India is a major force in the global energy economy. Energy consumption has more than doubled since 2000, propelled upwards by a growing population – soon to be the world’s largest – and a period of rapid economic growth. Near-universal household access to electricity was achieved in 2019, meaning that over 900 million citizens have gained an electrical connection in less than two decades.

India’s continued industrialisation and urbanisation will make huge demands of its energy sector and its policy makers. Energy use on a per capita basis is well under half the global average, and there are widespread differences in energy use and the quality of service across states and between rural and urban areas. The affordability and reliability of energy supply are key concerns for India’s consumers.

The Covid-19 pandemic has disrupted India’s energy use; our updated assessment shows an estimated fall of about 5% in the country’s energy demand in 2020 due to lockdowns and related restrictions, with coal and oil use suffering the biggest falls. The pandemic has also hit investment in the energy sector, which fell by an estimated 15% in 2020, exacerbating financial strains across the board, in particular among India’s electricity distribution companies. How long the impacts last will depend on how quickly the spread of the virus is brought under control, and on the policy responses and recovery strategies that are put in place.

Over 80%of India’s energy needs are met by three fuels: coal, oil and solid biomass. Coal has underpinned the expansion of electricity generation and industry, and remains the largest single fuel in the energy mix. Oil consumption and imports have grown rapidly on account of rising vehicle ownership and road transport use. Biomass, primarily fuelwood, makes up a declining share of the energy mix, but is still widely used as a cooking fuel. Despite recent success in expanding coverage of LPG in rural areas, 660 million Indians have not fully switched to modern, clean cooking fuels or technologies.

Natural gas and modern renewable sources of energy have started to gain ground, and were least affected by the effects of the Covid-19 pandemic in 2020. The rise of solar PV in particular has been spectacular; the resource potential is huge, ambitions are high, and policy support and technology cost reductions have quickly made it the cheapest option for new power generation.

India is the third-largest global emitter of CO₂, despite low per capita CO₂ emissions. The carbon intensity of its power sector in particular is well above the global average. Additionally, particulate matter emissions are a major factor in air pollution, which has emerged as one of India’s most sensitive social and environmental issues: in 2019, there were well over one million premature deaths related to ambient and household air pollution.

India has a wide range of policies in place that aim to bring about a secure and sustainable energy future. This Outlook does not have a single view on how India’s energy future might look. Instead, based on a detailed examination of today’s energy markets, technologies and policies, our scenarios [ZPI1] explore the implications of different circumstances and choices, and the linkages between them.

• The Stated Policies Scenario (STEPS) assumes that the pandemic is gradually brought under control in 2021. Against that backdrop, it assesses the direction in which today’s policy settings and targets seem likely to take the energy sector in India, taking into account a range of real-life constraints that might affect their realisation in practice.
• The India Vision Case (IVC) takes a more optimistic stance on the speed of economic recovery and long-term growth, and also on the prospects for a fuller implementation of India’s stated energy policy ambitions.
• The Delayed Recovery Scenario (DRS), by contrast, examines the implications of a more prolonged pandemic with deeper and longer-lasting impacts on a range of economic, social and energy indicators than is the case in the STEPS.
• The Sustainable Development Scenario (SDS) takes a different approach, working backwards from specific international climate, clean air and energy access goals, including the Paris Agreement, and examining what combination of actions would be necessary to achieve them.