A new report by research and data analyst Wood MacKenzie charts a path for India that says it could be Asia’s second cheapest producer of green hydrogen by 2030. And if it maintains the political will and seeks strong partnerships, it can meet its 2050 climate pledge and be an example to the world
India has the opportunity to transform itself into a low-carbon economic powerhouse and avoid the mistakes of others, according to a new report.
India’s global profile is soaring. It already boasts the world’s largest population and is forecast to be the fastest-growing major economy over the coming decades. By 2032, it will be the world’s third-largest economy, up from fifth today.
Currently a successful services economy India aims to achieve this expansion by increasing its industrial output. Such growth will be challenging, however, without a massive increase in carbon emissions. And with a fossil-fuel-dominated energy system, India is already the world’s third-largest emitter.
The conflict is obvious in this opening of a new report by power industry experts Wood MacKenzie but the analysts are optimistic: “Here, we think the country has a unique opportunity to take a different path, to transform itself into a low-carbon economic powerhouse and avoid the mistakes of others. This will take more than investment in clean energy: it will require a radical redesign of India’s economy and its relationship with energy as both its population and manufacturing capacity expand.
“We are under no illusions as to how difficult this will be. Our analysis of how India can reach net zero by 2050 – two decades ahead of its current pledge – is highly ambitious, extremely challenging and without precedent.
“But it is possible.”
The report recognises that it will require trillions of dollars in clean energy investment, but achieving net zero by 2050 would also bolster India’s climate and global leadership credentials – and benefit the world.
India pledged to reach net zero by 2070 at the COP26 climate conference in Glasgow in 2021, but its current emissions pathway is wildly off target. Our base case sees emissions almost double by 2040 and fall only marginally by 2070; India’s strong economic growth depends on fossil fuels.
The report says: “Our Net Zero 2050 scenario sets out an entirely different outcome. Requiring a complete economic rethink, this scenario is built around huge investment in clean energy, decarbonising India’s rapidly expanding industrial and infrastructure sectors, and maximising its unique human talent.
“Given India’s rising population, it is essential that our Net Zero 2050 scenario does not come at the expense of economic growth. Indeed, India should view it as a US$13 trillion investment opportunity.”
Renewables now account for around 43% of the country’s total power generation capacity (including hydro). “Progress so far has been admirable, but India must keep upping its game to realise our scenario of non-fossil-fuel electricity output reaching almost 80% by 2050. By doing so, India can strengthen domestic supply chains and boost energy security, cost control and job creation.”
The country’s lack of solar wafer production capacity is highlighted in the report sayIng “It is hindering India’s manufacturing ambitions and net-zero goals. Policy initiatives to foster growth in the domestic photovoltaic (PV) supply chain have accelerated, but the sector continues to rely on imports, particularly for polysilicon, ingots/wafers, ancillaries and PV machinery.”
Battery storage is critical to India’s net zero ambition, with a massive increase in renewables to be supported by extensive additions to grid and storage capacity.
Another opportunity is the country’s 750 million tonnes per annum (Mtpa) of biomass residue and “its bioenergy potential is largely untapped”. Shifting bioenergy usage from the residential to the industrial and transport sectors would help reduce both oil imports and air pollution from stubble burning.
Green Hydrogen
Hydrogen production is a real opportunity as well says the report: “Low-carbon hydrogen is pivotal to decarbonising India’s most challenging sectors. With a relatively high solar irradiance (1,200-2,300 KWh/m2/year) and wind speeds (4-6 m/s), we estimate that India’s levelised cost of hydrogen (LCOH) produced from renewables offers a cost-effective, round-the-clock option when combined with battery storage.
“Hybrid onshore wind and solar could cut the LCOH to US$4.3/kg H2 by 2030, the second lowest in Asia after China. To incentivise this, the government has allocated US$2.1 billion through a three-year incentive scheme to reduce electrolytic hydrogen production costs by 10%. India’s hydrogen policy also allows developers to purchase renewable power from the grid with no transmission costs for 25 years.”
But the report warns: “This will not be achievable unless India continues to ramp up its delivery of wind and solar power, however. Alongside decarbonisation, renewables must deliver 125 GW of clean power for India to hit its 5 Mt green hydrogen production target by 2030. We forecast that around 4 Mt of low-carbon hydrogen is likely to be operational by 2030, accounting for around 5% of global production.
“Much more will be required: India needs 55 Mt of hydrogen to reach net zero by 2050. Of this, we believe India has the potential to produce up to 35 Mtpa domestically, with the remaining supply met through imports.”
Cement
Cement production accounts for nearly a quarter of India’s total industrial emissions. The fast-paced construction sector should help major cement players invest in a low-carbon value chain. For example, JSW Cement plans to source agricultural waste for use as biomass fuel at its manufacturing plants in a bid to curb its carbon emissions.
Iron & steel
India’s steel output is the fastest growing globally, but also its largest contributor to industrial emissions. Steelmakers must first reduce their dependence on coal-fired direct-reduction furnaces and highly polluting induction furnaces. Shifting to low-carbon electric arc furnaces (s) and the linked rise in the share of green metallics, such as scrap, and gas- or hydrogen-based direct reduced iron (DRI) offers a route to decarbonisation.
“With Indian steelmaking capacity expected to rise threefold to 510 Mt by 2050, our Net Zero 2050 scenario requires India’s EAF steel production share of total emissions to reach 60% of total output versus 35% in our base case. Unlike cement, process emissions in steel make up a lower proportion of total emissions, so steelmakers will focus on energy-efficient processes and cleaner steelmaking technologies.”
Increasing energy efficiency, the Indian way
Indians are already among the lowest per capita emitters globally. To reach net zero by 2050, this needs to be maintained, says the report as final energy consumption must fall by more than 30% by 2050 versus our base case. Achieving this will be challenging, but a range of uniquely Indian approaches is already paying dividends.
Conclusion
India’s four big steps towards decarbonisation
The country must first galvanise its greatest asset – its people. Indians are among the lowest per capita energy users and carbon emitters globally. Harnessing their entrepreneurial spirit and immense software and data analytics skills can help India.
Second, it must redefine its energy supply. India has an opportunity to push harder and faster to be the decarbonisation leader across the developing world. The use of renewables and myriad low-carbon technologies to reduce dependence on coal and oil can be supported with uniquely Indian opportunities in biofuels, energy efficiency and the circular economy.
Third, India must maintain the political will. Its leaders must embrace a redesign of the country’s economy and energy systems and entice the private sector to participate in the trillions of dollars in necessary investment. India’s infamous red tape must be cut to for the country to go green.
Lastly, India must seek global support, harnessing its soft power and diplomatic heft to get rich countries to buy into its vision. Strong partnerships are critical.
“High hopes for India’s future are nothing new. However, while previous waves of optimism have been dashed on the rocks of poor policy, failed investment and muddled bureaucracy, India now has the chance of a lifetime to decarbonise rapidly. It should take it.”
Read the full report Chance of a lifetime Can India show the developing world a unique path to net zero?
About Wood MacKenzie
“Now in our 50th year, Wood Mackenzie is synonymous with quality data, analytics and insights that power the natural resources industry.
“From humble beginnings as a small Edinburgh-based stockbroker in 1923, Wood Mackenzie became one of the leading stockbrokers in the UK by the 1970s, renowned for its outstanding equity research.
“In 1973, the firm published our first oil report, beginning a new era. We first cultivated deep expertise in upstream oil and gas, and now offer the same level of detailed insight for every interconnected sector of the energy, chemicals, metals & mining, and power & renewables industries across the world.
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