India must provide energy to the poor at minimum cost: IEA's Fatih Birol

Fatih Birol, executive director of IEA, talks about the possible impact of rising geo-political tensions in West Asia on the global energy market and the need for India to provide energy accessibility

As geo-political equations between Iran and the US worsen, the International Energy Agency (IEA) has expressed concern over the rising tension. Fatih Birol, executive director of IEA, talks to Shine Jacob about its possible impact on the global energy market and the need for India to provide energy accessibility at minimal costs to the poor. Edited excerpts.

How much will the geo-political tensions in West Asia impact the global energy market?

It is a major concern. If some incident happens, it may have serious consequences for prices, the economy and oil security. I hope we don’t see a major problem in the coming weeks and months to come. The geo political issue is important because of the very important Strait of Hormuz coming into the dispute. Every day, around 20 million barrels of oil pass through the strait, which is about one-third of the global oil trade. This mainly comes from Saudi Arabia, Emirates and Kuwait to India, China, Japan and Korea. Not only that, about one-third of the total liquified natural gas (LNG) also goes through this route. We are following the situation very closely.

What is your take on the global energy demand for the coming years?

In 2020, we expect a lot of oil in the market. Demand is growing only by one million barrels a day, mainly because the global economic growth is slowing. Due to the trade dispute between the United States and China, the Chinese economy is slowing down. Also, the economy of advanced countries is slowing down and the entire world will be affected by this since China is a country with a major demand for oil. We expect the Chinese economy to grow the slowest in the last three decades this year. 

It is good news for countries like India as it would put downward pressure on prices. For other fuel, people could say coal is dead, but in 2017-18, global coal consumption continued to increase. We all know that coal has implications for the environment, but it is the cheapest source for generating electricity in many countries. It is also a secured source because of domestic availability. It is for this reason, I believe, we will continue to see coal demand. Today, it is about 40 per cent of the total electricity generation. I hope countries will look at using coal more efficiently.

India is going through a transition phase with lot on emphasis on electric vehicles (EVs). Is it sustainable in the long term?

The energy world is changing very quickly. I think it is very important for countries and companies to see these changes and position themselves accordingly. Otherwise, they may well miss the train. According to our recent numbers, total energy investment in India last year was about $87 billion and this is the largest growth in energy investment for any country in the world. More importantly, for the first time, investment in solar energy exceeds that of coal in India. Energy security in India is an important issue. We should not only look at future environmental issues, but also on how we can get the cheapest energy to the poor people and those in rural areas. For India, we should find the most economic and most sustainable resource. If coal is the most economical option for India, we should not push it back, as it is top priority, giving access to energy in rural areas.

There is talk to shift to EVs in India by 2030. Do you think it is possible?

I am a friend of India and in Turkish we say best friends are those who will say the truth. The EV plan by 2030 is rather an ambitious one. We may expect the share of EVs to increase, but to expect it to take over is a bit optimistic. Electric vehicles will have two impacts. One of them is reducing oil imports, which is important. The other is the climate change impact, for which you have to decarbonise the power system, too. Buying a 2019 model car may be better for climate change than buying a 2019 electric car because the bulk of electricity demand with respect to the car will come from the heavily-dominated coal environment. From that point of view, electric cars’ impact on CO2 emission gains will be limited if we cannot decarbonise the power system. In my view, media and research groups give disproportionate emphasis on cars when it comes to climate change. All the cars in the world are responsible for only 9 per cent of the CO2 emissions, while 91 per cent is coming from somewhere else. Cars are becoming a soft target.

Will it make sense for a consumer nation like India to come up with a gas hub?  

If there is enough volume to be imported and if companies are looking at the geographical advantage of India, it should be a good candidate for being a gas hub. But it shouldn’t be one if the volumes are not significant.