Emerging Trends in the U.S.-India Energy Corridor
U.S.-India energy cooperation is positioned to be one of the fastest growing areas of the strategic and commercial relationship over the next 20 years.
The importance of energy cooperation and the desire to increase collaboration has been a priority sustained through several U.S. and Indian administrations. The strategic and commercial role of energy between our two countries was reaffirmed and elevated during President Trump and Prime Minster Modi’s 2017 meeting in Washington, when the two leaders announced the U.S.-India Strategic Energy Partnership. In order for both countries to achieve deeper and more meaningful cooperation, the U.S-India Strategic Energy Partnership held the stated goal of facilitating increased industry and stakeholder engagement for which the U.S.-India Business Council is a proud partner.
India’s economic and strategic influence in the Indo-Pacific region continues to grow. During the launch of the Indo-Pacific Business Forum at the U.S. Chamber of Commerce in Washington, D.C. July 2018, energy and energy infrastructure were highlighted as priorities by Secretary of State Pompeo and Secretary of Energy Rick Perry. Unveiled during the event, the U.S. government showed its own commitment to the region through the roll out of the Asia EDGE (Enhancing Development and Growth through Energy) program which will invest approximately $50 million to strengthen energy security and promote energy access across the region. As Asia EDGE and other Indo-Pacific initiatives are further developed by the U.S. government, the private sector players of both countries will be essential to closing the investment gap and providing input to policy makers in order to continue growth for priority initiatives.
Here are some key trends in the sector to watch out for in the coming months:
India’s Growing Energy Demand:
India has emerged as the fastest growing major economy in the world and is expected to account for about one quarter of the growth in global energy demand through 2040 – offering enormous opportunities for U.S. businesses to play a critical role in developing the energy sources and infrastructure India will need to achieve its goals.
While India and the United States share an all-of-the-above energy strategy and a focus on energy security, for India this is largely focused on 24×7 access to reliable energy. To meet these targets, India has focused on building out cleaner fuel sources including natural gas, renewal energy and civil nuclear. While some of the renewable buildout is ambitious, the vision for India is supported by abundant domestic solar and wind resources, a strong national government commitment to deployment of cleaner energy and technologies, an expanding building sector, and growing workforce. The widespread public concern with sustaining economic growth while improving quality of life metrics like air quality and a stable energy grid support the further development of these alternative fuel sources.
India’s rapidly growing renewables market is also primed for U.S. exports, with the U.S. Commerce Department ranking India as the third most attractive market for U.S. renewable energy exports. Despite the challenges posed by local content requirements and competition from companies with foreign government backing, hundreds of millions of dollars will be invested in the Indian renewable energy sector in the coming years. U.S. companies are well placed to lead in this sector and play a key role in developing best practices and standards.
Cooperating to Achieve Energy Efficiency
Energy efficiency is another area of opportunity for increased bilateral trade and cooperation. With roughly 80 percent of India’s commercial buildings yet to be built – robust implementation of energy efficiency policies that are in-synch with U.S. and global standards can help curb energy use and improve reliability, while still creating markets for innovative building technology services. Industrial energy efficiency, particularly in manufacturing, is an area ripe for more cooperation. Space cooling and efficient appliances will benefit from increased commercial ties, research and development. USIBC supports mechanisms to promote out-of-the-box thinking for new development and deployment of cutting edge technologies in the air conditioner industry – a market that will continue to grow in India with the burgeoning middle class and corporate campus development. Cooperation in energy efficiency has already supported the development and implementation of India’s energy efficient building codes.
Fossil Fuels Dominate India’s Power
Fossil fuels will remain a significant source of energy for India and the region in the coming years. While the costs associated with the long shipping distance to India limit the competitiveness of U.S. coal exports relative to suppliers in other countries, there is significant potential for increased U.S. coal exports, as well as selling big-ticket mining equipment and continuing consulting on mine safety and environmental issues. Increased cooperation in this area would not only create the potential for U.S. technology and service providers to contribute to efforts which increase efficiency and reliability of existing coal power generation and implement clean coal technology, but also to have a real impact on India’s emissions and air quality concerns.
India’s Import of U.S. Oil and Gas
The recent increase in oil and gas sales between the United States and India is another trend likely to continue over the next several years. India’s growing import volume of U.S. crude comes as India seeks to diversify sources, with strong potential for cooperation on Strategic
Petroleum Reserves between the two countries.
Gas will be particularly interesting area to watch. India’s stated goal of increasing the share of gas to 15% in the near-term and the focus on infrastructure and policy reforms in the gas sector provide ample opportunities for growth which USIBC support through its Executive Committee for Energy and Environment. Gas will also play an essential role in achieving India’s renewable energy targets by providing increased flexibility for grid integration. The United States is well positioned to become a key partner in this area, whether it’s through new exports to India, technology exchange or collaboration through the exchange of regulatory best practices.
Innovation is a particularly important component of both countries’ energy strategies, with technical collaboration in areas like smart grids, energy storage, energy efficiency, fossil fuel technologies, and electric vehicles poised to expand over the coming decades. The bilateral relationship provides opportunities for growth through both private enterprise and joint R&D programs like the Partnership to Advance Clean Energy’s new energy storage and smart grid track which could be expanded to include clean coal and civil nuclear cooperation.
Electric Vehicles Can Transform India
India’s ambitious agenda for electric vehicles (EV) is another area ripe for increased commercial ties and cooperation. As one of India’s largest and most ambitious programs, EV promotion enjoys government-wide support for India’s electric vehicle and battery manufacturing industries, charging infrastructure, and energy sector development. In September 2018, Prime Minister Modi outlined his vision for India’s mobility development, focused on the “Seven Cs” of mobility – common, connected, convenient, congestion-free, charged, clean and cutting-edge. Successful development of a competitive electric vehicle market in India will require engaging other countries and adopting global best practices for the Indian context.
These technological transformations would also have the benefit of reducing demand for energy imports and increasing India’s energy security through resource diversification. Developing a cleaner and smarter grid alongside a growing number of electric vehicles will be a challenge for India, requiring significant transformation of existing industries like automobile and battery manufacturing, as well as changes to electricity generation and transmission regulations. In all these areas, India and the United States can partner on regulatory and technology development while promoting continued business collaboration and advancing new investments.
January 17, 2019