India in the middle of an energy trilemma: Ranked 54 in growth, 98 in access, and 79 in sustainability, among 124 nations

How to fuel economic growth with better access to energy in a sustainable way is the trilemma that India and other nations face. And to track how they are doing on all three fronts -- growth, access and sustainability -- the World Economic Forum has developed a Global Energy Architecture Performance Index, designed to strike the right balance between economic, social and environmental well-being. In its latest ranking of 124 nations on this index, based on 18 parameters, India is placed somewhere in the middle at 69.

While India’s overall ranking may not look so bad, closer inspection reveals that India and China have scored above average on the economic development indicators, but poorly in terms of energy security and environmental sustainability. India in fact is in the bottom quatrile globally for energy access and security -- at 98th rank -- because of its low electrification rate and dependence on oil imports. It is the worst performer under this head among the BRICS nations -- Brazil, Russia, India, China and South Africa -- which are usually clubbed together for comparisons because of their similar growth paths. On the environmental dimension, however, China and South Africa are the worst offenders, although India is not much better off than them.

“For an effective energy system, countries need to focus on all three sides of the energy triangle - environmental sustainability, security of supply and affordability,” says Roberto Bocca, Senior Director, Head of Energy Industries, World Economic Forum.

BRICS under the scanner

BRICS nations and their carbon-intensive economies -- except for Brazil which mostly uses hydropower -- have increasingly come under the scanner for their contribution to greenhouse gas emissions, global warming and climate change. In response to this, China and India have both announced plans to increase the share of renewables in their energy mix. India has also imposed a coal tax, and China is expected to follow suit. “The recent environmental pollution (haze) in major Chinese cities has greatly attracted the public’s attention… It clearly indicates how much China has paid environmentally for its economic growth. China’s State Council issued an action plan for air pollution control on 12th September, 2013. The plan expresses China’s effort in the next five years to improve air quality, especially in areas near Beijing, the Yangtze River Delta and the Pearl River Delta,” said Lin Boqiang, Director, China Centre for Energy Economics Research, Xiamen University, in the WEF report.

The Chinese trilemma closely parallels that of India. Coal provides the bulk of energy and electricity; hydropower development can’t expand much further; and renewable energy is yet to reach a meaningful scale. Nuclear energy could substitute coal substantially, but it requires a long-term development plan.

In the short term, China has a plan that’s far from ideal - shifting the energy production from the industrialised east to its western region. This will ease the pollution in the east but it won’t be long before western China faces similar degradation in its atmosphere, unless targets for cleaner energy and lower coal consumption are reached in time.

An additional complication in India comes from subsidies. India’s diesel subsidy places it in the bottom quarter globally on this indicator in the WEF index. What it means is that far from disincentivising the use of dirty fuel, India actively encourages it. There are political, social and economic factors behind this, but pressure is building up to at least rationalise fuel subsidies. The move to limit the supply of subsidised LPG to a maximum of nine cylinders is one step in this direction.

Different solutions for different countries

The Global Energy Architecture Index thus clearly identifies the different challenges that various countries face in balancing the energy requirements of their growing economies with long-term environmental sustainability. “Our analysis concludes that there is no single way forward; each country must work with its own resources and constraints, making difficult choices and trade-offs,” said Arthur Hanna, Managing Director, Energy Industry, Accenture, which has been a collaborator with the WEF in developing the index. “The index helps nations take stock of their energy transition challenges and address key barriers to success, such as market distorting subsidies, continued uncertainty around energy policy and funding for research and development of new energy sources and technologies,” added Arthur Hanna.

Norway tops the Index rankings, followed by New Zealand and France. The top ten is dominated by EU and OECD countries, underscoring the ability of service sector economies to prioritize investment in the development of low-carbon economies and address climate change through renewables and energy efficiency -- 41% of energy supply in the top ten countries comes from low carbon energy sources, compared to a global average of 28%.

Nestled among the big boys in the top 10 is the small middle-income nation of Costa Rica. Ranked No.9 in the index, Costa Rica aims to become the world's first carbon-neutral country, with 99% of electricity output from renewable energy sources. That may be a hard act to follow for larger nations, but they can surely draw inspiration from Costa Rica’s example.