Investment in energy is critical for India. The World Energy Council estimates that about 56% of rural households in India have no access to electricity. The World Bank calculates that energy poverty levels such as these can reduce gross domestic product (GDP) growth by as much as 4% annually.
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India is rightly striving for a step change in energy infrastructure investment over the next two decades to sustain and accelerate its economic growth. The International Energy Agency (IEA) suggests that to meet its future energy needs, India will need to expand its gross capacity to exceed 400GW—equal to today’s combined capacity of Japan, South Korea and Australia. IEA says this translates into an investment price tag for India of about $1.25 trillion (Rs58.12 trillion) in energy infrastructure—three-quarters in the power sector—by 2030.
However, to avoid becoming a major new contributor to climate change means India’s energy investments must also be “clean”. This involves using the latest low-carbon and energy-efficient technologies, such as decentralized solar, wind, solar-thermal, bio-energies, nuclear, clean coal (high-efficiency coal-fired power stations coupled with carbon capture and sequestration facilities) and smart grids.
Cost concerns: A wind farm in Jaisalmer, Rajasthan. Most of these clean energy technologies are currently more expensive than traditional ones, not least because of subsidies for fossil fuels. Mint
Most of these clean energy technologies are currently more expensive than traditional ones, however, not least because of subsidies for fossil fuels. This adds a “clean energy” incremental cost to the scale of investment required for India to eradicate its energy poverty. A 2008 analysis by Project Catalyst suggests that the extra cost for clean energy investment in all developing countries could reach up to $60 billion a year.
Even with margins for error, it is clear that hundreds of billions of dollars will be required by 2030 for India to tackle energy poverty using clean technology. Additional urgency arises from the fact that this investment needs to start soon in order to avoid a “lock in” to high carbon infrastructure projects and the prospect of emissions levels continuing to rise.