India’s net-zero transition offers $12.7 trillion investment opportunity: Report

New Delhi: India's ambitious path towards a net-zero economy by 2050 presents an unprecedented investment opportunity estimated at a staggering $12.7 trillion, according to the New Energy Outlook: India report by BloombergNEF.

The report, which outlines two distinct scenarios for India's energy transition, highlights both the challenges and opportunities that lie ahead. The first scenario, known as the Economic Transition Scenario (ETS), is characterized by an economics-led transition that aligns with a global temperature rise of 2.6 degrees Celsius by 2050. In this scenario, while India makes significant strides towards energy independence and decarbonization, it falls short of achieving these goals by 2050.

The second scenario, the Net Zero Scenario (NZS), envisions a future where the government and private sector join forces with enhanced support, ultimately resulting in a net-zero emissions economy by 2050 without relying on unproven technologies. This path also allows India to attain its mid-century energy independence objective at the lowest cost.

India's commitment to clean energy has been exemplified by the addition of 53 gigawatts of solar and wind energy between 2018 and 2022, with an impressive 16 gigawatts of utility-scale solar installed in 2022 alone. However, solar and wind power still constitute less than a quarter of the nation's energy generation capacity, with coal retaining dominance. This reliance on coal continues to be the largest contributor to India's greenhouse gas emissions.

BloombergNEF's analysis reveals that the most cost-effective strategy for India to simultaneously enhance electricity access and decarbonize its power supply is to maximize the deployment of solar and wind energy. This approach, supplemented by nuclear power, energy storage, and carbon capture and storage (CCS) for thermal power plants, offers a sustainable solution.

In the NZS, wind and solar power capacity is projected to increase thirty-fold, reaching 2,998 gigawatts by 2050, with wind and solar contributing to 80% of the electricity supply. Nuclear power accounts for 9%, while the remainder is sourced from hydro, biomass, hydrogen-fired thermal plants, and thermal power plants equipped with CCS. Even under the ETS, solar and wind are expected to dominate electricity generation in 2050, comprising 67% of the total.

To achieve these targets, enhancing the grid's flexibility to accommodate variable wind and solar power is crucial. Solutions include batteries, pumped hydro storage, and peaker gas plants, as outlined by Rohit Gadre, India Research Senior Associate at BNEF.

Under the ETS, an investment of $7.6 trillion is projected in energy supply and demand from 2022 to 2050, averaging $262 billion annually. To align with the NZS and reach net-zero emissions, investment levels need to increase by 1.7 times, reaching an average of $438 billion annually, equivalent to approximately 5% of the expected gross domestic product, and totaling $12.7 trillion by 2050.

Significantly, investment in fossil-fuel power decreases from $317 billion in the ETS to $142 billion in the NZS. To mitigate emissions from the remaining use of fossil fuels in the NZS, India would require an investment of $870 billion in CCS. Electric vehicle sales constitute a substantial portion of energy demand investment in both scenarios, with $3.9 trillion allocated for EV deployment in the NZS.

Komal Kareer, India research associate at BNEF, emphasized the need for bold policy initiatives to transition to a zero-emission vehicle fleet by 2050, further stating that falling battery costs would accelerate EV adoption and boost local manufacturing.

Shantanu Jaiswal, head of India research at BNEF, highlighted India's potential to eliminate dependence on fossil fuel imports by its centennial in 2047 through the deployment of clean technologies, enhancing economic opportunities, reducing emissions, and strengthening energy security.

The report also underscores the rising challenge of industrial CO2 emissions, which are projected to surpass those from the power sector by the early 2040s, driven by sectors like steel, aluminum, petrochemicals, and cement. To combat this, green hydrogen and CCS will play pivotal roles.

In the NZS, India's industrial emissions peak in 2031 and start declining in the mid-2030s as hydrogen and carbon capture technologies are adopted in steel, cement, and petrochemical production. Domestic demand for hydrogen is expected to increase tenfold by 2050, driven by the adoption of hydrogen-fired direct-reduction furnaces in the steel industry.