India before large scale motorization takes hold.
AG: Of the many transportation technologies that use fuels other than oil, electric vehicles (EVs) appear to hold the greatest promise in India. India has such high demand for non-transport uses of biomass that biofuels are unlikely to be a major solution for India. Natural gas vehicles (NGVs) can be part of the ‘Beyond Oil’ solution, as evidenced by the gasification of transit fleets in some cities, but India’s natural gas resources are not abundant and the exploitable shale gas resource does not seem promising. Hence, large-scale deployment of NGVs may only shift India from oil import dependence to natural gas import dependence, doing nothing for the CAD.
EVs on the other hand do not suffer from the problems of biofuels and NG that we described above. EVs also offer some additional benefits:
(1) They can enable greater renewable energy penetration by offering grid balancing and other Vehicle-to-Grid (V2G) services;
(2) They substantially improve human health outcomes by eliminating tailpipe pollutant emissions which are one of the main causes of morbidity and early mortality in India; and,
(3) Unlike NGVs, EVs can enable very deep reductions in Indian greenhouse gas emissions because renewable electricity costs are falling dramatically in India.
JG: Why are EV’s particularly suited for India?
AG: In our research, we have found that the transition from internal combustion engine cars to power-split hybrid and full electric cars results in much greater real-world fuel economy improvements in India (and China) than we see in the U.S. That’s due to four main reasons peculiar to Indian driving behavior:
(1) Hybrid or electric powertrains operate at much higher efficiency at low Indian driving speeds than an Internal Combustion Engine (ICE);
(2) A higher share of energy per Indian trip is lost in braking, which is almost wholly recovered in an hybrid-electric vehicle (HEV) and EV;
(3) HEVs and EVs use no fuel during idling and the share of idling time in traffic is much higher in India (than the U.S.); and
(4) The average range traveled in India is much smaller than in the U.S., making EVs much more feasible and range anxiety less of an issue.
JG: What technology, business model, and financing breakthroughs (if any) need to happen for EVs to be deployed?
AG: The cost of batteries is the key barrier to EV affordability. So, these would need to drop for greater market uptake. However, the large share of two-wheelers and the smaller power needs for cars there may allow for less energy dense battery chemistries than Li-ion in EVs. We are interested in exploring such possibilities at LBNL.
India’s fuel economy test procedures should be more reflective of real-world use. Currently, India uses a modified version of the New European Driving Cycle for fuel economy labels, which has no correlation to Indian driving. This test procedure systematically underrates hybrid and electric vehicles and overrates ICE vehicles.
It may also be helpful to provide incentives for EV purchases. These incentives can be designed in a net revenue neutral manner. The incentive can be set at a level where the EV purchase it facilitates results in the full recovery of costs from fuel savings over the life of the vehicle. The incentive could be even higher because of the macroeconomic stabilization effect from reduced oil imports.
Taken together these changes can finally set India on a path to break oil dependence and solve the CAD.