Production and consumption of electricity in India
India is the third-largest energy-consuming country globally, thanks to rising incomes and improving the standard 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. India is soon expected to become the world’s most populous country. To meet the 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.
The Indian govt has introduced many reforms and policies (Such as STEPS, India vision case, delayed recovery and sustainable development scenario) towards building an energy-efficient nation and as well as keeping greenhouse gas emissions in mind. India has so far contributed little towards the cumulative greenhouse gas emissions, but we are already feeling its effects. India aims at quadrupling renewable electricity capacity by 2030, more than doubling the share of natural gas in the energy mix, enhancing energy efficiency and transport infrastructure.
Before 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. That has forced the lower-income households to fall back on inefficient and more polluting energy sources.
India is currently in the phase of an expanding economy, population, urbanization and industrialization. That means India sees the largest increase in electricity demand by 2040. In STEPS, as India develops and modernizes, its rate of energy demand growth is supposed to be three times the global average.
India is the 3rd largest producer of electricity in the world. The national electric grid in India has an installed capacity of 388.134 GW as of 31 August 2021. During the fiscal year (FY) 2019-20, the gross electricity generated by utilities in India was 1,383.5 TWh (terawatt-hour). The total electricity generation (utilities and non-utilities) in-country was 1,598 TWh. The gross electricity consumption in FY2019 was 1,208 kWh per capita. The per capita electricity consumption is low compared to most other countries despite India having a lower electricity tariff. In spite of the surplus power-generation capacities, India lacks adequate transmission and distribution facilities. Fossil fuels dominate the electricity sector in India. Coal, in particular, produced 3/4th of the nation's electricity in 2018-19. The govt. has been taking various measures to scale down the use of fossil fuels. And let's just say it paid off. Renewable power plants, which include large hydroelectric plants, constitute 37% of India's total installed capacity. By the end of 2021, the contribution of renewable energy sources increased to about 39%. 2,75,000 MW renewable power capacity plants are being added. It was projected that renewables would contribute to 44.7% of the total by 2029-30, but, since India has already reached close to 40%, the Prime Minister and the Renewable energy Minister RK Singh have said that India will achieve its 500 GW (50%) non-fossil fuel energy target within 2030; just as promised at COP26. India aims at producing about 450 GW from solar and the rest 70-100 GW of energy from hydropower. Experts believe that India might be able to reach its targets well before the deadlines.
The solar energy revolution:
Solar power growth is projected to explode in India, matching coal’s share in the Indian power generation mix in 2 decades or sooner. As things stand, solar accounts for less than 10% of total energy production, but the numbers are predicted to be in the mid-30s by 2040. This dramatic turnaround is fueled by India’s ambitious target of producing 500GW (50%) of the energy requirement from renewables by 2030. India’s electricity demand is set to increase much more rapidly than its overall energy demand. It is forecast that India will have anywhere between 140-200 GW of battery storage capacity by 2040.
Coal’s hold over India’s power sector has been high ever since independence, but things are turning around. It is predicted that coal’s share in the overall energy mix will come down from around 44% to somewhere in the lower 30s by 2040.
The expected spike in India’s energy demands.
Energy demand for road transport in the STEPS is projected to increase more than 200% over the next two decades. An extra 25 million trucks will be travelling on India’s roads by 2040. As the road freight activity triples, a total of 300 million vehicles of all types will be added to India’s fleet between now and then. In the STEPS, India’s oil demand rises by almost 4 million barrels per day (mb/d) to reach 8.7 mb/d in 2040, the highest increase of any country. India is set to more than double its building space over the next two decades, with 70% of new construction happening in urban areas, which will further hike the energy demand.
India outperformed what it promised in Paris.
India has been outperforming its Paris pledges because of the clean energy push. By 2030, the share of non-fossil fuels in electricity generation capacity will reach almost 60%, well above the 40% mark that India had pledged. India's clean energy workforce is projected to grow by over 1 million in the next ten years. In the Sustainable Development Scenario, where the equipment market for solar, wind, batteries and water electrolysis rise to $80 billion per year, the industrial and commercial opportunities for clean energy are even more extensive.
Growth of natural gas:
The market for natural gas is growing fast in India, but its role varies by sector, by scenario and over time. The 6% share of natural gas in India’s current energy mix is among the lowest in the world. It almost doubles in the STEPS as gas use rises in the industrial sector and city gas distribution. However, affordability is a matter of concern, given the complex patchwork of added tariffs, which on average doubles the cost of gas when it reaches the consumers.
India’s energy crisis risk:
India’s largest import is fossil fuels, and it is expected to increase three folds in the next two decades according to the STEPS. The net dependence on imported oils is set to hit 90% by 2040, compared to 75% today. If the necessary flexibility in power systems does not materialize, the electricity sector could face an energy security risk. The poor financial health of many electricity supply firms poses a systemic threat to the reliability of electric supply. Improving efficiency and reducing losses are considered key to reforming the sector.
India’s CO2 emissions are set to increase by 50% in the next two decades. Nevertheless, the per capita emissions remain well below the global average. The main reasons for CO2 emissions occur outside the power sector: The industries and the transport sector. These two sectors are also responsible for a much larger share of air pollutants emissions than the power sector.
India’s hike in electricity demand due to EVs:
It is projected that India will need about 100 TWh more, which is roughly 5% of total electricity if EVs take over road transport. According to NITI Aayog’s energy policy report, the electricity demand is set to double or even triple due to the increased ownership of appliances by 2030. As of now, during peak hours, people have to either use less electricity or have to pay extra. So, it becomes critical for the nation to be able to handle the grid load. Also, by 2030, India is expected to attain a 30% market penetration of EVs, which in turn is projected to push the demand to power the EVs to around 630 TWh 2030. A Brookings institution India report suggests that EVs will account for the "most significant load capacity in the country", higher compared to other energy-intensive industries.
How is India preparing for an EV revolution?
The global EV market grew about 43% annually over the last five years, and the global market penetration of EVs stood at 2.9% in 2019. The CoViD recovery packages of many leading and developed countries focus heavily on EVs. India lags behind the leading markets where out of the 7.2 million units sold globally in 2019, India accounted only for 1,70,000 units.
EVs are of great interest in India. The post-pandemic economic recovery is backed by a green industrial policy to reduce oil imports and strengthen energy security. Reducing conventional vehicles is also central to checking air pollution and mitigating climate change. As discussed earlier, India has already rolled out several incentive schemes to support and stimulate the indigenous production of EVs. Experts feel that besides the incentives and subsidies, private sector investment and participation are essential for innovation, development and affordability of the products.
Economic impacts of EVs on the Indian economy:
As stated earlier, India is expected to have an EV market penetration of about 30%. That will mean a direct savings of about 1.1 lakh crore (USD 14.1 bn) on crude oil imports. A combination of high public transport mode-share with 30 per cent EV sales will further lead to INR 2.2 lakh crore (28.3 billion) of savings on crude oil imports. That means the state and the central governments lose about 15% of potential tax revenues on petroleum compared to a business as usual (BAU) scenario as a result of the reduction in fossil fuel consumption. The new manufacturing activities and increase in electricity consumption are expected to generate close to 1.2 lakh jobs in 2030 with 30 per cent EV sales. On the flip side, the petroleum and automotive (ICE vehicle) sectors would lose 1.6 lakh jobs. There are several other crucial and trivial factors, which are beyond the scope of this blog, that might affect the economy.
After all this discussion, an existential question pops up in our minds. How long will it take to switch to EVs completely? And what will happen to conventional vehicles? Well, it's projected that by 2047, EVs will take over the transportation market in India. But, with the current trends, this ambitious goal seems far-fetched. The introduction and the sales of any new product in the market follow an S-curve, where the price is too high during its early days, and its market share is low. Then, with innovation and newer tech, the price falls, which leads to an exponential increase in sales. It reaches an asymptote stage when the market is saturated. The current EV market is still in its infancy. That makes it hard to sell the higher-priced EVs to highly a price-conscious consumer community like the one in India. So, it’s going to take some time for people to accept it, given the range anxiety, longevity of the batteries and so on. Until then, the technology would have matured enough to make the vehicles well affordable.
But, even after a near 100% market penetration, conventional vehicles will coexist alongside EVs. There are a few handfuls of places where electric vehicles cannot be used. So yeah, the next generation won’t have to see IC engines in the museum.
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