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Rapidly rising energy demand and reliance on fossil fuels
India’s energy needs are rising fast, with growth in electricity demand and other energy uses among the highest in the world. In one direction lies a future heavily reliant on fossil fuels; and in the other, a more diverse energy mix based on greater use of renewables. If India follows the first route, it risks locking its energy system into today’s pattern – with increasing levels of air pollution, uncertainties around meeting its sustainability targets and concerns about supply and sourcing for coal, oil and natural gas. The government, contemplating a better path, has taken steps to increase renewables and move the country towards a sustainable future. Still, much remains to be done. This report provides a perspective on the changes required for India to achieve an affordable, secure, inclusive and environmentally friendly energy system.
India’s socio-economic characteristics make it unique among the world’s major energy-consuming economies. Per capita income is low, but is expected to grow quickly as India becomes the world’s most populous country towards the end of this decade. Population and economic growth, combined with accelerating urbanisation, will increase the number of people living in cities and towns from approximately 435 million in 2015 to 600 million by 2030. Urban populations consume more energy and – importantly in India’s case – significantly more electricity.
India’s total demand for energy will more than double by 2030, while electricity demand will almost triple. Ensuring that India’s growing population has access to energy, and meeting the country’s ambitious economic growth targets, will require massive investments in the power, transport, buildings and industry sectors. Despite rapidly growing demand and significant renewable energy potential, India is set to install less renewable power-generation capacity than China, Germany or the United States. India’s electricity demand has grown by 10% a year over the past decade. Rapid growth is expected to continue, requiring massive investments in power-generation capacity and related infrastructure. This creates an important opportunity for renewable energy deployment, assuming the right policies are in place and policy makers start planning for it now.
Despite rapid strides in adding power capacity, India continues to be plagued by widespread energy poverty. Much of the population lacks access to clean and affordable energy. Estimates suggest that 80 million households, or more than 300 million people, have limited or no access to electricity. While the electricity grid now covers much of the country, reaching rural or remote areas with the necessary transmission and distribution infrastructure often remains a challenge. Supply constraints, therefore, persist.
In economic terms, the health impact of outdoor air pollution costs about 3% of India’s annual gross domestic product, and indoor air pollution adds significantly to this total. The World Health Organization estimates that the number of deaths from ambient air pollution reached 700 000 in 2010. Besides, 400
million Indians (90% of them women) are exposed to respiratory, pulmonary and vision hazards associated with indoor air pollution from burning traditional biofuels. Both outdoor and indoor air pollution must be addressed through clean and sustainable rural and urban energy supplies.
If business continues as usual and present energy and environmental policies persist, fossil fuels will still dominate India’s total energy mix in 2030 and beyond. Such a pathway, known as the Reference Case in this report, relies heavily on fossil fuels along with unsustainable and inefficient uses of bioenergy to meet most of the country’s rising energy demand. While the growth of renewable power generation will accelerate, even faster increases are expected in the use of coal for industry, natural gas in residential and commercial buildings, and oil in transport. India’s demand for coal is set to triple by 2030. As a result, the share of modern renewables could decrease from around 17% to only 12% of India’s total energy mix by 2030. A large share of energy demand will need to be supplied by imports, increasing energy security risks. Growing reliance on coal imports will add to India’s existing import dependency for oil and gas.