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India, one of the fastest-growing major economies in the world, is poised at a critical juncture in its energy transition. With its vast and rising energy needs fuelled by a consumption-led economy, India faces significant challenges, exacerbated by a high dependency on energy imports and severe air pollution concerns.
India imports over 80% of its oil and nearly half of its natural gas. Moreover, the climate crisis is manifesting in tangible threats to public health. According to a report by IQAir, last year, 83 out of the 100 cities worldwide with the worst air pollution were in India, each surpassing the World Health Organization’s air quality guidelines by over tenfold.
Amidst this backdrop, India’s transition to renewable energy is crucial. Prime Minister Narendra Modi has committed to a robust climate agenda, pledging that renewable sources like solar and wind will meet 50% of India’s energy needs by the end of this decade and aims to establish 500 gigawatts of non-fossil fuel-generating capacity by 2030. Furthermore, Modi has set a national goal of achieving net-zero emissions by 2070.
And India seems to be on a robust path to achieving these goals. According to the REN21 Renewables 2023 Global Status Report, India is already 4th globally in renewable energy installed capacity, 4th in wind power capacity and 5th in solar power capacity. As of March 2024, the country’s installed non-fossil fuel capacity stood at more than 198.75 GW (including large Hydro and nuclear), about 45% of the country’s total capacity. The installed solar energy capacity has soared 30-fold in the last nine years.
“That means the country is becoming cleaner earlier in its economic development curve than all of the other major economies, including China,” points out Eric Carlson, Head of Sustainability, Emerging Markets Equity Team, at Morgan Stanley Investment Management.
“Despite scepticism around India’s target, the country has made a conscious effort to decarbonise its economy,” Carlson opines.
India’s ambitious project: Khavda Renewable Energy Park
One example of the country’s energy transformation is an initiative by Adani Green Energy Limited (AGEL). The Adani Group, traditionally known for its significant stakes in coal importation and mining, is now pivoting towards clean energy. The group’s latest venture, the Khavda Renewable Energy Park in Gujarat, is set to become the world’s largest renewable energy park (RE park). Spanning over 538 square kilometres – five times the size of Paris – this $20 bn project is expected to generate enough electricity to power 16 million homes and avoid 58 million tonnes of CO2 emissions annually upon completion.
The success of the RE park is crucial for India as it will contribute significantly toward achieving the country’s ambitious climate goals. Earlier this year, AGEL announced that it had already operationalised 551 MW solar capacity in the RE park within 12 months by supplying power to the national grid. The goal is to reach a capacity of 30 GW of renewable energy annually within the next five years, representing approximately 9% of India’s 2030 non-fossil fuel capacity target.
„Despite its reputation as an environmental laggard, India is laying the groundwork now to secure a cleaner and more renewable future. We think this presents multiple opportunities to invest, and we believe these opportunities will only continue to grow,” says Carlson.
