India’s energy policy dilemma: India plans to substantially increase its oil refining capacity in the coming years, even as the global focus shifts towards renewable energy and electric vehicles. The crude oil refining capacity of state-run companies is set to increase by 500,000–600,000 barrels per day over the next decade. This expansion may represent the final wave of grassroots refinery projects, given India’s commitment to achieving Net Zero emissions by 2070, and the rapid adoption of electric vehicles.
According to industry data, three new refineries are planned alongside the ongoing expansion of refining capacity, which is expected to rise by approximately 800,000 bpd. These projects are slated for Andhra Pradesh, Uttar Pradesh, and Gujarat. However, they remain in the preliminary stages, with Bharat Petroleum Corporation Ltd (BPCL) and Oil and Natural Gas Corporation (ONGC) still finalising land acquisition. This development comes at a pivotal time, as India faces a complex and evolving energy scenario.
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India’s energy policy
India is set to be the largest contributor to global oil demand growth this year, with consumption increasing six-fold compared with China’s growth rate, according to the International Energy Agency (IEA) and the US Energy Information Administration. This highlights the need for a balanced approach to scaling up both renewable and non-renewable energy sources.
On the fossil fuel front, India’s strategy involves managing and mitigating its increasing import dependency on petroleum. This entails diversifying sources of oil imports, building strategic reserves, enhancing domestic exploration, promoting demand conservation and efficiency, and ensuring environmental protection. These measures aim to provide energy security while minimising the environmental impact.
Simultaneously, India is accelerating its transition to renewable energy. The country has set both short- and long-term goals, such as reducing the carbon intensity of its GDP and creating 500 GW of electricity generation capacity from non-fossil fuel sources by 2030. The ultimate objective remains achieving Net Zero carbon emissions by 2070, a target that requires consistent and focused policy implementation.
Challenges in India’s energy transition
India’s energy transition is taking place against the backdrop of geopolitical tensions and rapid technological advancements. A significant challenge lies in the country’s reliance on China, which holds a dominant position in the global supply of critical materials necessary for green energy technologies. China’s low-cost production of solar panels, wind turbines, and other green technologies gives it a competitive edge, making it difficult for other nations to compete without addressing supply-chain vulnerabilities.
India has recognised the risks posed by its dependence on Chinese imports, especially during times of conflict, and is working to reduce this exposure. Policymakers are exploring strategies similar to the US’ CHIPS and Science Act, aimed at boosting domestic manufacturing of green energy technologies. However, these efforts must be scaled up to match the growing demand for such technologies.
Further complicating matters, trade tensions between the US, EU, and China have led to the imposition of anti-dumping duties on Chinese electric vehicles. In retaliation, China has imposed export controls on critical minerals, intensifying global supply chain uncertainties. These developments have heightened concerns over the availability of key materials like copper, lithium, nickel, and cobalt. To stay on course with its energy transition, India must formulate a robust strategy to secure these resources and minimise vulnerabilities in its supply chains.
Investment opportunities in renewable energy
India has made remarkable progress in its clean energy transition. Renewable energy now accounts for 42% of the country’s total power generation capacity, making India the fourth-largest market for renewable energy globally. Additionally, India has established itself as a significant player in solar manufacturing, contributing to 3% of global solar capabilities.
This progress has also attracted considerable investment interest. The World Bank’s $1 billion investment in solar parks and rooftop solar projects has successfully leveraged $40 billion in private capital, demonstrating the immense potential of India’s renewable energy sector as a lucrative investment opportunity.
Gaps in India’s energy ecosystem
Despite its achievements, India faces several challenges that must be addressed to sustain its energy transition. One key issue is the intermittency of renewable energy sources, which makes consistent power supply a challenge. Strategic investments in energy storage solutions and enhanced transmission infrastructure are crucial to overcoming this limitation.
Another pressing concern is the cautious approach of private investors toward green energy projects. Private capital is essential to finance the energy transition, but investor sentiment remains subdued due to perceived risks and policy uncertainties. To address this, the government must introduce targeted incentives for specific sectors or activities while increasing public investment to attract private capital. Reducing regulatory and policy risks associated with long-term green energy projects will also be critical in boosting investor confidence.
India stands at a critical juncture in its energy transition, with the potential to become a global leader in green energy. By addressing supply-chain vulnerabilities, encouraging private sector participation, and maintaining its focus on renewable energy goals, the country can not only meet its growing energy demands but also serve as a role model for South Asian nations.
If India manages to overcome these challenges, it can ensure energy security, foster economic growth, and make a meaningful contribution to global climate action. This dual achievement of energy independence and sustainability will be a testament to India’s strategic vision and its commitment to a greener future.