Can Natural Gas Be Used as a Transitional Fuel

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Over the recent years, the option of using natural gas as a substitute to coal energy has gained attention. The argument in favour the of use of natural gas comes in light of depleting coal reserves and relatively lower pollutant emissions. The use of natural gas as a transitional fuel or a bridge fuel means that natural gas would serve the purpose of reducing and replacing coal as a source of energy while the country transitions towards renewable sources of energy. However, the policy on how that purpose would be achieved is vague and uncertain.

Though natural gas is recognised as a transitional fuel, the Indian government policies seem to consider it as more of an alternative energy source rather than a transitional fuel source.

India is an energy deficient country and the demand for energy is only projected to rise in the future. Natural gas presently has only a 7% share in the country’s energy consumption. In its effort to promote natural gas, the government of India has taken to development of gas sources by way domestic exploration and production as well as importing Liquid Natural Gas (LNG) from other countries. The state is also taking measures to develop the gas pipeline and distribution infrastructure as well as the key gas consuming markets of power, fertilisers, transport and industries. Under the government schemes, stranded power plants of about 16000MW capacity have been revived. The consumption of Liquid Natural Gas in the power sector has seen an increase of to maximum of 11.47 MMSCMD in March 2016 from the maximum of 3MMSCMD in April 2015. The Hydrocarbon Exploration and Licensing Policy (HELP) was unveiled in 2016 with the objective of inviting foreign investments into India’s natural gas resources. The state has also granted marketing freedom as incentive to increase gas production. These policies surely are aimed at increasing the consumption of natural gas in the energy market of India but they fail to demonstrate any plan about how natural gas would function as a bridge fuel for transitioning from coal to renewable and sustainable sources of energy.

 

In its Intended Nationally Determined Contribution (INDC) for the Paris Agreement, India had stated its goal of 33-35% reduction in emissions intensity (from the 2005 levels) by 2030. The government has also declared its aims of deriving 40% of energy from non-fossil fuel sources by 2030. In order to achieve these goals, the government has to be careful of the methods it adopts. When considering reliance on natural gas, one has to recognise that its nature is transitional and not permanent and the policies thus drafted should reflect this character. The state needs to practice caution keeping the inherent hazards of natural gas in mind.

In the USA, the market for natural gas has seen a growth and gas extraction processes like fracking have reduced the cost of natural gas. However, the use of such technology has a detrimental affect on the environment and human health. Gas leaks pose severe environmental hazard as natural gas is composed mostly of methane. Methane is a short-lived greenhouse gas but about 25 times more potent than carbon dioxide. Only 20% of methane leaked today will remain in the atmosphere after 20 years but half of the carbon dioxide emissions of today will sustain in the atmosphere for a 100 years. Gas extraction processes like fracking also pose human health hazards because of their use of chemicals which can lead to sever water contamination.

Given these facts, though the use of natural gas might seem like a reasonable idea, its success towards meeting the emission reduction goals of the country depend upon ultimate phasing out of natural gas to make way for renewable sources of energy like wind and solar power. This may come as a major challenge for the government because of the lack of policy framework for the same. Natural gas power plants require a huge amount of capital and take about 15 to 20 years to break even the cost only. This means that power plants built presently would break even around the year 2030 and would require many more years of operation in order to turn over profits. Investors and operators would thus be reluctant to power off these plants in the next 30 to 40 years due to economic reasons. Given India’s domestic and international pledges of reduction of greenhouse gas emissions and adoption of renewable sources of energy by 2030, reliance on natural gas as a transitional fuel, in the absence of strong policy may not be fruitful.

Therefore the need of the hour is not a blind push for natural gas, but for the government to understand the transitory nature of it and then treat it as a transitional fuel. This would entail policy which incentivises investors and developers as well as consumers to switch to natural gas and then a strong exit policy which phases out the natural gas power plants to make way for more sustainable sources of energy while at the same time protecting the investors, developers and consumers from economic losses.