Stories to Watch: India’s growing energy demand puts it at the centre of the global energy economy, says IEA

The IEA released their flagship India report, the India Energy Outlook 2021 on 9th February. The report highlights India’s important position in the global energy economy, with its energy demand projected to grow at the fastest rate in the world over the next two decades. Trends in global energy markets, emission targets and technological developments will be significantly influenced by the direction taken by India.

The growth in energy demand is primarily driven by India’s urbanising population, estimated to increase by 270 million in the next two decades. IEA points out that this rapid urbanization leads to a massive demand for energy-intensive building materials like steel and cement, ownership of appliances like ACs, and further growth of transportation. In the main scenario (Stated Policy Scenario or STEPS), nearly 60% of India’s emissions by late 2030s comes from factories, vehicles, buildings and power plants that are yet to be built.

The report also notes the rapid transition of India’s electricity sector towards renewables. From less than 4% today, solar is projected to account for around 30% of electricity generation, matching the share for coal as soon as 2040 under STEPS. The recent budget allocations of Rs 1,000 crores and Rs 1,500 crores to the Indian Renewable Energy Development Agency (IRDEA) and Solar Energy Corporation of India (SECI) respectively are in line with this vision.

Battery storage is highlighted as an appealing solution to provide short-run flexibility to the power supply, for addressing the mismatch between solar-generation peaks and the demand peaks. IEA projects that India’s battery storage capacity will increase to 140 GW by 2040 in the STEPS, the largest in the world. Regulatory innovations like the first Round-The-Clock renewable energy auction last year can give a boost to India’s nascent battery storage industry.

The IEA also states that India is in a unique position to pioneer a new model of low-carbon inclusive growth and highlights the role of government policies in shaping that future.

Environmentality is a collection of ideas, perspectives, and commentary by researchers at the Initiative on Climate, Energy and Environment, Centre for Policy Research, New Delhi. Views and opinions expressed in this blog are solely those of the authors. They do not represent institutional views.

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