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CERAWeek: India’s energy needs to double in the next 15 years

06 March 2021 Bernadette Lee

India will be a major driver of energy demand in the world, with its needs expected to double in the next 15 years, Amitabh Kant, chief executive of National Institution for Transforming India (NITI Aayog), told the CERAWeek by IHS Markit conference.

While both the third-largest electricity producer and consumer in the world, India expects to see significant increases in consumption, Kant said during a panel discussion on what policymakers should do to accelerate the path to a low-carbon future and to attract foreign investors to India.

India is undergoing a massive transformation, including expanding its economy, as well as rapid urbanization, with 500 new cities expected to be added in the next five decades. These developments will be accompanied by an increase in energy needs, and meeting this demand through new and renewable sources is vital, Kant said. The country presently has the fourth-highest installation of renewable power capacity in the world, he added.

"There are massive opportunities in India's energy sector, which is today catering to the needs of over a billion people. We are the third-largest producer and consumer of electricity in the world. We have been able to electrify all our unelectrified villages. Our rail network, one of the largest in the world, is set to become carbon-neutral very soon. We have taken a huge leap in the World Bank list of [the ease of] doing business … moving from 137th to 22nd position," he said.

Speaking on 5 March at CERAWeek, India's Prime Minister Shri Narendra Modi said the use of non-fossil fuel sources in the power sector has grown by 38% in the last few years. He said that expanded use of natural gas will meet the nation's growing needs for cleaner energy.

And Modi listed other aspects of the nation's transformation of its energy sector, including:

  • The country has installed approximately 37 million LED lightbulbs, which he said is reducing power demand equivalent to 38 million metric tons (mt)/year of carbon emissions.
  • It will have 5,000 biogas-from-waste facilities operating by the end of 2024, reducing emissions by another 15 million mt.
  • Propane is now delivered to 99.6% of the rural population, up from 55% in 2014.

"We are using resources responsibly," he said. "Now is the time to think logically and ecologically."

Modi's commitments on this path were honored with the CERAWeek Global Energy and Environment Leadership Award, said Daniel Yergin, IHS Markit Vice Chairman. "Prime Minister Modi has been guiding India towards economic growth, energy security, and environmental stewardship in this age of energy transition," Yergin said. "He has brought broad perspectives [to the energy transition] … that are diverse, market-based, inclusive, and focused on environmental sustainability."

In response, Modi said: "I dedicate this award to the people of this great motherland of India. I dedicate this award to the glorious tradition of our land that has shown the way when it comes to caring for the environment."

Access to power

In discussing India's energy outlook, Tim Gould, head of the International Energy Agency's (IEA) energy supply and investment outlooks division, said the country will see the largest increase in energy demand of any country, given the vast developments and various transitions it is now undergoing.

"To full universal access [to electricity], also transitions from rural to urban life associated with many shifts in energy consumption, and often toward electricity. We highlight also this pivot in global manufacturing on India, so it is very important to take a broad view of India's development and also the energy challenges it faces … Whatever aspect of energy you are interested in, India is going to be such an important player," he said.

Some 270 million people will be added to India's urban population over the next two decades, with another seven Mumbais just by 2030.

"If you choose electricity, where the focus of this discussion lies, India, over the next two decades, is going to need a power system the size of today's European Union's power system, [in addition] to the one it already had. This is a scale of undertaking that is simply breathtaking," Gould said.

Policies can move India to lower emission pathway

Policy can help India along a more inclusive and lower emission path, as evident from the many policies that have been implemented, which demonstrate how well-designed policies can have a huge impact on consumption trends, Gould said, referring to initiatives such as those Modi would highlight a day later.

However, India will see an increased need for flexibility in its power system over the next few years, part of which is related to solar generation, but a sharp increase in demand for cooling that boosts the evening peak will also have a significant impact.

A range of policies will be essential in addressing these issues, be it efficiency standards for air-conditioners, measures to ensure investment in the grid, or encouraging the deployment of battery storage, Gould said.

Risks and opportunities

In response to questions from moderator Rashika Gupta, IHS Markit Director of Power, Gas, Coal & Renewables, about the level of energy and technology investment that will be required to aid India's energy transition, Gould estimated the figure at $150 billion/year, double the current level of investment. The level of energy investment in India in recent years has been in the range of $70 billion to $80 billion annually, according to Gould.

"That's a massive opportunity for domestic and international investors. Clearly, [state-owned] enterprises play an extremely important role in the Indian context. But in our view, the bulk of that is going to need to come from private actors," he said.

"There's a number of areas that they're expressing a lot of interest in. Clearly, renewable power and the related infrastructure is one, and there, I think the sentiment is very positive. But we also need to be aware of some well-known uncertainties and risks, especially in relation to electricity distribution companies, which remain in a sense the biggest financial uncertainty in the value chain of India's power sector investment," he added.

Renewable growth, green hydrogen

Renewable energy growth in India is expected to see a substantial upswing in 2021, doubling from 2020, according to Kant.

India's liberal foreign direct investment policy in the energy sector and the recently announced production-linked incentive scheme for important areas such as advanced cell chemistry, battery and solar photovoltaic (PV) modules will pave the way not just for India to become a global manufacturing hub, but also give a massive boost to the renewables sector while reducing emissions.

"We have a very collaborative public-private approach when it comes to power generation, the 'One Nation, One Grid' initiative will bring greater efficiency in the energy sector, and we are keen on this greater private sector collaboration," he said.

India's future also lies in green hydrogen, which has the potential to grow in size and scale by leveraging the country's solar tariff's potential at $0.03 kilowatt per hour, which will bring down the cost of hydrogen substantially, Kant said. He sees opportunities for India to become a global leader in the green hydrogen economy.

"There is today huge exponential global interest for making investment in India, from private equity players to global pension funds … My view is India's energy story has just begun. In addition to what Mr. Gould said, which I do not want to repeat … we will see a major, major transformation in India in the next three to four years towards clean, sustainable energy," he said.

Posted 06 March 2021 by Bernadette Lee, Principal Journalist, Climate and Sustainability, OPIS, IHS Markit

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