India Energy
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As India expands its international influence with a stronger economy, robust manufacturing system, and unprecedented diplomatic outreach, it’s also emerging as a leading force in the global clean energy transition.

With a goal to become energy independent by 2047 and achieve net zero emissions by 2070, India is rapidly expanding its renewable energy capacity and ramping up adoption of green energy, while consolidating its presence in clean energy manufacturing, supply chain, R&D and innovation.

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As one of the fastest growing economies in the world, India’s efforts in decoupling economic development from carbon emissions and indiscriminate use of resources have a significant impact on global energy transition, influencing other nations towards pro-climate decisions.

Economic impact

India’s drive to progressively reducing the reliance on fossil fuels is not only driving energy efficiency across various industries but also aligns with its long-term economic ambitions, supporting its goal of reaching a $10 trillion GDP by 2030.

According to the Asia Society Policy Institute (ASPI), achieving net zero emissions by 2070 could boost India’s economy by up to 4.7 per cent of its GDP by 2036 — equating to $371 billion. This positive impact could continue, with long-term effects maintaining 3.5 per cent growth above the baseline by 2060.

According to the US-based Natural Resources Defense Council (NRDC), India can potentially create about 3.4 million green jobs, both short and long term, by 2030.

However, with rapid industrialisation and urbanisation, rising energy demand remains a critical concern. India is expected to experience the highest growth in energy demand globally over the next 30 years. As India works to balance economic, social, and environmental ambitions, the scale of the task ahead is significant.

Ashwin Jacob, Partner and Energy, Resources & Industrial Industry Leader, Deloitte India

“India’s net zero target factors in the assumption that India would continue to be one of the fastest growing large economies in the world for the next 20-25 years. While the GDP is expected to grow at 6-7 per cent, the electricity demand is also expected to grow at 5-6 per cent. This means India will require all forms of energy to meet its growing demand,” Ashwin Jacob, Partner and Energy, Resources & Industrial Industry Leader, Deloitte India, tells Gulf News.

India energy
Muppandal Wind Farm, India’s largest operational onshore wind farm at Aralvaimozhi in Kanyakumari Image Credit: Shutterstock

India’s power sector is mainly reliant on coal and other fossil fuels, but the country aims to greatly accelerate its use of renewable energy.

“If India meets its 2030 target of 500 GW in non-fossil fuel capacity, this will represent 40-50 per cent of the total energy generation capacity, aiding in the reduction of GDP emissions intensity by 45 per cent from 2005 levels,” explains Jacob.

For the remaining energy demand, coal will be essential for meeting needs.

“Government analysis indicates that India will need to add about 80 GW of additional coal capacity by 2032 to satisfy base load demand. Therefore, both coal and renewables will co-exist, complementing each other to meet electricity demand while adhering to net zero and the Nationally Determined Contribution (NDC) targets,” he says.

Coal and renewables to work together

According to Delhi-based policy research institution Council on Energy, Environment and Water (CEEW) Centre for Energy Finance, the share of renewables in India’s power generation capacity has grown fivefold over the past decade, while the share of coal in the capacity mix has come down to half.

From 2014 to 2023, the share of non-fossil fuels in India’s energy mix for power generation has also grown from 17 to 23 per cent.

“The first quarter of 2024 saw 8 GW of new solar capacity addition, taking total solar capacity to 82 GW by March 2024. Indian renewable energy (RE) navigator shows that an additional 25 GW of solar capacity was also auctioned in the same period. Overall, 128 GW of utility-level solar and wind capacity is in the pipeline,” says Shalu Agrawal, Director – Programmes, CEEW.

“With RE deployments picking pace and India meeting its target of 500 GW of non-fossil capacity by 2030, the share of coal in India’s generation mix will come closer to 50 per cent by 2030.”

Shalu Agrawal, Director – Programmes, CEEW

Given that the shift to renewables will take decades, it is clear that coal- and fossil gas-fired power will be around for maintaining grid stability during periods of intermittent renewable energy.

“Owing to a rapidly rising power demand, it often becomes increasingly difficult for power system operators and distribution companies to meet energy and peak demand during non-solar hours,” says Agrawal.

Between January 2022 and May 2023, renewable energy power losses ranged from 1,000 MW to 7,000 MW due to non-compliance with grid standards.

“This is where coal plants play a critical role by providing baseload support and reliability and flexibility services to the grid,” she says.

Spotlight on solar energy

Among renewables, solar energy is central to India’s transition to clean energy systems. CEEW’s net zero assessment indicates that solar and wind will be key to meeting India’s energy needs in a net zero economy, while bioenergy and hydro will also play a significant role in advancing the nation’s sustainability agenda.

Solar
Photovoltaic panels for renewable electric production in Mahoba, Uttar Pradesh Image Credit: Shutterstock

“The country’s geographical location is favourable for solar energy. Many regions have almost 300-330 sunny days annually. The installed capacity of solar photovoltaic (PV) has seen a remarkable jump of approximately 30 times during the past decade, standing at 85 GW at present,” R. P. Gupta, Chairman and Managing Director (CMD), Solar Energy Corporation of India (SECI), tells Gulf News.

R. P. Gupta, Chairman and Managing Director (CMD), Solar Energy Corporation of India (SECI)

Growth in solar energy is primarily driven by continuous technological advancements, decreasing costs of production, expansion in domestic solar PV module manufacturing, and a supportive policy ecosystem.

“On the back of many such factors, solar tariffs in the country dropped from around Rs7/kWh (30 fils/ kWh) in 2014 to around Rs 2.50/kWh in 2023. The budgetary allocation towards solar projects has more than doubled,” says Agrawal from CEEW.

FDI flows rise

Solar energy sector is also witnessing unprecedented investment growth in recent years. According to the IEA’s World Energy Investment Report 2024, investments in solar power are expected to surpass those in all other energy sources combined.

“Over the past decade, the renewable energy sector in India has attracted Rs7.1 trillion in investments, with a large share going to solar energy. By 2030, this investment is projected to increase by 4 to 4.5 times,” says Gupta, adding, “The solar energy domain in India attracts huge foreign investments and is a self-sustaining sector. The investor confidence has significantly grown due to better payment security measures, including the letters of credit (LCs), payment security funds, and late payment surcharge rules.”

Despite its immense potential, the solar sector is grappling with several challenges, including the need for large land areas – requiring about 4 acres per megawatt of installed capacity – as well as the timely synchronisation of power evacuation infrastructure and a reliance on imported raw materials for solar cells, highlights Gupta.

“These issues are, however, being actively addressed through collaborative efforts by central and state governments, which are implementing supportive policies, enhancing execution frameworks, and promoting domestic manufacturing to ensure continued progress and stability in the sector,” says Gupta.

To drive growth in the solar sector, India has developed large solar parks to ensure RE deployment at speed and scale. “The Intra-State Green Energy Corridor (GEC) Phase-II is being implemented in seven states to set up transmission lines with the centre’s support – 33 per cent of the cost – to evacuate 20 GW of renewable generation capacity,” says Agrawal.

In addition, there is a parallel focus on tapping decentralised RE potential. “PM-KUSUM scheme that supports the solarisation of energy demand for farm irrigation is quite a unique model. Furthermore, the PM Surya Ghar Yojana will tap the rooftop solar potential in India by supporting 10 million households in investing in rooftop solar systems,” notes Agrawal.

Focus on green hydrogen

Meanwhile, India is scaling up production of green hydrogen to decarbonise key industrial sectors like transportation, shipping, and steel among others.

Last year, the government launched the National Mission on Green Hydrogen to position the nation into a global hub for production, usage and export of green hydrogen and its derivatives. The initiative aims to build the capability to produce at least 5 million metric tonne (MMT) of green hydrogen per annum by 2030, with potential to reach 10 MMT per annum as export markets grow.

“India’s energy import bill reached $185 billion in 2022 – a number that’s likely to increase if the country continues to meet its rising energy demands through traditional means. Green hydrogen could be a key component in meeting India’s energy security needs and reducing emissions in hard-to-abate sectors, while not inflating the import bill,” says Jacob from Deloitte India.

Producing green hydrogen requires a substantial supply of renewable energy for the electrolysis process. “India’s RE potential can support its green hydrogen goals, but a rapid increase in installed capacity is needed both for hydrogen production and meet the country’s electricity needs,” he says.

While there is a lot of investor interest in green hydrogen, there has been limited progress so far. “Key stakeholders are currently in a wait-and-watch mode. Many expect significant production of green hydrogen to begin around 2027 and onwards, as many of the large projects will begin earnestly after the implementation of the Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme,” points out Jacob.

Agrawal from CEEW also highlights that the uptake of green hydrogen faces several challenges. “The foremost is its high cost, currently around $4-5 per kg, compared to a break-even price of about $1 per kg for some industrial applications. Additionally, there is a geographical misalignment between green hydrogen demand centres in east India and renewable energy sources in the western and southern India, necessitating significant investments in grid infrastructure.”

However, to accelerate the green hydrogen ecosystem, the government has allocated Rs197.44 billion under the National Green Hydrogen Mission. This includes funding for electrolyser manufacturing, green hydrogen production, hydrogen hubs, R&D, and pilot projects.

“Effective implementation of these measures, along with stimulating demand through Hydrogen Purchase Obligations and access to green debt, will be essential for driving the transition towards green hydrogen,” she says.

With India’s ongoing efforts to balance growth with sustainability, experts emphasise that the country is on track to advance its ambitious goals of energy independence and net zero emissions, while strengthening its position as a leader in the global clean energy sector.