Five trends in India's energy transition in 2024

India is likely to see one of the biggest transformations in the world when it comes to energy transition.

There is little debate in the third-largest emitter of greenhouse gases about choosing between fossil fuels and renewables. Rather, India plans to accelerate growth of all fuel types to cater to the rising energy demand.

In doing so, its main aim will be to keep balancing energy security, affordability and sustainability.

India's strategy is seen as a test case and a blueprint for other emerging economies. The strategy aims to achieve net zero by 2070 and includes several short-term and medium-term targets to enhance renewable energy supply and utilization. These targets include reaching 500 GW of renewable power capacity by 2030 (currently at 179 GW) and 5 million mt of renewable hydrogen production by the same year.

Simultaneously, the strategy also includes plans to add large new fossil fuels capacities, with 80 GW of new coal power capacity by 2032 and open exploration blocks for oil and gas finds which will result in continued rise in emissions for decades to come.

Here are five trends that stand out in India's energy transition journey this year.

1. More support for supply side with subsidies, policies

A $2.4 billion subsidy is chasing renewable hydrogen developers, while a $2.8 billion production-linked investment scheme is reserved for solar panel producers. Additionally, a viability gap funding is in store for those venturing into battery storage development, with a 4 GWh capacity.

In addition, policies are framed for easy land availability, concessional power supply and offering low-cost loans. These policies serve as some of the biggest support features of India's energy transition strategy.

However, most of the incentives are designed to boost the supply side of the new energy business with the demand development is not being adequately stimulated, says the industry. For instance, mandatory consumption targets for renewable hydrogen are yet to be introduced.

New energy developers, like, ReNew have said until there is demand certainty, it will be hard to start building renewable hydrogen plants.

Industry members say when emissions reduction rules are imposed on hard-to-abate sectors such as steel, cement and chemicals, they are likely to demand their own set of financial and policy incentives to facilitate their energy transition.

2. Fertilizer, steel, refining sectors take lead in decarbonization

With the world moving towards regulations to account for emissions such as EU's Carbon Border Adjustment Mechanism, Indian industries are initiating hydrogen adoption, carbon capture, utilization and storage and shadow carbon pricing, as part of their decarbonization plans.

In June, Solar Energy Corporation of India, the government's tendering arm, released an aggregated tender for buying 539,000 mt/year renewable ammonia for several fertilizer plants.

Additionally, JSW Energy signed an agreement with the group firm JSW Steel to supply 3,800 mt/yr renewable hydrogen for seven years at its plant in Karnataka.

Around 15 of the 100 renewable hydrogen projects in India involve oil and gas companies such as BPCL, Indian Oil and GAIL with a projected production of 35,627 mt/year.

ONGC said in July, it will spend Rupees 2 trillion ($24 billion) in new energy and decarbonization projects to reach its net-zero target (Scope one and Scope two) by 2038.

The hard-to-abate industry is seen participating in the government's carbon market stakeholder consultations and working on their respective shadow price for carbon.

3. Renewable ammonia hubs develop, non-binding deals signed

Partnerships such as ReNew-JERA, ACME-IHI, Greenko-Uniper and AM Green-Yara are in the limelight for being the front runners in signing non-binding agreements for supply of renewable hydrogen and its derivatives to Japan, Germany and Singapore.

The hydrogen developers are based in hubs on India's eastern coast in Odisha and Andhra Pradesh state and are yet to be commissioned.

However, for the non-binding agreements to turn into binding sales and purchase contracts, policy clarity and uniform certifications would be required.

India's hubs will also face competition from Middle East and the US that are developing as low-cost, low-carbon ammonia-supplying zones.

Additionally, Australian hubs are ready to sign deals and secure finances to jump-start their projects, posing further competition.

In such a case, the trade believes India's renewable hydrogen/ammonia business may benefit from the diversification strategies of the largest global buyers.

4. National carbon market policy formulation in spotlight

India is currently developing its carbon market policy and after registration of carbon credits domestically, the market is likely to be ready for trade by 2026-2027.

The success of the carbon market will depend on factors like having robust system for price discovery, a transparent mechanism of reporting GHG emissions and drawing enough participants to create a sustainable and liquid trading system.

In addition, industry members are closely monitoring the development of the policy, particularly to see how the compliance and offset markets will be integrated and how India's national market will align with the global carbon market, where the country is a large supplier of carbon credits.

Specifically, concerns over the export policy of carbon credits have sprung up time and again and participants are closely watching any policy move that could adversely impact India's sale of carbon credits in the global voluntary carbon market.

5. Changing policies to factor in evolving market dynamics

Policies in the energy transition space are seen being tweaked to make them more suitable for the changing market dynamics. For example, in June, Solar Energy Corporation, amended the subsidy scheme guidelines issued in January for allocation of renewable ammonia for the fertilizer sector, by raising the quantity to 750,000 mt/yr from 550,000 mt/yr as the scheme "gained traction."

In May, the Ministry of New and Renewable Energy exempted renewable energy plants in Special Economic Zones that supply power to renewable hydrogen projects in SEZs, from the Approved List of Models and Manufacturers -- a list of domestic producers of solar PV modules.

The move, designed to lower renewable hydrogen prices, opens the door for these renewable energy plants to import cheap solar PV modules instead of buying from the ALMM firms.

The government has also advanced the date for 20% ethanol blending in gasoline to 2025-26 from 2030 It also said natural gas contracts can be reworked or reimagined so that the share of natural gas in the energy mix grows from about 7% now to 15% by 2030.

In line with this, at India Energy Week in Goa in February, Secretary Pankaj Jain from the Ministry of Petroleum and Natural Gas, said India would "fix the plane while flying it," implying policy changes would be a regular feature in India's energy transition.