India’s fossil fuel import bill could triple by 2040: IEA study

India’s fossil fuel import bill could triple by 2040: IEA study

India’s annual import bill for fossil fuels is projected to triple by 2040 as the country is set to experience the largest energy demand increase in the world over the next two decades, according to a new study by International Energy Agency.

“The combination of a growing and industrialising economy and an expanding and increasingly urban population will drive energy use higher, raising the question of how best to meet that swelling demand without exacerbating issues like costly energy imports, air pollution, and greenhouse gas emissions,” IEA said in its report that analyses multiple scenarios based on a blend of assumptions related to policy objectives, resolution of Covid crisis, and economic growth.

In the STEPS, the key scenario based on today’s policy setting, net dependence on imported oil rises above 90% by 2040, up from 75% today. Natural gas imports quadruple to 124 billion cubic meters (bcm) in 2040, about 60% of domestic consumption. Annual gas imports would cost $43 billion while oil imports would cost $250 billion in 2040.

“This continued reliance on imported fuels creates vulnerabilities to price cycles and volatility, as well as possible disruptions to supply,” the report said. “Energy security hazards could arise in India’s domestic market as well, notably in the electricity sector in the absence of significant increases in system flexibility, improvements to the financial health of many electricity distribution companies, and other reform efforts.”

Domestic crude oil production is projected to drop a quarter while the gas output is seen rising nearly two and a half times in 20 years. Domestic coal production is projected to expand about 37% in two decades. The country’s refining capacity is also seen rising 50% by 2040 under the IEA’s key scenario.

Share of coal in the country’s primary energy mix is projected to fall in 2040 to 34% from the current 44%. Share of oil stays unchanged at 26% while natural gas’s share rises to 11% from 6%. Renewables grows to 10% from the present 1% while hydro stays static at 2%. The share of bioenergy contracts to 13% from 20% while nuclear energy’s stake expands to 4% from 1%.

In the final energy consumption, electricity’s share expands from 17% to 24%.

India is also seen as emerging as the renewables and storage powerhouse In the two decades in the key scenario. The Indian market for solar photovoltaic modules, wind turbines, lithium-ion batteries and water electrolysers together grows to around $40 billion per year by 2040. For each product, India represents a sizeable share of the global market – around 10% for lithium-ion batteries, 15% for wind turbines, and 30% for solar PV.

By 2040, India is projected to have built 40 GW of battery capacity, the largest of any country, as per the key scenario.

India exceeds the climate goals set out in its Nationally Determined Contribution (NDC) under the Paris Agreement, as per the key scenario. The emissions intensity of India’s economy improves by 40% from 2005 to 2030, above the 33-35% set out in its existing NDC. And the share of non-fossil fuels in electricity generation capacity reaches almost 60%, above the 40% that India pledged.

As per IEA’s key scenario, India’s EV fleet– including two- and three-wheelers, cars, vans, buses, and trucks – would represent 34% of the entire road stock by 2040, with two- and three-wheelers accounting for the vast majority of the total.

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