Wednesday, December 1, 2021

India US Energy Sector Cooperation

Script: Debasish Mishra
Leader for Energy, Resources and Industrial Products at Deloitte Touche Tohmatsu in India 

Last week India’s Minister for petroleum and natural gas and steel, Dharmendra Pradhan and the new US Secretary of Energy Jennifer Granholm had an introductory meeting to review Strategic Energy Partnership (SEP) between the two nations. Both the Ministers agreed to revamp the India-US SEP to reflect the new priorities of PM Narendra Modi and President Joe Biden, which is to focus on clean energy with low carbon pathways to accelerate energy cooperation.

They agreed to prioritize greater collaboration in cleaner energy sectors such as biofuels, Carbon Capture Utilization and Storage (CCUS), Green Hydrogen, etc. through technology exchange, joint R&D through Partnership to Advance Clean Energy Research (PACE-R), among other initiatives.

The US and India have a long history of cooperation in the energy sector. From a tiny hydro plant in the early 20th century to a nuclear reactor in the 1960s to offshore oil and gas platform and then in recent years in renewable and new energy areas – the cooperation has been wide-ranging. There is the involvement of individuals, academic institutions, private sector, public sector – apart from the cooperation amongst governments and regulators.

The US-India Civil Nuclear Cooperation Agreement of 2008 was key to formalize and put a structure to the energy cooperation between the two countries. Through this agreement, the US helped India in getting a waiver from the Nuclear Suppliers Group to participate in global civil nuclear trade.

The highest level of the political leadership of both countries has always given maximum priority to energy sector cooperation, as reflected in joint statements after meetings between President Barak Obama and PM Modi and President Trump and PM Modi in 2017. In fact, the cooperation was scaled up to a Strategic Energy Partnership (SEP) in 2017.

In 2018, Minister for Petroleum and Natural Gas, Dharmendra Pradhan and US Secretary of Energy, Rick Perry formalized the SEP and announced specific areas of cooperation in Oil and Gas, Renewable Energy, energy efficiency, etc. Since 2009, the US has been helping India in the clean energy area through the Partnership to Advance the Clean Energy (PACE) program. Advancing solar energy, biofuels and energy-efficient buildings were part of PACE.

As part of its commitment to the COP21, Paris Agreement, India has announced an ambitious plan to reach 450 GW of renewable energy capacity by 2030. India has been able to increase the renewable energy portfolio from 30 GW to more than 90 GW under the leadership of PM Modi in less than 7 years. As part of the SEP, a gas task force was also launched to help India increase the share of gas in its primary energy basket.
Public sector gas utility, GAIL, has contracted liquefied natural gas (LNG) from Cheniere Energy’s Sabine Pass liquefaction facility in Louisiana. On 30 March 2018, GAIL’s first charter-hired vessel, MV Meridian Spirit, arrived after a 25-day voyage and docked for unloading in the presence of petroleum minister Dharmendra Pradhan and US officials. Other Indian corporates have also invested billions of dollars in the Shale oil and gas sector in the US. 

India began importing crude oil from the US in 2017 as it looked to diversify its import basket and deepen energy sector cooperation with the US. Though it started with a modest 1.9 MT in FY18 and 6.2 MT in FY19 – the share has been constantly increasing, replacing supplies from traditional sources.

India sources more than 70 per cent of its power from thermal coal-based generation and hence reducing greenhouse gas emission is critical for India. Realizing this, the PACE-R program in Phase-2 expanded to cooperation in making coal-fired thermal stations more efficient. The program also included integration of renewable energy into the Indian grid, a smart metering program and modernization of electricity utilities in India, development of power markets etc.

The appointment of John Kerry as the climate envoy signals the commitment of the Biden Government to restore the US’s global leadership on climate change. This will further deepen the climate action related cooperation. We have seen renewed interest from several U.S. based investors in India’s renewable energy program, following such appointments and commitments from the Biden government. Some of the largest Indian renewable companies are now owned by US-based funds, some of them are even listed in US exchanges.

The energy industry is adopting digital technologies like AI, ML, Big Data Analytics, Robotics, IOT, etc. in a big way. That opens up another big area in the energy sector of mutual interest for corporates of both countries.

The energy ministers of both countries, through a call last week agreed to convene the third meeting of a revamped India-US Strategic Energy Partnership at an early date.

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