India Energy Outlook 2021

About this report

India Energy Outlook 2021 explores the opportunities and challenges ahead for India as it seeks to ensure reliable, affordable and sustainable energy to a growing population. The report examines pathways out of the crisis that emerged from the Covid-19 pandemic, as well as longer-term trends, exploring how India’s energy sector might evolve to 2040 under a range of scenarios.

India’s future prosperity will hinge on affordable, clean and reliable energy…

India has seen extraordinary successes in its recent energy development, but many challenges remain, and the Covid-19 pandemic has been a major disruption.

In recent years, India has brought electricity connections to hundreds of millions of its citizens; promoted the adoption of highly-efficient LED lighting by most households; and prompted a massive expansion in renewable sources of energy, led by solar power. The gains for Indian citizens and their quality of life have been tangible. However, the Covid-19 crisis has complicated efforts to resolve other pressing problems. These include a lack of reliable electricity supply for many consumers; a continued reliance on solid biomass, mainly firewood, as a cooking fuel for some 660 million people; financially ailing electricity distribution companies, and air quality that has made Indian cities among the most polluted in the world.

India is the world’s third-largest energy consuming country, thanks to rising incomes and improving standards of living. 

Energy use has doubled since 2000, with 80% of demand still being met by coal, oil and solid biomass. On a per capita basis, India’s energy use and emissions are less than half the world average, as are other key indicators such as vehicle ownership, steel and cement output. As India recovers from a Covid-induced slump in 2020, it is re-entering a very dynamic period in its energy development. Over the coming years, millions of Indian households are set to buy new appliances, air conditioning units and vehicles. India will soon become the world’s most populous country, adding the equivalent of a city the size of Los Angeles to its urban population each year. To meet growth in electricity demand over the next twenty years, India will need to add a power system the size of the European Union to what it has now.

This special report maps out possible energy futures for India, the levers and decisions that bring them about, and the interactions that arise across a complex energy system. 

The increasing urgency driving the global response to climate change is a pivotal theme. India has so far contributed relatively little to the world’s cumulative greenhouse gas emissions, but the country is already feeling their effects. This report’s analysis is based on a detailed review of existing or announced energy reforms and targets. These include the aims of quadrupling renewable electricity capacity by 2030, more than doubling the share of natural gas in the energy mix, enhancing energy efficiency and transport infrastructure, increasing domestic coal output, and reducing reliance on imports. Progress towards these policy goals varies across our report’s different scenarios, none of which is a forecast. Our aim is rather to provide a coherent framework in which to consider India’s choices and their implications.

The Stated Policies Scenario (STEPS) provides a balanced assessment of the direction in which India’s energy system is heading, based on today’s policy settings and constraints and an assumption that the spread of Covid-19 is largely brought under control in 2021.

The India Vision Case is based on a rapid resolution of today’s public health crisis and a more complete realisation of India’s stated energy policy objectives, accompanied by a faster pace of economic growth than in the STEPS.

The Delayed Recovery Scenario analyses potential downside risks to India’s energy and economic development in the event that the pandemic is more prolonged.

The Sustainable Development Scenario explores how India could mobilise an additional surge in clean energy investment to produce an early peak and rapid subsequent decline in emissions, consistent with a longer-term drive to net zero, while accelerating progress towards a range of other sustainable development goals.

Prior to the global pandemic, India’s energy demand was projected to increase by almost 50% between 2019 and 2030, but growth over this period is now closer to 35% in the STEPS, and 25% in the Delayed Recovery Scenario. 

The latter would put some of India’s hard-won gains in the fight against energy poverty at risk, as lower-income households are forced to fall back on more polluting and inefficient sources of energy. It would also extend the slump in energy investment, which we estimate to have fallen by some 15% in India in 2020. Even though the pandemic and its aftermath could temporarily suppress emissions, as coal and oil bear the brunt of the reduction in demand, it does not move India any closer to its long-term sustainable development goals.

India’s size and dynamism will keep it at the heart of the global energy system