A multidimensional reality: India’s energy, power, industrial and mobility transitions

Technology slate for interlinked sectoral transitions in power, mobility, industry

India’s journey toward a low-carbon future involves an integrated, cross-sector approach. Each of the following sectors faces unique challenges and opportunities in this transition, necessitating sectorspecific strategies and technologies. India’s low-carbon technology landscape comprises both mature and burgeoning technologies. Mature technologies such as solar, wind, energy storage, energy efficiency and electric vehicles require significant scaling to meet 2030 targets.

Transport sector: The transport sector comprises about 13% of India’s total CO₂ emissions. EVs, in tandem with policies promoting their adoption, the development of charging infrastructure and incentives for manufacturers and consumers, are key to mobility transformation. Advancing biofuels and improvements in fuel efficiency are also critical to electrifying transport.

Power sector: The power sector comprises 48% of India’s total CO₂ emissions. Solar and wind power are central to its decarbonization, with ambitious targets for 2030. Energy storage systems, such as batteries, are vital to address problems with intermittent, variable renewables and ensure a stable power supply. Integration of smart grids and digital technologies will further enhance the efficiency and reliability of the grid.

Industrial sector: The industrial sector comprises 21% of the country’s CO₂ emissions, particularly in areas such as refineries, chemicals, iron and steel, and cement. Decarbonizing these industries requires a multifaceted approach, including energy-efficiency improvements, adoption of cleaner technologies and transition to alternative fuels such as green hydrogen and bioenergy. Carbon capture, utilization, and storage (CCUS) technologies also hold promise for mitigating emissions from hard-to-abate industrial processes.

Power sector transition

India’s power sector faces the hurdle of heavy reliance on coal, which makes up about 73% of total generation. Continued power demand growth, the intermittent and variable nature of power supply from renewables, high storage costs and infrastructure constraints suggest the coal bias will continue in India’s power mix in the near term.

To address these challenges and scale up renewables, India is pursuing a multipronged strategy of diversifying energy sources, reducing costs with competitive tenders and economies of scale, strengthening grid infrastructure and bringing self-reliance to supply chains. India is targeting to more than triple its current renewable capacity to reach about 500 GW by 2030, according to the Ministry of Power. This ambitious goal provides long-term visibility for renewables demand, which will be tender-driven by federal- and state-level agencies. Further, India is prioritizing low-emission technologies such as green hydrogen, green ammonia, small nuclear reactors and CCUS to achieve its climate objectives.

Strategies such as the Production Linked Incentive (PLI) scheme for solar and battery manufacturing and the Ministry of New and Renewable Energy’s Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme are being launched to significantly increase India’s manufacturing capacity to build self-reliant supply chains. This should help the country meet domestic demand as well as position India as an alternative regional hub for export markets. Further, commissioning deadlines under the PLI scheme may be extended to allow original equipment manufacturers to scale up their facilities and start production to access the PLI’s five-year financial incentives However, in the short term, transition to local manufacturing for key components may create upward cost pressures for the sector.

Green mobility transition

India’s road map for green mobility unfolds in phases, balancing technological advancements with market readiness and infrastructure development. By 2030, the nation targets significant penetration of battery-electric vehicles (BEVs) across all segments, from two-wheelers to buses and commercial vehicles. This phased approach to the transition addresses the needs of urban and rural areas while promoting innovation and competition among manufacturers.

Initiatives such as the PLI, Faster Adoption and Manufacturing of Electric Vehicles, and Advanced Chemistry Cell schemes will make BEVs increasingly attractive, with enhanced range and faster charging, addressing concerns about practicality and convenience.

Alongside the rise of BEVs, hybrid solutions and compressed natural gas powertrains, India is focusing on the mass adoption of economically sustainable solutions such as biofuels. This promotes its agriculturalbased economy (India is the world’s largest producer of sugar), reduces imports of crude oil and LNG — a step toward self-reliance, or Atmanirbhar Bharat — and improves air quality, as biofuels are produced from waste, thus reducing pollution from crop burning and waste decomposition. India’s commitment to green mobility is underscored by its adoption of stringent emission standards and robust regulatory frameworks. The implementation of Bharat Stage 7 emissions norms aims to reduce pollution from conventional internal combustion engines, while the phased introduction of Corporate Average Fuel Efficiency/Economy norms (phase three by 2027 and phase four by 2032) should ensure a gradual but impactful transition toward greener powertrains.

Hard-to-abate industrial transition

As India accelerates manufacturing, the country’s share of global industrial production is expected to double from about 3% in 2023 to about 6% in 2050. S&P Global estimates that for a net-zero scenario, India will need about a 1.7-gigaton reduction in industrial emissions in that time. This longer-than-2030 time frame is when key breakthrough technologies that impact hard-to-abate process emissions are expected to achieve global commerciality. Key industrial sectors for applying these technologies will include refining and chemicals, nonferrous metals such as aluminum, iron and steel, and cement. 

Burgeoning technologies such as hydrogen and CCUS are crucial for deep emissions reduction but face challenges on readiness and scale. Unless the green hydrogen economy is developed faster to meet India’s 2030 net-zero target, achieving this goal could be delayed by a decade. CCUS is in its early stages, with a few pilot projects and unexplored sequestration options. Policy intervention is crucial to identify and match carbon sources with suitable sinks. The development of carbon markets will be vital in putting a price on carbon and developing a market basis that will have a material impact on emissions reduction in the hard-to-abate industrial sector. 

A just transition: Investment themes and conundrums

India’s energy transition can be characterized by four key investment themes: energy efficiency, renewables, low-emission fuels, and mobility. The government’s policy framework uses a mix of subsidies, mandates, taxes and incentives to cover these. While subsidies and incentives have been the primary tools thus far, India has allocated an average of 37% to fossil fuels and 5% to green energy over the past five years, according to the International Institute for Sustainable Development. The adoption of mandates and incentives to stimulate demand for environmentally friendly technologies such as green hydrogen is likely to grow. To facilitate financing for these technologies, the country is also developing a carbon market framework and a climate finance taxonomy.

Ensuring a just transition, securing adequate financing and making radical choices are essential to achieve India’s net-zero goals. A significant hurdle is the returns gap between traditional oil and gas companies and green energy enterprises. Despite investor enthusiasm and higher stock market valuations for green energy companies, S&P Global Commodity Insights data shows that oil and gas companies have consistently outperformed them by an average of 8.3% in returns on capital employed over the past five years. Addressing this disparity is crucial for a fair and just transition and impacts the broader political economy of fossil fueldependent industries.

Looking forward: 7 critical decisions for India’s energy transition

1) Make the radical choice of gas in power mix: Gas, a key growth fuel and bridge for the full energy transition, remains underrepresented in the Indian energy mix, being stuck at approximately 6%, according to Energy and Climate Scenarios. To achieve the government’s ambition of 15%, announced by the Ministry of Petroleum and Natural Gas in 2023, India must deploy sufficient gas in power to support flexibility, alongside the growth of renewables and sustainability, to transition away from coal. 

2) Advance critical mineral security: India, the only developing nation in the Minerals Security Partnership, has identified 30 critical minerals necessary for its energy transition. The country has also established Khanij Bidesh India Ltd., a joint-venture company under the aegis of the Ministry of Mines, to secure access to critical minerals overseas. While the number of projects on critical minerals more than double to 127 in 2023 from 59 in 2020, according to the Ministry of Mines, more focus on domestic exploration is required.

3) Accelerate power sector reforms: India must prioritize market reforms to address legacy issues such as high losses, inefficient operations and financial distress in the distribution sector. It should foster a competitive market environment by promoting private participation and ensuring fair market practices. It should also develop and implement innovative market-based solutions to improve grid reliability, including demand response programs, advanced AI-linked grid technologies and real-time pricing. Additionally, India needs to focus on grid modernization and expansion to accommodate increasing renewable energy integration and enhance grid resilience.

4) Boost energy efficiency and productivity: India should focus on energy-intensive industries for significant efficiency improvements. It must promote energy-efficient cooling solutions, expand public transportation and leverage energy service companies for environmentally friendly building projects. A concerted effort to reduce energy consumption in these areas is vital for improving energy productivity.

5) Build strong clean energy supply chains: Securing domestic raw material supplies, developing a skilled workforce and promoting local component manufacturing are essential for building robust battery, electrolyzer and photovoltaic manufacturing ecosystems. Leveraging government procurement to create a domestic market is crucial for supporting local industries.

6) Mobilize green finance: India should create a conducive environment for green bond issuances, explore innovative financing models and strengthen financial institutions’ capacity to manage green projects. Attracting private capital through a climate taxonomy and impact investment funds is necessary to scale up clean energy investments.

7) Drive innovation and technology development: India must focus on decentralized renewable energy solutions, promote domestic innovation and foster public-private partnerships for technology development. Supporting research and development in off-grid and mini-grid technologies will be crucial for addressing energy access challenges in rural areas.

As India pursues a balanced energy transition prioritizing long-term sustainability and energy security, several critical challenges have emerged. Despite the policy push in a greener direction, advancing a just transition raises a few conundrums. Radical choices will be needed to ensure that each technology option, mature or burgeoning, has been applied to its full potential to bend the emissions curve. Addressing the twin challenges of air pollution and climate change will help deliver a high-quality, high-growth economy to the world’s largest democracy.