24 Sep 2021

No Silver Bullet: India’s Clean Energy Transition

Contributor(s): Citi Global Insights
India is set to become the world’s third-largest energy consumer by 2030. Its progress to cleaner energy sources has profound global ramifications. A new report by Citi Research’s Saurabh Handa takes a look at India’s ambitions, the obstacles to achieving them and why there’s no silver bullet for decarbonisation. We distil the report’s key findings.

Indian policy measures have focused over recent years on accelerated and ambitious plans to boost the contribution of cleaner sources of energy. The government has announced targets and incentives across a range of clean technologies. That should lead to a significant shift in trajectory and a rapid increase in cleaner energy consumption. Corporations are also joining the “net zero club” (albeit not India as a whole yet). Meanwhile, various traditional sectors such as oil & gas and power generation are also adapting to the wider energy transition.

Decarbonising India requires nothing short of a transformation. There is no silver bullet, but rather a whole portfolio of mitigation.

India is already the fourth-largest energy consumer (behind China, the US, and EU), with primary energy consumption more than doubling in the last two decades. It is poised to become the third largest consumer by 2030. It is also currently the third largest in terms of emissions, albeit with a lower per capita share.

India’s primary energy consumption more than doubled in the last two decades despite the COVID-induced slowdown in 2020

India is the fourth-largest energy consumer globally

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Source: BP Statistical Review of World Energy 2021, Citi Research

Source: BP Statistical Review of World Energy 2021, Citi Research.


Coal, oil and gas dominate India’s energy landscape. Historically, among the three, coal met greater than 50% of overall demand, led by rapid expansion of the industrial base and power generation—a process that has been largely coal-led. In recent years, however, coal’s share has started to decline, being replaced by renewables in the power sector.

Coal share of generation capacity has started to decline with rise in renewables

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Source: CEA, Citi Research.


Gas currently constitutes ~6-7% of the primary energy mix and even if this rises to the stated goal of 15% by 2030, in order to achieve emissions intensity targets, the bulk of share needs to be borne by alternative clean technologies and renewables.

Policy support remains vital

In India, the biggest driver of clean energy investments largely remains the policy framework. This is already visible in investment trends in the energy sector where, following the announcement of the 175 Gigawatt target by 2022 (later enhanced to 450 GW by 2030), renewables have been dominating investments in power generation (ahead of fossil fuels), with a cumulative investment of ~$90billion in the past six years.

Enhancing support in the form of subsidies and implicitly directing SOEs’ investment focus towards clean energy could accelerate this trend. A recent study indicates that between Jan’20 and Jun’21, the government committed close to Rs10trillion (~$140billion) in energy-related support via SOEs, public finance, and subsidies, with clean energy cornering ~26% of the share.

The Drivers Behind the Clean ‘Drive’


Source: Citi Research

A large part of the global clean energy drive flows through from the national commitment by respective countries to lower their carbon footprint and achieve a net zero carbon target over the longer term.

An early signatory to international climate goals

India announced its first climate action target at COP15 (Conference of the Parties) in Copenhagen in 2008, which was to reduce the emissions intensity of its GDP by 20-25% by 2020 vs. 2005 levels. Following up on these earlier commitments, India ratified the Paris Agreement (COP21) in 2016 and announced the Intended Nationally Determined Contributions (INDCs) to achieve a low-carbon future. Key features of India’s INDCs include:

  • Reducing emissions intensity – To reduce the emissions intensity (excluding the agriculture sector) of India’s GDP by 33-35% by 2030 vs. 2005 levels.
  • Increasing the share of non-fossil fuel-based generation capacity – India intends to achieve the share of cumulative non-fossil fuel power generation capacity of 40% by 2030, though this remains conditional on the transfer of technology and low cost international finance from developed nations, including from Green Climate Fund.
  • Increasing carbon sink coverage – India plans to create an additional carbon sink of 2.5-3bn tCO2e (tonnes of carbon dioxide-equivalent) by 2030 through afforestation efforts and by enhancing the green cover.
  • Preservation of lands and ocean – More recently, India endorsed the 30-by-30 targets that aim to protect and preserve 30% of the country’s land and 30% of the ocean by 2030.

No ‘net zero’ target (yet)

India, along with other developing nations, has been voicing concerns on issues such as pre-2020 actions of the developed nations, climate financing, and more recently, carbon border taxes. On the latter, India has raised concerns against the EU’s proposal to unilaterally adopt a carbon border tax on imports of carbon-intensive products (such as steel, cement, fertilisers, and aluminium) that could widen the trust deficit between developed and developing nations on climate actions. India recently urged the G20 countries to commit to bring down their own per-capita emissions to the global average by 2030, which would help not only achieve faster decarbonisation but also provide the necessary buffer for developing countries such as India, given their legitimate need for economic growth.

COP26 could pave the way

A recently published report by the Intergovernmental Panel on Climate Change (IPCC) warned that global warming could spiral out of control unless urgent steps are taken to mitigate greenhouse gas emissions. The panel report has urged much more aggressive and extensive emission cuts to contain global warming. The report could potentially set the tone for the Glasgow Climate Change Conference scheduled to be take place in November. That could not only lead to more stringent net zero targets but also spur more countries to provide enhanced financing and policy support, which could in turn potentially drive increased investments towards clean energy.

Investment trends in India's energy sector (US$bn)

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Source: Derived from IEA India Energy Outlook 2021, Citi Research

The Citi report goes into greater detail on renewable power, hydrogen, biofuels (biogas, ethanol), carbon capture, and other enablers such as battery storage that will be key to the future of India’s clean energy transition.  For more information, please see the full report India Clean Energy - Fueling the Future, and Sooner Than Expected first published on September 16.

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.

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