India faces higher increase in energy demand over next decade: IEA

India, which was the fastest growing major economy in 2023 with output increasing by 7.8%, is on track to become the third-largest economy in the world by 2028

India is poised to face a higher increase in energy demand than any other country over the next decade mainly because of its size and the scale of rising demand from all sectors, the International Energy Agency (IEA ) said in its World Energy Outlook on Wednesday.

The IEA said coal is set to retain a strong position in the energy mix in India. (X)

“India was the fastest growing major economy in 2023, with output increasing by 7.8%. It is on track to become the third-largest economy in the world by 2028. India overtook China in 2023 to become the most populous country in the world, even as its fertility rate dropped below replacement level,” said the report.

In the STEPS scenario based on current policy plans, India is on track to add over 12,000 cars daily to its roads over the period to 2035. Built-up space is set to increase by over 1 billion square metres annually. This is larger than the total built space in South Africa, IEA projected.

By 2035, iron and steel production is on track to grow by 70%. The cement output is set to rise by nearly 55%. The stock of air conditioners is projected to grow by over 4.5 times, resulting in electricity demand from air conditioners in 2035 more than Mexico’s total expected consumption that year, the report said.

The total energy demand in India is set to increase by nearly 35% by 2035 in the STEPS, and electricity generation capacity nearly triple to 1 400 GW.

IEA said coal is set to retain a strong position in the energy mix in India over the next decades. “In the STEPS, nearly 60 GW of coal-fired capacity will be added net of retirements by 2030. The electricity generation from coal rises by over 15%. Generation from coal remains over 30% higher than that from solar PV even in a decade in which solar PV accounts for twice as much capacity, owing to the lower capacity factor of solar installations,” IEA projected.

IEA said coal has been playing a prominent role in meeting energy demand in the industry, providing 40% of its energy needs in 2023. By 2035, the consumption of coal in industry would have grown by 50%, with its share in total industry demand remaining at similar levels as today.

India has a goal of achieving net zero emissions by 2070. “In this scenario, clean power generation is nearly 20% higher than in the STEPS by 2035, and India has the world’s third-largest installed battery storage capacity in place by 2030 to accommodate the rising share of variable renewables,” IEA said.

A rapid rise in electric mobility is projected for India, which will contribute to oil consumption peaking in the 2030s. Coal use in the industry also peaks in the 2030s as industrial use of electricity and hydrogen rises steadily. On its trajectory to net zero emissions by 2070, India’s aggregate annual CO2 emissions reach 2.5 billion tonnes in 2035, which is 25% below the level in the STEPS, IEA said.

IEA warned of a fossil fuel surplus especially oil and gas, which are likely to be abundant and cheaper during the second half of this decade as climate policies on energy transition are implemented globally.

Overall, regional conflicts and geopolitical strains are highlighting significant fragilities in the global energy system, making clear the need for stronger policies and greater investments to accelerate and expand the transition to cleaner and more secure technologies, the IEA report said.

The report, based on present policies, projects that the world is set to enter a new energy market context in the coming years, marked by continued geopolitical hazards but also by a relatively abundant supply of multiple fuels and technologies. This includes an overhang of oil and liquefied natural gas supply during the second half of the 2020s, alongside a large surfeit of manufacturing capacity for some key clean energy technologies, notably solar PV and batteries.

“In the second half of this decade, the prospect of more ample – or even surplus – supplies of oil and natural gas, depending on how geopolitical tensions evolve, would move us into a very different energy world from the one we have experienced in recent years during the global energy crisis,” said IEA executive director Fatih Birol in a statement on Wednesday.

“It implies downward pressure on prices, providing some relief for consumers that have been hit hard by price spikes. The breathing space from fuel price pressures can provide policymakers with room to focus on stepping up investments in clean energy transitions and removing inefficient fossil fuel subsidies. This means government policies and consumer choices will have huge consequences for the future of the energy sector and for tackling climate change.”

In a statement, the UAE, the 2023 United Nations Climate Change Conference Presidency, where parties agreed last year on tripling of global renewable energy capacity by 2030, said it is important to remain focused on the goal. “We welcome the IEA’s call to speed up the energy transition and urge governments to include specific renewable energy and infrastructure targets in their third round of Nationally Determined Contributions (NDCs) due by February 2025.”

It called for greater efforts to incentivise private sector investment and cut red tape so it is easier to develop and deploy clean energy projects at the pace and scale needed. “All stakeholders must remain laser-focused on tripling renewable energy capacity and doubling annual energy efficiency improvement by 2030,” the statement said.