HomeWorld RegionsAsia'India will be the engine of global energy demand growth'

‘India will be the engine of global energy demand growth’

So says International Energy Agency chief Fatih Birol. Kelvin Ross looks at the IEA’s forecast for the Indian power sector and hears from players active in the country

The IEA’s Fatih Birol at COP21 in Paris

Credit: IEA

India is set to contribute more than any other country to the rise in global energy demand over the next 25 years, according to the International Energy Agency.

But even so, its energy demand per capita in 2040 would still be 40 per cent below the world average, says the IEA.

“India’s energy transformation requires three things: investment, investment and investment,” says IEA executive director Fatih Birol.

“A lot is being done already to overhaul the energy regulatory system and get the incentives in place – this is vital, as India will need to call upon a wider range of investors and sources of finance than it has in the past.”

And he stressed that “India will be the engine of global energy demand growth”.

“India is moving to the centre stage of world energy. Some 600 million people will be connected to electricity in the next 25 years.”

Although its energy demand has almost doubled since 2000, some 240 million people – one in five citizens – still lack access to electricity. The IEA states that “to ensure that energy is a spur, rather than a hindrance, to India’s advancement, policymakers must redouble efforts to bring capital into the sector, particularly in more efficient and low-carbon technologies”.

In a forecast of the India energy sector, the IEA calculates that India needs more than $140 billion in energy investment per year to 2040, around $110 billion per year in energy supply – 75 per cent of which is required to meet India’s burgeoning need for electricity – and a further $30 billion a year to improve energy efficiency.

India One solar thermal power plant

Credit: Brahma Kumaris

Taking into account the achievement of universal electricity access and anticipated demographic trends that will make India the most populous country in the world, India has to make provision for nearly 600 million new electricity consumers by 2040.

Over the same period, the IEA estimates that some 315 million people, almost the population of the US today, will be added to India’s urban population.

This, it says, “will accelerate the switch to modern fuels and the rise in appliance and vehicle ownership while pushing up demand for construction materials. The ‘Make in India’ programme that aims to transform India into a manufacturing powerhouse can help modernize the economy and create jobs for the growing workforce, and also has major implications for energy use.”

This will see India’s coal demand growth rocket, with most of it met by expanded domestic production. Oil demand will also increase – according to the IEA, more than in any other country – and be nearly 10 million barrels per day by 2040, although this will be via imports, particularly from the Middle East.

However, the growth in energy provision is not confined to fossil fuels. The IEA predicts India will become the world’s second-largest market for solar PV. More than half of the new electricity generation capacity to 2040 is projected to come from non-fossil fuels, led by solar and wind power.

The potential of renewables in India – and the price tag needed to realize it – was highlighted by a panel of energy and financing experts at the World Future Energy Summit in Abu Dhabi in January.

“The potential is huge – the number of gigawatts is mind-boggling,” said Amit De, senior strategist at Canada-headquartered solar developer SkyPower Global.

India has to make provision for nearly 600 million new electricity consumers by 2040

Credit: Siemens

De said that SkyPower has committed to build 18 GW of solar projects in India by 2022.

“We see India as a very competitive market but is has fantastic opportunities. There are challenges in terms of the grid, some states are not so easy to do business in, and it would be nice if regulation was more streamlined, but renewables will change the face of power generation in India.”

Last month, SkyPower signed four power purchase agreements with the Indian state of Telangana to build and operate a total of 200 MW of solar projects.

Over the previous months, SkyPower had secured 400 MW of solar PV projects in Madhya Pradesh and Telangana.

“India is a world leader in deploying solar, not only with its significant targets but through its very actions,” says SkyPower’s president Kerry Adler.

India is embracing the potential of windpower

Credit: Land Rover Our Planet

He adds that SkyPower “is committed to making a powerful contribution to India’s goal of generating 100 GW of solar power by 2022”.

At the World Future Energy Summit, Pranav Mehta, chairman of the National Solar Energy Federation of India, said there was “exponential growth in India” for renewables, and added that the growth would be built on “four pillars”.

“Firstly, volume – if the volume is there the business will come; second, spread – spreading renewables throughout the country is needed; third is technology and fourth is infrastructure.”

He said India had gone from zero renewables to 5000 MW in just a few years and “we are going to have 20 times as much”.

The IEA says India needs over $140 billion in energy investment per year to 2040

Credit: World Energy Council

Ashish Sethia of Bloomberg New Energy Finance said that for India to fulfil its renewable energy targets, $20 billion of capital will need to come into the market each year.

“Last year it was $11 billion, so we need to double that number.”

He added that India was “the only major economy in the world that has power market growth of between 4 and 5 per cent”. Not even China, he said, could compete with that.

Vikas Dawra, managing director of Yes Bank, India’s fifth largest private sector bank, stressed the urgency of a renewables rollout: “One third of Indians don’t have access to the grid – that’s 330 million people.”

Mytrah Energy is a company specializing in renewable projects in India. Its executive vice-president Bob Smith told Power Engineering International: “I am delighted that the IEA have confirmed what we at Mytrah have been saying for some time – that India is the most exciting power market in the world.”

Smith said that the combination of rapid economic growth and a relatively low per-capita consumption “places India at the centre of the world energy stage, with demand growth exceeding all other countries over the next 25 years”.

He said that Mytrah had been “attracted by the rapidly growing market, and the lack of large government subsidies”, and had “built a portfolio of 578 MW of wind power in India over the last five years. Wind is cost-competitive with fossil fuels in India and has the great advantage of being very quick to construct – an ideal solution for a rapidly growing market.”

Mytrah has commissioned the first phase of a wind farm in Rajasthan.

The 50 MW project will ultimately see the installation of 24 Suzlon wind turbines of 2.1 MW each. Phase one of the project comprises an initial 16.8 MW, with the remainder following this year.

Mytrah now has a wind power portfolio of 560 MW across six Indian states – Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu.

Ravi Kailas, Mytrah chairman, said the project “is the first part of 200 MW of additional capacity which we have planned for the 2016 wind season”.

He added: “The demand for renewable energy in India continues to increase, with a government target of 170 GW by 2022.”