20 Jun India’s Energy Surge: IEA Ranks Nation Just Behind US and China in Power Output Growth
This article covers “Daily Current Affairs” and the Topic of India’s Energy Surge: IEA Ranks Nation Just Behind US and China in Power Output Growth
SYLLABUS MAPPING:
GS-3–Economic Development and Energy- India’s Energy Surge: IEA Ranks Nation Just Behind US and China in Power Output Growth
FOR PRELIMS
What are the major factors driving the rising electricity demand in India?
FOR MAINS
What role does international cooperation play in India’s clean energy development?
Why in the News?
India has emerged as the country with the third-highest growth in power generation globally over the past five years, trailing only China and the United States, according to a recent IEA report. This growth is attributed to rising electricity demand driven by expanding residential, commercial, and industrial usage. To meet this demand, India has significantly scaled up power generation across both conventional and renewable sources. A major highlight is the country’s strong focus on clean energy, especially solar PV, which accounted for over half of its non-fossil energy investment. In 2024 alone, 83% of power sector investment was directed toward clean energy. India also became the top recipient of development finance for clean energy, securing $2.4 billion in project-specific funding.
Rising Electricity Demand in India
1. Rapid Urbanisation & Smart Cities Push: Accelerated growth of Tier-2 and Tier-3 cities and urban infrastructure under Smart Cities Mission is increasing electricity consumption.
2. Industrial Growth & Manufacturing Expansion: Schemes like PLI (Production Linked Incentive) and ‘Make in India’ are driving energy demand in industrial hubs and SEZs.
3. Increased Household Appliance Penetration: Rising middle-class income has led to higher ownership of energy-intensive appliances such as refrigerators, air-conditioners, and washing machines.
4. Digitalisation & Electrification of Services: Expanding data centres, digital payments, and e-governance platforms have raised the base power load across sectors.
5. Electrification of Transportation: Growth in Electric Vehicles (EVs) and related charging infrastructure is steadily adding to grid demand.
6. Wider Rural Electrification & Saubhagya Impact: Universal household electrification has added millions of new connections, expanding the electricity demand base.
7. Heatwaves and Climate Change: Frequent and intense heatwaves in 2024–25 have led to record peak electricity demand for cooling (ACs and fans).
8. Expansion of Commercial Infrastructure: Boom in real estate, malls, office complexes, and logistics parks (post-COVID recovery) has contributed to higher energy usage.
Diversified Growth Across Energy Sources – India’s Strategy
1. Thermal Power Still Backbone of Base Load: Despite the green push, coal-based thermal plants continue to supply ~70% of India’s electricity due to reliability and load-bearing capacity.
2. Hydropower Expansion in the Himalayan States: Major projects like Arun-3 and Pakal Dul in J&K and Sikkim have boosted clean energy generation and grid stability.
3. Revival of Nuclear Energy Push: Indigenous PHWR (Pressurised Heavy Water Reactors) development and international collaborations (e.g., with France & Russia) have revived nuclear projects.
4. Surge in Solar PV Installations: Solar capacity crossed 85 GW in 2024, driven by the PM-KUSUM, Rooftop Solar Programme, and large-scale solar parks.
5. Wind Energy Developments Along the Coasts: Offshore and onshore wind projects, especially in Gujarat and Tamil Nadu, are being scaled up with support from IREDA and MNRE.
6. Government Policies Encouraging Mix: National Electricity Plan (NEP 2023), Renewable Energy Targets, and the Energy Transition Roadmap promote balanced growth across sectors.
7. Battery Storage and Hybrid Projects: Growth of solar-wind hybrid systems and investment in battery energy storage systems (BESS) ensures efficient energy use and grid reliability.
8. Private Sector & FDI in All Segments: Companies like NTPC, Adani Green, and Tata Power are investing across all sources; FDI is allowed up to 100% in power generation (except nuclear)
Push Towards Renewable Energy – India’s Green Shift
1. Solar PV Dominates Clean Energy Investment: Solar photovoltaic (PV) alone made up over 50% of non-fossil energy investment in India over the past five years.
2. Large-Scale Solar Parks & Rooftop Installations: Programs like PM-KUSUM, Rooftop Solar Phase II, and Ultra Mega Solar Parks accelerated solar deployment nationwide.
3. Renewables Driving Capacity Addition: Renewable energy accounted for a major share of new power capacity additions, surpassing fossil fuels.
4. Green Hydrogen & Bioenergy Initiatives: India launched the National Green Hydrogen Mission and expanded use of biomass, waste-to-energy, and bio-CNG.
5. 83% of Power Sector Investment in 2024 in Clean Energy: According to IEA, ₹6.6 lakh crore (~USD 80 billion) was invested in clean energy initiatives in 2024 alone.
6. Integration with Storage and Smart Grids: Investment in battery energy storage systems (BESS) and smart grid technologies supports intermittent renewables.
7. Global Support & Climate Commitments: India’s renewables growth is supported by international climate finance, ISA (International Solar Alliance) cooperation, and its net-zero 2070 pledge.
Foreign Investment Trends – Power Sector India
1. FDI Reached USD 5 Billion in 2023: Foreign direct investment almost doubled compared to pre-pandemic levels, reflecting strong investor confidence.
2. 100% FDI Allowed in Power Sector (Excl. Nuclear): India allows automatic route FDI in generation, transmission, and distribution, promoting private and global participation.
3. Key Investment from Energy Majors: Firms like Brookfield, TotalEnergies, and BlackRock made strategic entries in renewables and transmission infra.
4. Development Finance Institutions (DFIs) Support: India received USD 2.4 billion from DFIs in 2024, the highest globally, mainly for solar and wind projects.
5. Dip in Foreign Portfolio Investment (FPI): FPI in the power sector declined over the past two years due to global macroeconomic uncertainty and rupee volatility.
6. Policy Reforms Boosting Investor Confidence: Initiatives like Electricity Amendment Bill, carbon market development, and renewable purchase obligations (RPOs) improved the ease of doing business.
7. Infrastructure Push through Gati Shakti & NIP: Cross-sectoral infrastructure growth under Gati Shakti and the National Infrastructure Pipeline (NIP) created long-term investment opportunities in power logistics.
Development Finance & Global Cooperation
1. India Top Recipient of DFI Funding in 2024: India received USD 2.4 billion from Development Finance Institutions (DFIs) for clean energy, the highest globally.
2. Project-Specific Focus: Funds were allocated to solar PV parks, wind farms, transmission corridors, and green hydrogen projects.
3. Key International Contributors: DFIs like the World Bank, ADB, AIIB, and Germany’s KfW played a major role in supporting clean energy projects.
4. Support for Innovation & Pilot Projects: International funds also backed R&D in energy storage, microgrids, and smart meters under pilot schemes.
5. Capacity Building & Technical Support: Cooperation extended to technical training, feasibility studies, and energy planning via bilateral partnerships.
6. India’s Role in Global Climate Platforms: Active engagement in ISA (International Solar Alliance) and One Sun One World One Grid (OSOWOG) elevated India’s global standing.
7. Tied to Climate Goals & Just Energy Transition: Funding aligned with India’s Net Zero by 2070 pledge and ensured a just transition for coal-dependent regions.
8. Catalyst for Private Investment: DFI backing acted as a risk mitigator, encouraging private equity and FDI into green infrastructure.
Challenges & Opportunities in India’s Power Sector
| Challenges | Opportunities |
|---|---|
| Macroeconomic Headwinds Global inflation, interest rate hikes, and currency volatility affect foreign capital flows and increase financing costs. |
Massive Domestic Demand Growth Urbanisation, industrialisation, and digitalisation are driving long-term electricity demand. |
| Grid Bottlenecks Outdated transmission systems cause congestion and hinder renewable energy integration. |
Government Push for Clean Energy Flagship schemes like PM-KUSUM, PLI, and the Green Hydrogen Mission are creating growth avenues. |
| Storage Deficit Limited deployment of battery energy storage systems (BESS) affects reliability of renewables. |
Energy Transition for Energy Security Shift from fossil fuels enhances energy independence and price stability. |
| Land Acquisition & Clearances Delays in land and environmental clearances slow large-scale RE projects. |
Global Climate Finance Flows India benefits from Green Climate Fund, JETP, and other international finance avenues. |
| Financial Health of DISCOMs High debt and poor efficiency reduce DISCOMs’ capacity to purchase power or invest. |
Renewable Manufacturing Potential PLI and ‘Make in India’ policies position India as a manufacturing hub for clean tech. |
| Policy Uncertainty Delays or rollbacks in subsidies, open access, and tariffs create investor uncertainty. |
Private Sector Participation Liberal policies and de-risking frameworks attract private and institutional investment. |
| Dependence on Imports for Solar Components High reliance on Chinese imports makes supply chains vulnerable. |
International Cooperation Platforms India’s leadership in ISA, G20, and BRICS enhances global collaboration and funding. |
| Fluctuating FPI Trends A drop in foreign portfolio investment due to short-term risks and macroeconomic instability. |
Emerging Tech Adoption Focus on AI-powered smart grids, BESS, and green hydrogen is opening new tech-driven growth. |
Conclusion
India is steadily emerging as a global leader in the energy transition, driven by rapid growth in clean energy capacity, rising investments, and supportive government initiatives. The country’s focus on renewable energy, grid upgrades, and sustainable practices reflects its commitment to meeting climate goals and ensuring energy security. However, addressing challenges like infrastructure bottlenecks, financing gaps, and regulatory uncertainties remains crucial. Sustained policy support, technological innovation, and international cooperation will be key to navigating these hurdles. With the right momentum, India can set an example for inclusive and resilient energy development worldwide.
Prelims Questions
Q. With reference to India’s power sector, consider the following statements:
1. India was the top recipient of global development finance for clean energy projects in 2024.
2. In 2024, more than 80% of India’s power sector investment was directed towards clean energy.
3. Solar photovoltaic accounted for less than 30% of non-fossil energy investment in India from 2019 to 2024.
Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: A
Mains Questions
Q. India’s power sector is undergoing a rapid transformation, balancing the imperatives of clean energy, domestic demand, and energy security. Critically analyse the challenges and opportunities in India’s power sector in the post-2023 context.
(250 words, 15 marks)
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