Improving energy efficiency of sectors and sub-sectors through technology upgrade together with maximum fuel switching to electricity is being increasingly recognized as the main strategy for a clean energy transition, as an electrified demand side is necessary to absorb the increasing share of renewable energy on the supply side. To achieve this objective, the increasing electricity demand must be met through clean energy sources on the generation side, thus reducing its carbon intensity. The fact that the Levelized Cost of Energy (LCoE) of renewable energy sources has decreased over time and is projected to decrease further, thus making it cheaper than fossil fuels is a strong argument in favour of electrification as a way of decarbonizing the economy. It is understood that the possibility and feasibility of total electrification of processes may be limited in some sectors or sub-sectors. In such cases, other clean energy sources such as green hydrogen could be explored to transition away from fossil fuels, in order to meet the objectives of the Paris Agreement.
ELECTRIFICATION STATUS IN INDIA
The industrial sector mainly comprises of Iron & steel, Cement, Paper, Textile, Fertilizers & Chemicals, Sponge iron, Bricks and a diversified Micro, Small and Medium Enterprises (MSME) sector. As showcased in Figure 2.2, consumption of electricity by the industrial sector more than doubled during 2010-11 to 2019-20 (2,72,589 GWh to 5,51,362 GWh).8 Among the energy intensive industries, the iron and steel industries have the highest consumption (~24%), followed by chemical and petrochemical (~17%), non-metallic minerals (9%) and other industries (~48%9 ). The penetration of electrification is high in the MSME sector. Almost 76% of the energy demand in this sector is met by electricity, followed by oil (11%), coal (6%) and rest by traditional sources.
The residential electricity consumption increased from 169,326 GWh to 310,151 GWh in the period of 2010-11 to 2019-20, at a CAGR of 6.96%15. This could be attributed to the increasing purchasing power, ownership of electric appliances and demand for space cooling and to a lesser extent heating equipment. Another major driver could be the increased access to electricity in the recent years. Under the Saubhagya Scheme launched by the Government of India, 99.92% of villages and 99.99% of households have been provided access to electricity.16 The Saubhagya Scheme is launched with a purpose to provide energy access to all households by last mile connectivity and electricity connections to all remaining un-electrified households in rural as well as urban areas to achieve universal household electrification.
Air Conditioners (RACs) is almost 60%.22 These require considerably higher starting power than their average running power consumption; such momentary surges raise the burden on already-stressed electricity grids, leading to blackouts and burnouts. They also contribute to increasing electricity consumption, which causes indirect GHG emissions as most power generation in India is coal-based, therefore requiring a shift towards low energy and low carbon cooling technologies. Smart home technologies have the potential to reduce the operational expenses by around 30%23 and are essential to de-couple growth in buildings and electricity consumption. Thus, smart home technologies are recommended as an integral element of energy efficiency in the residential sector.
EU STRATEGY FOR ELECTRIFICATION
This chapter will set out the context for the electrification of the energy services in the EU, on the basis of which it will assess the elements that are relevant for the Indian context.
EU electrification status
Per capita energy consumption was 138,164 MJ in the EU during 2017-18 compared to india 23.355 MJ. This varied from 83,736 MJ for less energy intensive countries to 251,208 MJ for the more energy intensive countries.58 In comparison, the per capita energy consumption in India is only 24,620 MJ, which is only 18% of the average EU consumption. Per capita electricity consumption in EU in 2019 was 5,345 kWh per capita compared to 1,141 kWh. The EU consumption varies from less than 3,500 kWh to more than 12,000 kWh.59 Figure 3.1 shows the fuel-wise breakdown of energy use in various sectors in the EU.
SECTORAL DEVELOPMENTS TOWARDS ELECTRIFICATION IN THE EU
The previous EU strategies for greenhouse gas emission reductions have had some influence on the electrification of the various sectors, but still leave large potential for further electrification.
In terms of end-use split, space heating represents more than 60% of the total energy use. In 2018, almost 60% of the heating demand was met by fossil fuels and only 5% came from electricity. Moreover, 50% of the buildings are heated by inefficient, fossil fuel-heated boilers, which have exceeded their serviceable lifetime.78 In order to meet the 2030 and 2050 targets, electric heating, heat pumps and efficient district systems are being explored, which would be eventually fuelled by renewable energy including solar, thermal, geothermal and biomass. Furthermore, electric heating and cooling means higher integration with industrial and transportation sector. The maturation of small heat pumps for residential heating has resulted in the substitution of natural gas or petroleum-based heating appliances. Even in a country like Denmark where district heating is dominant, the sales of residential heat pumps have increased from about 18,000 units in 2009 to 47,000 units in 201979. The district heating networks in Northern Europe (e.g. Germany, the Netherlands, Denmark) are also changing heat source from traditional combined heat and power from fossil fuels to biomass boilers or large-scale electrical heat pumps and even resistive electrical heaters. This is pushed by the various national incentive plans and the European Emissions Trading System, which makes the business case for heat pumps better than fossil fuel district heating.
POSSIBLE ELEMENTS OF INDIAN ELECTRIFICATION STRATEGY
This section introduces possible elements of an electrification strategy for India. These elements have been derived from the status of electrification in various sectors in India, the status of different programmes to promote electrification, learnings from the policies introduced by the EU and the EU Member States The possible impact of the recommended strategies has also been assessed. It is important to state that this study focuses on the demand side electrification as a means to mitigate climate change. Greenhouse gas emissions are only reduced, if in parallel the production of electricity is gradually shifted towards renewable sources such as wind and solar. This would be a prerequisite for the true benefit of electrification and should be addressed in other parts of the Indian strategies for climate change mitigation. Electrification may not be a strategy to stand alone but can be integrated in an over-arching strategy that combines multiple purposes and elements. An overarching strategy would combat
climate change, reduce pollution in major cities, ensure independence from fossil fuels, ensure 24/7 access to affordable energy and energy security, and increase efficiency and profitability of the Indian industry and power sector. In the EU Strategy on System Integration for example, electrification is a sub-strategy.
This strategy document discusses the increasing role and necessity of electrification of the demand side. Electrification ensures energy efficiency as well the potential for decarbonization once the supply side transitions towards clean, renewable energy sources (see section 1). The document also focuses on the status and potential of economy-wide electrification in India and its possible impact on the profitability of DISCOMs (see section 2 and 5). To bring in European experiences, the document throws light on the initiatives undertaken in the EU with electrification at its core and sectoral penetration of electricity and factors and policies leading up to it (see section 3 and 4). Recommendations have been provided in section 6 based on potentially relevant learnings from the EU experience to increase the penetration of electricity in India.