India: The Next Driver of Energy Demand – 12/9/16

Access to electricity can vastly improve quality of life and promote economic prosperity, but supplying electricity has its own costs as natural resources, infrastructure, and the environment can be strained when trying to meet increasing demand. Balancing the costs and benefits of adding new capacity is vital as energy demand increases in developing nations. Two nations facing especially large opportunities and challenges as they try to maintain that balance: India and China.

In the case of China, the government is already facing the aftermath of industrialization as air pollution has become a major concern for the country’s growing urban middle class(5). Their concerns about air quality come in direct conflict with the need to create more electricity generation capacity while coal remains a popular fuel in power plants. And India will face similar issues in the near future. According to the IEA, India is likely to become the new driver of global growth in energy demand by the mid-2020’s as the nation’s economic growth surpasses China’s and it becomes the most populous nation in the world(3).

Both nations use coal for a majority of their electricity generation. However, only India’s use of coal is expected to increase substantially in the future. The U.S. Energy Information Administration (EIA) projects that India will account for nearly 50% of the increase in global coal consumption from 2012 to 2040(4). By comparison, the EIA projections show coal consumption in China peaking in 2025 before steadily declining through 2040.

The Indian government has expressed plans to address its coal use in a variety of ways. Indian Prime Minister Narendra Modi has set a solar power target of 100 GW of capacity by 2022 with a capital subsidy of around $2.51 billion provided to develop rooftop solar projects across India, according to an official press release from the Ministry of New and Renewable Energy(7). His government also promised to double the share of natural gas from 7% to 15% in electricity generation(8). Emissions associated with combusting coal (206 to 229 lbs CO2/MMBtu) are higher than those associated with combusting natural gas (117 lbs CO2/MMBtu) helping to reduce air pollution without relying on intermittent power supplies(2).

The Chinese government has made similar promises saying it hopes to boost the share of natural gas in its energy mix to 10% by 2020 through favorable policies like an adjustment of pipeline fees to stimulate use(1). It has also aggressively promoted wind and solar power though its utilities now struggle to integrate the intermittent power supplies into the power system where distribution infrastructure cannot keep up. As a result of overbuilding, the country’s energy authority slashed wind and solar targets through 2020 in November of 2016(6). In its newly issued five-year plan for power, China’s government set new targets in which total installed solar capacity was revised to 110 GW by 2020, down from an earlier target of 150 GW. For wind power, the government now aims for 210 GW of installed capacity, down from 250 GW.

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