rethink sustainability
What could India’s election result mean for renewable energy?
India’s energy landscape has changed remarkably over the past decade. During his 10 years as Prime Minister, Narendra Modi and his governing Bharatiya Janata Party (BJP) have led the world’s third-largest emissions producer1 in promising to decarbonise half of its energy system by 20302 and to reach net zero by 2070. They’ve also overseen a 59% drop in fossil fuel subsidies – far more than many other leading economies.3 All of this has led to remarkable growth in India’s renewables sector, and the country’s recent election results promise further progress . The future for renewable energy in India certainly looks bright – though some clouds still linger on the horizon.
India’s road to renewable energy
India’s final energy demand – already the third highest in the world – is projected to double by 2070 compared to 20204. This anticipated surge has already accelerated the country's development of renewable energy, with capacity increasing by 128% since 2014. India now ranks fourth globally for the rate of renewable power additions,5 and replacing all its coal-fired power with renewables could save India around USD 8.4 billion a year, according to some forecasts6.
Read also: The countries leading the energy transition
India’s climate has made the country particularly fertile ground for solar power. It now boasts four of the 10 largest solar parks in the world, including the second largest: the 2,255 MW Bhadla Solar Park in Rajasthan.7 India is also home to the world’s first and only 100% solar-powered airport, Cochin International Airport in Kerala. Thanks to these and other significant projects, the country’s installed solar capacity now stands at 82.63 GW – 30 times larger than it was nine years ago and the fifth highest in the world.8
The BJP has played a crucial role in driving the electricity sector in India to embrace renewables through a range of landmark policies and initiatives. Most notable have been ambitious targets set at international forums such as COP26 and the UN General Assembly, including plans to install 500 GW of renewables by 2030 and to cover 50% of electricity demand with renewables by the same year.9
India has also set up a National Green Hydrogen Mission as part of a plan to become a leading producer, user and exporter of the clean fuel.10 Launched in 2021 with an initial budget of around USD 2.4 billion,11 the initiative aims to increase India’s commercial green hydrogen production capacity from zero12 to 5 million tonnes per year by 203013. Green hydrogen has the potential to help decarbonise sectors that can’t be easily electrified, such as steelmaking. Indian company Hygenco recently inaugurated the world’s first off-grid green hydrogen production plant for the stainless steel industry.14 With the global market for green steel expected to grow from USD 200 million in 2022 to USD 364 million by 2032,15 such projects could help India become a leader in decarbonising the steel industry and other hard-to-abate sectors.
Read also: Green hydrogen: the key to decarbonising heavy industry
The future of renewable energy in India
Before this year’s election, Modi pledged to build on India’s renewable-energy achievements if he remains in office. The BJP’s election manifesto outlined plans to create “mega” solar and wind parks, and to develop a “Green Energy Corridor” capable of distributing renewable energy across the country. It also talked of establishing India as a leading global renewable production hub.16 These initiatives would go a long way towards enabling the country to meet its targets on emissions reductions and renewable energy, as well as creating potential investment opportunities.
While India has already made significant strides towards a renewable future, it’s clear that existing momentum alone won’t be enough to deliver the next phase of the country’s energy transition. Reaching 500 GW of renewable energy capacity by the end of this decade will require a two- to three-fold increase in the rate of capacity additions. At the same time, India has yet to deliver a clear strategy for phasing out coal-based power plants and accelerating the deployment of renewable energy to the necessary pace of 30-35 GW per year. Crucially, such a strategy would require a tripling of energy investments to an estimated USD 160 billion a year between now and 2030 – a significant sum, even for the world’s fifth-largest economy. More private investors and innovative financing models would likely be needed to bridge such a significant funding gap.17
The impact of renewable energy on India’s economy
The growth potential of India’s renewable energy sector is vast. Its market for green hydrogen, battery storage and other low-carbon technologies could be worth USD 80 billion by 2030, according to the International Energy Agency.18 Renewable energy projects are also expected to create large numbers of jobs – particularly in rural areas – in everything from manufacturing and project development to maintenance. This has the potential to transform the economy and reduce poverty,19 helping India get closer to its goal of becoming the world’s third-largest economy20.
However, with states in western and southern India playing host to more renewable resources and having stronger economies than the more coal-reliant northern and eastern regions, India will also need to tackle the problem of energy inequality. As it deploys more renewable energy, states with fewer renewable resources may face higher energy costs and economic imbalances, potentially leading to significant budget deficits and the need for inter-state energy transfers.21 India will require “significant investment to make its energy transition just, sustainable, and inclusive”, according to an analyst at the International Institute of Sustainable Development.22
Read also: Electrification of the economy: unprecedented challenges for a sustainable future
Building a renewable nation
Indian’s move towards renewables aligns with a global shift towards electrification. At Lombard Odier, we believe that economy-wide electrification will increase from 20% today to 70% by 2050 as sectors transition away from fossil fuels. This shift will be essential to the world achieving its climate goals and creating a more sustainable future. India’s achievements and ambitious goals reveal a nation with the potential to become one of the leaders in this global energy transition.
This year’s election comes at a critical time in India’s renewable energy journey. The evidence suggests that a third term for Modi’s BJP will herald even more policies and initiatives designed to accelerate India’s energy transition. Yet the road ahead will also bring challenges that require pioneering solutions and significant investment. With India home to nearly a fifth of the world’s population, its transition to a net-zero economy will be vital for the health of the entire planet.
1 World’s Top Emitters Interactive Chart | World Resources Institute (wri.org)
2 Roadmap to India’s 2030 Decarbonization Target | ETC (energy-transitions.org)
3 Mapping India’s Energy Policy 2023 | IISD (iisd.org)
4 India energy transition pathways: A net-zero perspective | Deloitte (deloitte.com)
5 Renewable Energy | Invest India (investindia.gov.in)
6 Top Solar Energy Companies in India | IBEF (ibef.org)
7 The 10 Largest Solar Power Parks In The World (2023) | SolarCtrl (solarctrl.com)
8 Solar And Wind Energy Accounts For ~89% Of India's Total Renewable Power Capacity | SolarQuarter (solarquarter.com)
9 Renewable Energy | Invest India (investindia.gov.in)
10 National Green Hydrogen Mission | Ministry of New and Renewable Energy | India (mnre.gov.in)
11 National Hydrogen Mission | National Portal of India (india.gov.in)
12 India plans to produce 5 mln tonnes of green hydrogen by 2030 | Reuters (reuters.com)
13 India’s clean energy transition is rapidly underway, benefiting the entire world | Analysis | IEA (iea.org)
14 Union Minister of Steel inaugurates India’s 1st Green Hydrogen Plant in Stainless Steel Sector | Press Information Bureau | Government of India (pub.gov.in)
15 Green steel Market Size, Share, Competitive Landscape and Trend Analysis Report by Type, by End User: Global Opportunity Analysis and Industry Forecast, 2023-2032 | Allied Market Research (alliedmarketresearch.com)
16 India election 2024: What the manifestos say on energy and climate change | Carbon Brief (carbonbrief.org)
17 India energy transition pathways: A net-zero perspective | Deloitte (deloitte.com)
18 India’s clean energy transition is rapidly underway, benefiting the entire world | Analysis | IEA (iea.org)
19 Renewable energy for sustainable development in India: current status, future prospects, challenges, employment, and investment opportunities | Energy, Sustainability and Society | Full Text (biomedcentral.com)
20 Exclusive: Modi sets ambitious India economic goals for probable third term | Reuters (reuters.com)
21 Energy inequality on the rise in India amid renewable push, claims paper | News | Eco-Business | Asia Pacific (eco-business.com)
22 India Faces Clean Energy Challenges as Energy Demand Soars and Global Fossil Fuel Subsidies Rise | International IISD (iisd.org)
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
Read more.
share.