India’s Path to Energy Dominance

Timothy E. Wirth said, ‘Energy is essential for development and sustainable energy is essential for sustainable development.’. His words are very relevant to the growth curve India is showing in the energy sector. She has witnessed an average growth rate of 7% over the last decade. The Government of India (GoI) has optimistic targets to scale to 9% growth levels by 2025 helping them inch closer to their 2024 vision of a USD 5 trillion economy. The Indian market is a diverse and complex avenue with a range of consumer categories and demand patterns-- e industrial units occupy a share of 42% of the total fixed cost incurred by the nation while the residential sector follows with 29%. The country has seen the demand surge by 55% in the decade starting in 2007. However, in comparison to other G20 nations, namely China and the USA, the supply scales are significantly lower. A pressing concern for the country imports which majorly comprises oil and natural gas. India still has a long way to go which is prominent from the fact that it still is heavily dependent on coal for energy generation.

The NDA coalition, led by Prime Minister Narendra Modi, has transformed the energy set-up providing electricity to each village in the world’s third-largest economy, implemented with a handsome allocation of $2.5B in August 2015. Under this scheme the Modi government-connected 597,464 villages to the grid establishing them on the map of electrified villages in India. The potential of growth is massive with the renewable and clean energy revolution gaining momentum globally. India has a significant role to play in the metamorphic stage, acting as a mega consumption hub in the years to come. India is targeting a reduction in emission intensity by 33-35% of GDP by 2030. An ambitious target of 175 gigawatts of renewable installed capacity by 2022 is already being worked on. The 2021 budget mentions the launch of the Hydrogen Energy Mission, generating hydrogen from green power sources leading the country toward renewable energy development.

After the series of phased unlocking of economic affairs post the national lockdown, India experienced a growth in the demand for energy starting September 2020 when the manufacturing and industrial units were returning to normal production after a prolonged slowdown. When factories were shut, the demand side took a hit-- experiencing an ascent in residential electricity demand. India’s most populous state witnessed a 9% increase, while Rajasthan saw an 11% rise. While states like Tamil Nadu and Maharashtra saw a meager 2.9% and 5.3% growth, owing to inventory management problems for automotive sellers. Short-term growth was stalled for a 4-month span but pent-up demand has brought the cycle in motion again. Energy demand grew by 4.4% in September 2020 as compared to the year before at 112.4 billion units. Following this was an upward trail in October, leading to a 12% growth from the last year. If it weren’t for the pandemic-led lockdown, India was seeing higher and higher consumption with February 2020 figures showing the growth of 11.73% on a year-on-year basis. November demand peaked at 166 GW on the meter showing signs of the Indian economy resuming operations.

Post lockdown the industrial requirements have seen a spike vis-à-vis the lockdown period. However, the power sector will be making its way up to reach pre-covid levels in the months to come. The patterns have seen fluctuations over the last 8-9 months. Tariff collections remain low as commercial demand is staggering with every passing month. The status quo is certainly painting a very different picture as far as the energy sector is concerned. India might be behind its rival China but the future holds a lot for India and its power sector. Renewable energy is the talk of the town and is being fuelled by the pressing concern of global warming and climate change. GoI has launched several big-budget schemes to ensure that the trajectory of growth is maintained. The Smart Cities project being at the forefront of negotiations will carve out the path for many states in India. A plethora of complementary schemes has been launched to see this goal through. India aims to achieve 40% cumulative electric power from non-fossil fuels by 2030.

It is one of the main focus areas for the authorities to make energy security a priority for the country. As per NITI Aayog, India has gained heavily from a single national power system and major investments in thermal and renewable capacity. Fruitful investment projects and plans by the government in the times to come will reap results. A legend of the energy sector is in the making and should see India emerge as one of the leaders in this space in the decades to come.


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Technical Terms:-

Total Fixed Cost: The costs incurred by a company on a fixed basis (monthly/quarterly/annually) and are to be paid even at zero levels of production.

Edited By: Aarushi Kataria

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