India will dislodge the European Union as the world’s third-largest energy consumer by 2030 as urbanised population expands and rapid economic growth pulls more people out of poverty, says the International Energy Agency’s second ‘India Energy Outlook’ released on Tuesday.
By 2040, India’s electricity system will be larger than the EU in terms of generation capacity and the country will have more renewable capacity than the US.
The country will contribute 25% of the global growth in energy demand through 2040, posting the largest increase for any country, “underpinned by a rate of GDP growth that adds the equivalent of another Japan by 2040,” the report says.
But this will also pose twin challenges of securing energy supplies and meeting the “swelling demand without exacerbating issues like costly energy imports, air pollution and greenhouse gas emissions”.
“More than that of any other major economy, India’s energy future depends on buildings and factories that are yet to be built and vehicles and appliances that are yet to be bought. Based on India’s current policy settings, nearly 60% of its CO2 emissions in the late 2030s will be coming from infrastructure and machines that do not exist today,” the report says.
IEA executive director Fatih Birol says, “The stakes could not be higher, for India and for the world. All roads to successful global clean energy transitions go via India.”
The Outlook says India will need to embark on a path of sustainable development to address the “critical challenges of the industrial sector through more electrification of processes, greater material and energy efficiency, use of technologies such as carbon capture and a switch to progressively lower-carbon fuels”.
The transformation is crucial since India will lead the global oil and gas demand till 2040 with a five-fold increase in car ownership, increasing dependence on fossil fuels.
As a result, the overall fuel import bill will triple as oil demand rises 74% to 8.7 million barrels a day, gas imports meet 60% of consumption and coal consumption increases to 777 million tonnes. This will create vulnerabilities to price cycles and volatility as well as possible supply disruptions.