Energy demand in India will increase more than in any other nation over the next 20 years, the International Energy Agency says in a new report, underlining the importance of the South Asian country in global efforts to combat climate change.
As India recovers from a Covid19-induced slump, it is re-entering a dynamic period in its energy development, said the India Energy Outlook 2021 report.
“Over the coming years, millions of Indian households are set to buy new appliances, air conditioning units and vehicles,” the report said. “To meet growth in electricity demand over the next 20 years, India will need to add a power system the size of the European Union to what it has now.”
India’s ability to ensure affordable, clean and reliable energy for its growing population will be vital for the future development of its economy but avoiding the kind of carbon-intensive path previously followed by other countries will require strong policies, technological leaps and a surge in clean energy investment, the IEA report said.
The combination of a growing and industrialising economy and an expanding and increasingly urban population will drive energy use higher, the report projected, raising questions on how best to meet the swelling demand without worsening issues like costly energy imports, air pollution and greenhouse gas emissions.
“Our new report makes clear the tremendous opportunity for India to successfully meet the aspirations of its citizens without following the high-carbon pathway that other economies have pursued in the past,” said Fatih Birol, executive director of the IEA.
India aims to quadruple renewable electricity capacity by 2030, more than double the share of natural gas in its energy mix, increase energy efficiency and transport infrastructure, boost domestic coal output and reduce reliance on costly oil imports, the outlook said.
“India has arrived at the centre-stage of the world’s energy system,” Birol said at a media briefing during the launch of the report. ““All roads to successful global clean energy transitions go via India.”
The IEA looked at four scenarios to project the energy future for India — the Stated Policies Scenario (STEPS), the India Vision Case, the Delayed Recovery Scenario and the Sustainable Development Scenario.
Prior to the Covid19 pandemic, India’s energy demand was projected to increase by almost 50% between 2019 and 2030, the report said, but growth over this period is now closer to 35% in the STEPS, and 25% in the Delayed Recovery Scenario.
“It would also extend the slump in energy investment, which we estimate to have fallen by some 15% in India in 2020,” the report said.
Even though the pandemic and its aftermath could temporarily suppress emissions, as coal and oil bear the brunt of the reduction in demand, it does not move India any closer to its long-term sustainable development goals, the report warned.
Solar will be king
The rapid expansion of solar power in India, combined with smart policymaking would transform the country’s electricity sector, enabling it to provide clean, affordable and reliable power to a growing number of households and businesses, the report found.
IEA’s report “once again highlights that emerging economies such as India are at the forefront of the global energy transition. Today, India offers one of the largest renewable energy markets operating on market principles,” said Arunabha Ghosh, CEO of the Council on Energy, Environment and Water, a New Delhi-based think tank. “India now needs to focus on reducing the cost of finance for clean energy projects… to further accelerate the energy transition.”
Solar power is set for explosive growth in India, matching coal’s share in the power generation mix within two decades or earlier, IEA predicted.
The additional funding for clean energy technologies required to put India on a sustainable path over the next 20 years is USD 1.4 trillion, or 70% higher than in a scenario based on its current policy settings, the report said.
As things stand, solar accounts for less than 4% of India’s electricity generation, and coal close to 70%. By 2040, they would converge at around 30% in the stated policy scenario, the report said. This switch is even more rapid in other scenarios, it pointed out.
“This dramatic turnaround is driven by India’s policy ambitions, notably the target to reach 450 GW of renewable capacity by 2030, and the extraordinary cost-competitiveness of solar, which out-competes existing coal-fired power by 2030 even when paired with battery storage,” the report said.
“India is expected to become the world leader in battery storage,” said Tim Gould of the IEA, the leader of the study.
“Solar is the new king. In India, the potential is huge,” Birol said. “India is set to be a solar nation.”
The report said that more than that of any other major economy, India’s energy future depends on buildings and factories that are yet to be built, and vehicles and appliances that are yet to be bought.
Based on India’s current policy settings, nearly 60% of its carbon dioxide emissions in the late 2030s will be coming from infrastructure and machines that do not exist today, the report said. “This represents a huge opening for policies to steer India onto a more secure and sustainable course.” Most of the greenhouse gas emissions that are warming the planet are of carbon dioxide.
However, as is the case in economies around the world, the transport and industrial sectors — areas like road freight, steel and cement that are expected to grow rapidly — will prove far more challenging to develop in a sustainable manner, IEA said.
India needs to address the critical challenge of the industrial sector through efforts like more widespread electrification of processes, greater material and energy efficiency, the use of technologies like carbon capture, and a switch to progressively lower-carbon fuels.
Electrification, efficiency and fuel switching are also the main tools for the transport sector, alongside a determined move to build more sustainable infrastructure and shift more freight onto India’s soon-to-be-electrified railways, IEA said.
These transformations — on a scale no country has achieved in history — require huge advances in innovation, strong partnerships and vast amounts of capital. But the benefits are huge, including savings of the same magnitude on oil import bills, the outlook pointed out.
India in January entered into a strategic partnership with the IEA to boost energy security and freer exchange of knowledge and expertise from the world’s top energy watchdog. It became an associate member of IEA in 2017. The new strategic partnership is seen as a step towards full membership.