India will need to invest $12.7 trillion in its energy system, or more than three times its gross domestic product, to reach net-zero emissions by mid-century and help the world avoid catastrophic global warming , according to BloombergNEF.
Achieving that goal early, ahead of India’s official 2070 target, which lags behind the world’s biggest economies, will require rapid progress to clean up the country’s sprawling, coal-dependent power sector, according to the BNEF’s New Energy Outlook for India, published on Thursday. .
This means investments in the grid to manage variable renewable energy and also increasing cash for green energy.
The world’s third largest emitter of greenhouse gases currently produces around 70% of its electricity from coal, and the same fossil fuel underpins a range of heavy industries including steel, cement and the aluminum This is despite the rapid expansion of renewables, with a record 16 gigawatts of utility-scale solar installed by 2022.
A large amount of funding is required to change this dynamic and to meet the growing demand simultaneously. Meeting the 2050 spending target under global climate goals means investing $438 billion each year until the deadline, according to BNEF data, a massive jump for a country that invested $17 billion of dollars in energy transition technologies last year.
Cumulative investments to expand power generation capacity alone will need to reach $2.8 trillion by 2050, $2.7 trillion of which would be low-carbon, or more than $90 trillion annually.
“Building all the necessary infrastructure would require investments at an unprecedented scale and speed, which Indian banks alone may not be able to meet,” said Shantanu Jaiswal, head of India research at BNEF.
Global capital has been cautious. According to BNEF, eight of the world’s top 10 sovereign and pension funds have yet to invest in India’s renewable energy sector, while India’s own pension and life insurance funds face restrictions .
India has repeatedly raised the issue of global capital, but has been hampered by inefficiencies in its electricity market and, more recently, by the knock-on impact of the US Anti-Inflation Act and European measures to attract clean energy investors.
“India needs to establish sector-specific decarbonisation pathways and develop enabling policies to tap into all sources of global and domestic financing,” BNEF’s Jaiswal said.
Under BNEF’s ambitious 2050 scenario, energy-related emissions in the country will peak in 2024. Emissions from the transport sector will surpass 2028 with rapid deployment of electric vehicles, while industrial emissions reach peak in 2031 followed by a sharp decline. Technology will play a role, whether it’s green hydrogen in steel or carbon capture, which could cut 56% of emissions from cement manufacturing alone, according to BNEF.
For road transport, electrification will require both charging infrastructure and clean, affordable energy to fuel increased demand. Under BNEF’s net zero scenario, the impact on demand means India could end fossil fuel imports by 2050, nearly meeting Prime Minister Narendra Modi’s goal of becoming energy self-sufficient by 2047, the year that marks a century since independence.
In a less ambitious scenario, a baseline assessment of how the energy sector could evolve as a result of cost-driven rather than policy-driven technological changes, India’s energy mix is still improving, although spending is more modest at $262 billion a year on average. In this scenario, instead of reaching net zero by 2050, India’s energy-related emissions rise by more than a fifth of 2021 levels, with the power sector, a key contributor, not peak until 2036.
India, the only lower-middle-income nation among the largest emitters, aims to reduce the emissions intensity of its GDP by 45% from 2005 levels by 2030 and that half of its power generation capacity works with clean sources: solar, wind. , nuclear and hydroelectric — at the end of this decade.
