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IEA sees $1.4 trillion clean energy opportunity in India

India: BP and Reliance are pumping up the volume
India: BP and Reliance are pumping up the volume

India is set for the largest increase in energy demand of any country over the next 20 years. This underscores the potential for policies and investment to accelerate the clean energy transition, the International Energy Agency (IEA) said in a new report.

The additional funding for clean energy technologies needed to put India on a sustainable path over the next 20 years is $1.4 trillion, or 70% higher than in a scenario based on its current policy settings. However, the benefits are huge, including savings of the same magnitude on oil import bills, according to the Indian Energy Outlook 2021, released today.

India faces a range of evolving energy security challenges. “Based on today’s policy settings, India’s combined import bill for fossil fuels is projected to triple over the next two decades, with oil by far the largest component. Domestic production of oil and gas continues to fall behind consumption trends and net dependence on imported oil rises above 90% by 2040, up from 75% today. This continued reliance on imported fuels creates vulnerabilities to price cycles and volatility, as well as possible disruptions to supply,” warned the IEA.

The report examines the opportunities and challenges faced by the planet’s third-largest energy consuming country as it seeks to recover from the Covid-19 crisis. Significantly, the combination of an expanding and industrialising economy, coupled with a growing and increasingly urban population will drive energy use higher, raising the question of
how best to meet that swelling demand without exacerbating issues like costly energy imports, air pollution and greenhouse gas emissions, said the IEA.

“India has made remarkable progress in recent years, bringing electricity connections to hundreds of millions of people and impressively scaling up the use of renewable energy, particularly solar,” said Fatih Birol, the IEA executive director.

“What our new report makes clear is the tremendous opportunity for India to successfully meet the aspirations of its citizens without following the high carbon pathway that other economies have pursued in the past. The energy policy successes of the Indian government to date make me very optimistic about its ability to meet the challenges ahead in terms of energy security and sustainability,” said Birol.

The report said that the rapid expansion of solar power combined with smart policymaking is transforming India’s electricity sector, enabling it to provide clean, affordable and reliable power to a growing number of households and businesses. But as is the case in economies around the world, the transport and industrial sectors – areas like road freight, steel and cement – will prove far more challenging to develop in a sustainable manner, cautioned the IEA.

“More than that of any other major economy, India’s energy future depends on buildings and factories that are yet to be built, and vehicles and appliances that are yet to be bought. Based on India’s current policy settings, nearly 60% of its CO2 emissions in the late 2030s will be coming from infrastructure and machines that do not exist today. This represents a huge opening for policies to steer India onto a more secure and sustainable course,” said the IEA.

“If India goes down this path, it would need to address the critical challenge of the industrial sector through efforts like more widespread electrification of processes, greater material and energy efficiency, the use of technologies like carbon capture, and a switch to progressively lower-carbon fuels. Electrification, efficiency and fuel switching are also the main tools for the transport sector, alongside a determined move to build more sustainable infrastructure and shift more freight onto India’s soon-to-be-electrified railways,” added the Paris-based agency.

“These transformations – on a scale no country has achieved in history – require huge advances in innovation, strong partnerships and vast amounts of capital,” said the IEA.

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