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India Energy Outlook 2021 Report: All you need to know

On 9 February 2021, the International Energy Agency (IEA) released the India Energy Outlook 2021 report. The report is released by IEA annually.  

The report explores the opportunities and challenges ahead for India to ensure reliable, affordable and sustainable energy to a growing population. It examines pathways out of the crisis that emerged from the COVID-19 pandemic and how India’s energy sector might evolve to 2040 under a range of scenarios.

Key Highlights:

1- Over the next two decades, India will have the biggest share of energy demand growth at 25%, overtaking the EU as the world's third-biggest energy consumer by 2030. At present, India is the fourth-largest energy consumer in the world behind China, the US and the EU. 

2- The report highlights the doubling of India's energy consumption as the GDP expands to a projected USD 8.6 trillion by 2040. 

3- Before the ongoing COVID-19 pandemic, a 50% increase was expected in India's energy demand between 2019 and 2030. At present, it is close to 35%. 

4- In terms of Purchasing Power Parity (PPP), India accounted for around 10% of the world growth over the last three decades that is expected to account for 20% by 2040. 

5- Despite various government policies, India's domestic oil and gas production has been stagnant for years, which in turn, will make it more reliant on fossil fuel imports to meet its energy requirements. 

6- Rising coal demand may double the country's import bill to USD 181 billion by 2030 and to USD 255 billion by 2040. 

7- Under the existing policies, India's oil demand is expected to rise by 74%-- 8.7 million barrels per day by 2040. 

8- India is projected to lead the oil demand growth in the world due to a five-fold increase in per capita car ownership. The net dependence on oil imports is projected to increase more than 90% by 2040 from the current 75%. This is because domestic consumption will surpass domestic production. 

9- India will become the fastest-growing market for Natural gas and the demand is expected to triple by 2040. Natural Gas imports increased to almost 50% in 2019 and are projected to grow more than 60% in 2040. 

10- At present, coal dominates India's energy sector, accounting for more than 70% of overall generation. Also, the demand will rise to  772 million tonnes in 2040 from the current 590 million tonnes. 

11- India's share in renewable energy growth is the second-largest in the world, after China.

The energy in India today

Since 2000, India has doubled its energy consumption due to a growing population and is soon expected to be the world's largest energy economy. In the year 2019, over 900 citizens have gained an electrical connection in less than two decades. Affordability and reliability of energy supply to India's consumers are key areas to focus on. 

The ongoing COVID-19 pandemic and the subsequent lockdown have disrupted India's energy use. A 5% fall has been noted in India's energy demand and a 15% fall in the investments in the energy sector in 2020. 

Over 80% of India's energy requirements are met by three fuels-- Coal, Oil and Soil Biomass. Despite the access to LPG in rural areas, around 660 million Indians have not fully switched to modern, clean cooking fuels or technologies. Renewable sources of energy along with Natural Gas were least affected due to the COVID-19 pandemic in 2020. 

India is the third-largest emitter of CO2 in the world, despite low per capita CO2 emissions. Particulate matter emissions emerged as one of India’s most sensitive social and environmental issues and the year 2019 witnessed over one million premature deaths related to ambient and household air pollution. 

Urbanization and Industrialization in India

India's economic growth has been primarily driven by the services sector compared to the energy-intensive industry sector. Also, the rate at which India has urbanised is slower than in other developing countries.

As per estimates, around 270 million people will add to the urban population of India by 2040. In spite of such rapid urbanization, the share of the country's population living in urban areas in 2040 is expected to be less than 50%. 

Also, most of the buildings that will exist in India in 2040 are yet to be built. The residential floor space will increase to more than 50 billion squares metres from the present 20 billion squares metres, prompting huge demand for energy-intensive building materials. The demand for steel is expected to double and for the cement to triple by 2040. 

Urbanization will also impact energy use away from solid biomass and towards electricity. Rising ownership of appliances and demand for air conditioners indicates that the share of energy demand in the buildings sector rises from a quarter to around half by 2040.

Thus, India needs to expand the application of its Energy Conservation Building Codes and tighten appliance standards to limit future strains on its energy system. 

At present, transport is currently the fastest-growing sector in terms of energy demand, and urbanisation will foster further growth. Rising demand for transport has led to much congestion and poor air quality. The report projected that the oil demand for road transport will double by 2040. 

The current share of the Industry sector in total final consumption rises from 36% to 41% by 2040. Since the majority of goods transported in India move by road, industrial expansion means rapid growth in diesel use for road freight, despite shifting much of the freight market onto the railways.

Efforts are underway to promote energy efficiency and material efficiency, and greater use of natural gas and electricity-- mitigating the rise in industrial energy use. With an early peak in energy-related CO2 emissions and a subsequent decline, India is expected to reach net-zero emissions by the mid-2060s.

Fuels and electricity in India

India's gas production and trade are slightly below the levels projected in WEO 2019. The oil supply has flattened by 5% while the coal by one-quarter. 

Despite the COVID-19 pandemic shock, India's electricity demand is projected to grow by 5% per year to 2040-- double the rate of the energy demand. 

Solar PV and wind account for more than three-quarters of the capacity additions as their costs fall. By 2030, new solar PV will compete with the existing coal-generated power.

The rising demand for electricity brings greater variability in both supply and demand side. On the supply side, it reflects the growth in solar PV and wind while on the demand side, it is related to a six-fold increase in daily electricity consumption for air conditioning by 2040. 

India's requirement for power system flexibility rises faster than any other country in the world. India aims at achieving 450 GW of non-hydro capacity by 2030. 

India also aims at becoming a 'gas-based economy'. If the proposed gas infrastructure were to be built, 70% of India's population would have access to gas. The report highlighted that the growth in gas consumption is concentrated in the industrial sector and in city gas distribution. It displaces significant amounts of coal in the power sector. 

The report highlighted that India's vision for gas cannot be limited to natural gas of fossil origin but there's a need to incorporate biomethane and hydrogen to meet environmental and sustainability objectives. 

India also aims at reducing import dependence on oil and coal. Despite ongoing efforts, the oil sector is challenging due to the complexity and limited domestic resource base. However, this is not the case with coal as India has enough domestic resource base to support increased production. 

Incorporation of the latest technologies and alternatives to cooling at coal-fired plants to reduce environmental impacts is the need of the hour. It is to be noted that more than 80% of coal plants today are cooled by freshwater sources and over half of these are located in the areas that are experiencing high water stress. 

Implications for India and the world

The report underscored that India's energy choices have a direct and far-reaching effect on the lives of a growing population and will indirectly impact the rest of the world through energy markets, emissions, and flows of technology and capital.

India accounts for around one-quarter of global energy demand growth from 2019 to 2040-- more than any other country in the world. India is a global leader in battery storage. The report projects that by 2040, India will become the third-largest power system eclipsing the EU and second-largest growth market for renewable energy after China. 

India leads global oil demand growth on the backdrop of a fivefold increase in per capita car ownership and is the fastest-growing market for natural gas. 

At present, India imports around 40% of its primary energy and will continue to import at this level by 2040. However, the import bill for fossil fuels during this period is expected to triple.   

The increased requirement for flexibility in the operation of the power system is a potential hazard for electricity security in India. The poor financial health of discoms needs to be addressed. 

Improved billing and collection efficiency and reduced technical and commercial losses may bring a reform in the aforementioned sector. Encouraging investments in renewables point out in tackling risks related to delayed payments to generators, land acquisition and regulatory and contract certainty.

The combined markets in India for solar PV modules, wind turbines, lithium-ion batteries and water electrolysers is expected to grow over $40 billion per year by 2040. India's clean energy workforce is expected to grow by 1 million from 2020 to 2030. 

Polices to improve air quality helps in limiting pollutant emissions but a rising urban population may expose more people to air pollution and its ill effects. 

Growth in India's annual CO2 emissions slows steadily over time. A cleaner power mix supports the electrification of transport. At present, the carbon intensity of electricity in India means that there is no CO2 benefit from switching to an electric car. 

It is to be noted that India's total emissions are 50% higher in 2040 than in 2019. However, the per capita CO2 emissions will remain low by international standards. Efforts are needed to wipe out the use of coal in power generation. Improved efficiency and carbon intensity of industrial output will bring about lower emissions along with higher GDP. 

India’s energy-related CO2 emissions will flatten out in the 2020s, witness a steady decline by the 2030s and net-zero emissions by the mid-2060s. The report highlighted that by the late 2030s most of India’s annual emissions will come from factories, vehicles, buildings and power plants that do not yet exist.

International Energy Agency

International Energy Agency (IEA) is an autonomous Intergovernmental Organisation that was established in 1974 in Paris, France. It majorly focusses on energy policies including economic development, energy security and environmental protection. These policies are also known as the 3 E’s of IEA. In March 2017, India became an associate member of IEA. 

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