India’s push towards a net-zero economy could attract investments worth $12.7 tn: Report

India’s transition to a net-zero economy by 2050 presents an investment opportunity that is estimated to be worth at least $12.7 trillion, according to the New Energy Outlook: India report, released by research firm BloombergNEF on Thursday.

The two energy system futures for India are explained in the report, along with the opportunities and difficulties the nation will face during its transition.

The base case, Economic Transition Scenario (ETS), assumes a rise in global temperature of 2.6 degrees Celsius by 2050, and describes a shift driven by economics. In this scenario, India may make great strides towards energy independence and decarbonisation, but neither objectives could be accomplished by 2050.

The second scenario, known as the Net Zero Scenario (NZS), calls for increased public assistance and private sector investment. It is in line with achieving net-zero emissions without relying on emerging technologies by 2050. It enables India to achieve energy independence by the middle of the century at the lowest cost.

Moving towards the power sector de-carbonisation

According to the report, between 2018 and 2022, India added 53 gigawatts of solar and wind energy. However, coal still dominates the overall power generation capacity, with solar and wind making up less than a fourth of it.

India’s greatest source of emissions continues to come from energy generation via coal.

The study says that increasing the use of solar and wind energy while supplementing it with nuclear, energy storage, and carbon capture and storage (CCS) for thermal power plants is the most affordable method for India to increase access to electricity while decarbonising its energy supply.

In India, new wind and solar power facilities have already produced electricity at a lower cost than new thermal power plants. By the middle of the 2030s, the cost of producing electricity from new solar and wind power plants will be lower than the cost of maintaining coal-fired power facilities.

The total installed wind and solar power capacity in the NZS increases approximately 30 times, from 99 gigawatts in 2021 to 2,998 gigawatts by 2050. In 2050, nuclear power is projected to contribute 9 per cent of the country’s electricity, with wind and solar power generation making up the remaining 80 per cent. Hydro, biomass, hydrogen-fired thermal plants, and thermal power plants with CCS make up the difference.

Solar and wind are to become a major source of electricity supply, accounting for 67 per cent of electricity generated in 2050, even under the ETS, BNEF’s baseline scenario.

Investment opportunities

The report notes that a $7.6 trillion investment in energy supply and consumption will be made under the ETS between 2022 and 2050. According to the NZS, investment levels must be 1.7 times greater to stay on track for net zero, amounting to an average of $438 billion annually and a total of $12.7 trillion by 2050.

Moreover, India needs to reduce itstotal investment in fossil-fuel generation --from $317 billion in the ETS to $142 billion in the NZS. India also needs to invest $870 billion in carbon capture and storage to reduce emissions under the NZS.

Sales of electric vehicles represent the largest portion of energy demand investments in both cases. In the NZS, EV deployment costs $3.9 trillion.

“By accelerating deployment of mature clean technologies such as solar, wind and electric vehicles, India could create more domestic economic opportunities while reducing emissions and strengthening its energy security,” the report quotes Shantanu Jaiswal, Head of Research at BNEF as saying.

Tackling industrial emissions with hydrogen and CCS

By the early 2040s, industrial CO2 emissions in India are predicted to surpass those from the electricity sector under the ETS, attributed to the expansion of the steel, aluminium, petrochemical, and cement industries. The largest emitting industrial subsector in India, steel, will virtually quadruple its emissions from 351 to 948 million metric tonnes (Mt) of carbon dioxide between 2021 and 2050.

A similar rise is shown in the amount of coal used in steel production, which increases to 399 million metric tonnes by the middle of the century. By 2050 compared to 2021, the cement industry will need five times as much coal, or 83Mt. Thus, emissions from the cement industry increase five times, reaching 289 Mt by the middle of the century.

Decarbonising the industrial sector and removing such emissions will depend heavily on green hydrogen and CCS. According to the NZS, between 2022 and 2050, the use of clean hydrogen in the production of steel can prevent 54 per cent of the total emissions. Similarly, 56 per cent of the total emissions associated with cement manufacturing can be reduced by CCS.

According to the NZS, India’s industrial sector emissions reach their peak in 2031 and start to decrease sharply in the mid-2030s as more hydrogen and carbon capture technology is used to decarbonise the production of steel, cement, and petrochemicals.

By 2050, there will be a roughly tenfold rise in domestic hydrogen demand, reaching 53Mt. The steel industry’s adoption of hydrogen-fired direct-reduction furnaces will be the primary driver of the new demand for hydrogen, which will reach 33Mt in 2050.

The majority of the hydrogen produced in India today comes from unrestricted fossil fuels. Under the NZS, the predominant pathway in India by 2050 is hydrogen produced using electrolysers driven by renewable sources.

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