Energy Market in India: What Balance of Sources?

The energy market in India is changing. The country is accumulating successes in its recent energy development. Nevertheless, many challenges remain, including those related to the Covid-19 pandemic. In this sense, the IEA India Energy Outlook 2021 report released this February 2021 explores the opportunities and challenges ahead for India.

This report presents India’s possible energy futures through four different scenarios:

  • The Stated Policies Scenario (STEPS) provides an assessment of where the Indian energy system is headed, given current constraints.
  • The India Vision Case is based on a rapid recovery of the economy.
  • The delayed recovery scenario takes into account the eventuality of a prolonged pandemic.
  • The sustainable development scenario explores how India could mobilize an additional surge of investment in clean energy.

Overview of the Indian energy situation.

Read on energynews.com: India strengthens ties with IEA in view of its membership

Energy market in India: what is the situation?

India, 3rd largest energy consumer in the world

The energy market in India has changed a lot in the last few years. The country is the third largest consumer of energy in the world, and hundreds of millions of Indians are now connected to the power grid. Therefore, renewable energies are also growing in ecological and economic interest.

However, India will soon become the most populous country in the world. The result is massive growth in electricity demand over the next 20 years.

What are the consequences of population growth?

This population growth is also linked to the phenomenon of urbanization, from which arise certain problems that India will have to solve. For example, the rapid growth in the number of air conditioning unit owners makes the demand for electricity extremely variable. At the same time, urbanization and the construction of numerous infrastructures will increase the share of electricity in residential energy consumption.

In addition, the Covid-19 crisis has complicated efforts and problems have arisen. These include lack of reliable electricity supply, dependence on biomass for cooking fuel, and poor air quality.

Which energy market to meet the new challenges?

With urbanization and economic and population growth, India will experience the largest increase in energy demand in the world. Between coal, oil, gas and solar, which energies should India turn to?

The expansion of solar energy

First of all, solar energy is set to experience explosive growth in India. It would equal the share of coal in India’s electricity generation within two decades in the STEPS scenario. Nevertheless, solar power currently accounts for less than 4% of India’s electricity generation.

The shares of coal and solar in India’s electricity generation converge at around 30% in the STEPS scenario. This change is due to India’s political ambitions. These include the goal of reaching 450 GW of renewable capacity by 2030 as well as cost-competitiveness of solar energy.

Read on energynews.com: Solar park in India: EDEN secures 450 MW in Rajasthan

The decline of coal

As solar power takes over, what future for coal? There will be no further growth in India’s coal fleet when the last of the coal-fired power plants are completed in the next few years.

Nevertheless, coal suppliers are still finding opportunities. In particular, by turning to industrial consumers rather than to the electricity sector.

The persistence of oil

Unlike coal, oil does not necessarily seem to be under threat. Indeed, energy demand for road transportation in the STEPS scenario is expected to more than double over the next two decades. By 2040, an additional 25 million trucks will be on India’s roads.

However, the oil issue raises the question of India’s energy security. Indeed, India’s fossil fuel import bill will triple over the next two decades.

On this point, India is exposed to several factors. On the one hand, vulnerability and price volatility. On the other hand, possible disruptions in supply.

Read on energynews.com: Renewable energies more competitive than coal by 2030

Questions related to gas

The natural gas market is growing rapidly in India, with city gas favored by the urbanization phenomenon. In addition, the use of gas could help meet air quality and emission reduction goals in the near term. Nevertheless, the cost of wholesale gas doubled in 2019, so it remains a sensitive issue for consumers.

The importance of policy in the Indian energy market

Exceeding the targets set by the Paris Agreement?

The sustainable development scenario highlights an inclusive, low-carbon growth model. Its leadership in the solar market, coupled with battery technologies, will enable India to play an important role globally.

This dynamic would even exceed some of the commitments of theParis Agreement, as the emissions intensity of the Indian economy improves by 40% between 2005 and 2030, beyond the 33-35% set by the agreement.

Read on energynews.com: Total strengthens its partnership with Adani Group

Sharp increase in CO2 emissions by 2040

Nevertheless, certain problems, particularly in the industrial and transport sectors, remain to be solved. Indeed, India’s 50% increase in CO2 emissions until 2040 is the largest increase in the world. This is despite the fact that India’s per capita CO2 emissions remain well below the global average.

Finally, while it is possible to imagine India’s energy future, it is not possible to predict it. Indeed, it depends on the buildings and factories that remain to be built, and the vehicles and devices that remain to be purchased. India’s renewable energy ambitions can only be achieved if safe and sustainable government policies are implemented.

On this point, India seems determined to develop its solar activity. This is evidenced by the French company Total ‘s long-term presence in India to develop large-scale solar projects.

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