India’s window to curb its carbon emissions in line with the major goal of the Paris Agreement – holding global warming to well below 2°C and avoiding the worst impacts of climate change – is still possible; however, it looks increasingly hard to achieve, says the market analyst.  

In its New Energy Outlook: India report, BNEF says the country must rapidly decarbonise its power sector – the largest emitter in the country – to stay on track. That would involve more than tripling its solar and wind capacity by 2030 to 494 GW under a net zero scenario.  

Its analysis shows that India’s energy mix needs to transform over the next two decades, with all unabated fossil-fuel-based power generation exiting the grid by 2045. India’s electricity output needs to shift to a mix of low-cost renewables paired with flexible technologies like batteries, pumped hydro and gas peakers (gas-powered plants that generally run only when there is a high demand, or peak demand, for electricity).

‘India’s window to stay on a well-below-2-degrees pathway is closing, fast,’ states Shantanu Jaiswal, Head of BNEF in India and Southeast Asia. ‘Rapidly moving to a clean power system based on wind, solar and energy storage will be essential to cost-effectively reduce carbon emissions.’

The report builds and expands on the results of BNEF’s New Energy Outlook 2024. It presents two updated climate scenarios, the Net Zero Scenario (NZS) and a base-case Economic Transition Scenario (ETS).  

The report’s NZS, which is consistent with a 67% chance of holding global warming to 1.75°C, shows there is limited room for further carbon emissions growth and that the peak needs to be accelerated across all sectors within the next 10 years. India’s emissions from power, transport and buildings must peak in this decade, followed by industrial emissions by the early 2030s, and then rapidly decline using a mix of mature and nascent technology pathways. The alternative scenario, the ETS, which assumes no new policies are implemented, breaches the Paris Agreement with a global warming result of 2.6°C. It demonstrates how far the energy transition can go based on economical and commercially ready technologies.

India is one of the few countries that would achieve its updated Nationally Determined Contribution (NDC) even under BNEF’s base-case economics-led pathway, says the market analyst. However, the NZS results imply that for India to remain aligned with the Paris Agreement, the country’s emissions increase from energy-related sectors needs to be limited to only 106% by 2030 relative to its 2005 baseline. That is far below the 175% increase in the ETS and the 192% jump implied by its NDC.

In the NZS, cleaning up the power sector accounts for nearly half of all emissions avoided between today and 2050, compared with a no-transition scenario, in which there is no further action on decarbonisation. Electrification of end-use sectors, including road transport, buildings and industry, accounts for a further 12% of avoided emissions. By 2050, India’s power system grows dramatically and re-orientates entirely to clean power technologies. Wind and solar installations reach a combined 4,328 GW by mid-century. Storage, in the form of pumped hydro and batteries, increases from around 5 GW today to over 770 GW.

‘India’s 4 TW of wind and solar build from now through mid-century represents a $2.1tn* investment opportunity for the industry,’ says BNEF India Analyst Siddharth Shetty, lead author of the report. ‘A renewables-heavy system also poses severe grid-balancing challenges. We need flexibility in the system not just in the form of batteries and pumped hydro on the supply side but also in the form of electrolysers and smart vehicles charging on the demand side.’

The technologies and clean fuels needed to abate the remaining two-fifths of emissions – biofuels for shipping and aviation; clean hydrogen as well as carbon capture and storage (CCS) for use by heavy industry and power – are among the most challenging to scale. By 2050, India’s annual hydrogen consumption jumps more than 10-fold to 64mn tonnes relative to 2023, and carbon capture increases to 1.4bn t/y under the NZS.

India’s energy sector investment and spending under the NZS, at $12.4tn over 2024–2050, is 34% (or about $3tn) higher than in the ETS.

The report sheds light on the need to scale up key technologies in order to get on track for net zero: renewable power, electric vehicles, battery energy storage, nuclear energy, CCS, hydrogen, sustainable aviation fuels and power networks.

According to the Energy Institute’s Statistical Review of World Energy 2024, India generated 1,958 TWh of electricity in 2023, the second highest in the Asia-Pacific region after China (at 9.456 TWh). Some 382 TWh was generated from renewables, of which 149 TWh came from hydro, 113 TWh from solar and 82 TWh from wind, with the remainder accounted for by ‘other renewables’.  

*All figures are in real 2023 $US.