Over the next two decades, India will account for 25 percent of the world’s total demand growth, by far the most of any country.
Consumption of just about every source of energy could seen enormous growth in India in the coming years. According to the International Energy Agency (IEA), India has a “wide range of possible energy futures before it,” but its “future prosperity will hinge on affordable, clean and reliable energy.”
India in focus
For much of the past two decades, China’s growth story was very much at the heart of every energy analysis and forecast. Any bullish growth outlook depended heavily on China’s rise. Now, with Chinese energy growth moderating, the growth mantle is being passed to India.
Energy use in India has doubled since 2000, and could surge by as much as 50 percent over the next 10 years, according to a lengthy new report from the IEA. A quarter of the world’s expected increase in energy demand through 2040 will occur in India.
India has connected millions of people to the electricity grid, but some 660 million people still burn wood for cooking needs.
India has connected millions of people to the electricity grid, but some 660 million people still burn wood for cooking needs. There is obviously an urgency to extending electricity access to everyone. The question facing India is how will it accomplish this imperative, and from what source of energy will the electrons flow. “To meet growth in electricity demand over the next twenty years, India will need to add a power system the size of the European Union to what it has now,” the agency said.
A few more metrics highlight the enormous pent-up demand: India’s per capita energy use is less than half the global average, and the same is true of vehicle ownership, and steel and cement output, the IEA said.
In the not-so-distant past, coal would be the obvious beneficiary of an aggressive expansion in energy demand. However, that is no longer a foregone conclusion. The IEA said that India is “on the cusp of a solar-powered revolution.” Coal accounts for 70 percent of India’s electricity generation, and solar accounts for less than 4 percent. But even in a base-case scenario, solar matches coal’s share of the electricity market in India within the next two decades, both with market shares in the “low 30%s.
By 2030, solar plus battery storage not only outcompetes new coal, but it beats existing coal-fired power plants. The writing is already on the wall. “Once the coal‐fired power plants currently under construction are completed over the next few years, there is no net growth at all in India’s coal fleet,” the IEA said. Still, heavy industry remains one sector where coal still sees potential for expansion.
For transportation, energy demand in the country is expected to more than double through 2040.
For transportation, energy demand in the country is expected to more than double through 2040, with over half of those vehicles burning diesel. This translates to crude oil demand growing from nearly 3 million barrels per day (Mb/d) currently to around 8.7 Mb/d by 2040. No other country adds that much oil demand over the next two decades.
A cleaner path
The massive expansion in fossil fuel use behind India’s future growth is not inevitable. In the IEA’s Sustainable Development Scenario, which assumes more aggressive investment in clean energy and a path to net-zero emissions in the long run, clean energy captures larger shares of the pie.
For example, whereas oil demand more than doubles, adding roughly 4.7 Mb/d in the base case, the cleaner scenario only sees oil demand expand by less than 1 Mb/d. This is the result of electrification, efficiency and fuel switching.
The electricity numbers are even more eye-popping. Whereas coal and solar each capture roughly a third of the electricity market by 2040 in the base case, in the greener IEA scenario coal shrinks to about 5 percent of the market. Solar grabs nearly 40 percent, while wind, natural gas and other renewables capture larger shares.
A separate report from clean energy think tank Ember says that India’s coal use may have already peaked in 2018. Or, at least, there is an opportunity to ensure that coal did in fact peak. The report lays out recommendations to accelerate wind and solar deployment.
India’s greenhouse gas emissions could rise by 50 percent over the next twenty years.
As it stands, India’s greenhouse gas emissions could rise by 50 percent over the next twenty years, the largest increase out of any country. That would offset all of the projected decline in emissions from Europe over the same period. However, it is important to note that per capita emissions would still be below the global average (not to mention the historical imbalance in emissions between rich and poor countries).
The main takeaway from the IEA’s report is the “multiple futures” facing India today. There is urgency to provide basic energy provisions to hundreds of millions of people, but also an urgency around climate change. “India has so far contributed relatively little to the world’s cumulative greenhouse gas emissions, but the country is already feeling their effects,” the IEA noted.
The IEA framed the challenge this way: “All roads to successful clean energy transitions go via India.” India is “in a unique position to pioneer a new model for low-carbon, inclusive growth,” the agency stated. This depends on the aggressive expansion of renewable energy and a focus on not leaving communities behind – including heavily coal-dependent regions.
“If this can be done, it will show the way for a whole group of energy-hungry developing economies, by demonstrating that robust economic expansion is fully compatible with an increasing pace of emissions reductions and the achievement of other development goals,” the IEA concluded.