Grid, industry, transport decarbonisation crucial to meet netzero targets

This transition to new and renewable sources of energy would not come cheap, with India needing around $15 trillion in investments to achieve net zero between 2022 and 2070, according to a Deloitte-FICCI study.

India’s total energy demand would likely double by 2070 from the 2020 level, due largely to aggressive energy efficiency and the adoption of new technologies.

Even as the world’s third-largest energy consumer is looking to meet its net zero commitments by 2070, it could get there only through the gradual decarbonisation of the three fundamental pillars of grid, industry and transport, a joint study released by global advisory Deloitte and industry chamber FICCI said.

As a fossil fuel-dominated economy, India currently accounts for primary energy consumption of 880 million tonnes of oil equivalent (Mtoe), the report ‘India’s Energy Transition Pathways: A Net Zero Perspective’, has said. The electricity, industrial and transport sectors contributed more than 70 per cent of the primary energy demand and 85 percent of the energy-related Greenhouse Gas (GHG) emissions.

India had committed to the 2070 target at the COP27 summit held at Sharm El-Shaikh, Egypt, last year. In the near term, the country has targeted reducing the emission intensity of its GDP and meeting 50 per cent of its power generation capacity through non-fossil fuel sources by 2030.

With electricity’s share in the final energy mix expected to increase from 18 per cent in 2020 to more than 50 per cent by 2070, grid decarbonisation would rest on a significant increase in renewable energy penetration in the current mix. This called for an additional 2000 gigawatt (GW) of grid-scale wind and solar capacity and another 1000 GW of green hydrogen production. Amid this, hydro and nuclear energy would also be playing a critical role in the supply-side transition.

Industrial decarbonisation would be crucial towards reducing 30 per cent of energy-related emissions, with steel, cement, aluminum and fertiliser industries accounting for nearly 70 per cent of the total. Declaring there was no single solution to industrial decarbonisation, the report has asked companies to take a broad-based approach to reduce their carbon footprint. While green hydrogen was expected to find applications in fertiliser, refineries, steel production and transport segments, Carbon Capture, Utilisation and Storage (CCUS) would be the most preferred option in the cement sector.

The transport sector would require a complete transition to low-emission technologies such as Battery Electric Vehicle (BEV), Fuel Cell Electric Vehicle (FCEV), Hydrogen Combustion Engine (H2-ICE) and biofuels. The report added that this would need to be supported by widespread rollout of charging infrastructure and efficient urban planning.

India’s total energy demand would likely double by 2070 from the 2020 level, due largely to aggressive energy efficiency and the adoption of new technologies.

The transition to new and renewable sources of energy would, however, not come cheap. According to Deloitte data, India would need around $15 trillion in investments to achieve net zero between 2022 and 2070. This came to an average annual spend of $300 billion in areas such as energy supply and demand sides as well as transport transition.

In this regard, channelling public and private finance to fund the transition capex would be important. Other than the government and private sector, the role of Multilateral Development Banks (MDBs) would be pivotal to raising concessional financing in the initial years. In addition to concessional financing, credit enhancement schemes, such as credit risk guarantee funds, first loss, and project aggregation might help to de-risk projects and attract capital to new and risky projects. The Contracts for Differences (CfDs) mechanism could also play a part in financing the energy transition by providing stability and incentivising investment in emerging technologies.

The report also said that initially, the government may need to subsidise or create demand through mandates or the introduction of carbon taxes.