The recently published International Energy Agency report finds that the world is facing its first global energy crisis. Oil, gas, and coal prices have rapidly increased due to geopolitical tensions, the ongoing war in Ukraine, supply chain shocks, and rebounding demand in the aftermath of Covid.
This stress has in part propelled the world closer to a recession. It also highlights the vulnerability of the current energy system, which is both fragile and unsustainable, with the potential to create higher economy-wide inflation and instability.
In that vein, Prime Minister Narendra Modi’s commitment to Atmanirbhar Bharat (self-reliance), which aims to make India Urja Atmanirbhar (energy independent) by 2047, is more important than ever before. However, this goal is currently unattainable — India imports 90 per cent of its oil and 20 per cent of its coal. Yet, the deep reduction in clean energy costs provides India an opportunity to lower energy imports and achieve self-reliance through investment in renewable energy, energy storage, EVs, and green hydrogen.
India is on the verge of a massive energy revolution. As the fifth largest economy in the world, with a growing population, much of the country’s energy infrastructure will be built in the coming three decades. This comes at a time in which India has achieved the lowest solar and wind auction prices in the world. At the same time, global lithium-ion battery prices have plummeted 90 per cent over the last decade and are expected to further halve by 2030.
Achieving clean energy-led energy independence would have to span India’s three most energy intensive sectors — power, transport, and heavy industry. In power and transport, the pathway is clear — most new electricity demand is met by clean energy and the country’s transport is electrified. This is readily achievable with low-cost renewables and electric vehicles that are already in some cases at parity with their petrol or diesel counterparts, and with running costs 70-80 per cent cheaper.
In heavy industry like iron and steel which depends on imported coking coal, innovation is needed for rapid and economical clean energy deployment but provides India the opportunity to be a leader in new technology like green hydrogen.
Beyond cost savings, a pivot to clean energy would address the current economic crisis of energy dependence. India imports crude oil to meet its growing demand — the second-largest net oil importer in the world. These imports make up an outsized share of government expenditure, with annual bills around $100 billion ( ₹7,50,000 crore). Under current conditions, India’s oil demand is expected to quadruple by 2040, the largest increase of any country.
While oil and coal imports can be drivers of inflation, renewables and energy storage can inflation proof energy supply for freight movement and industrial production because the cost of fuel is static compared to the status quo. The Reserve Bank of India finds that every $10/barrel increase in crude prices leads to an additional $12.5 billion in India’s Current Account Deficit.
This creates pressure on the rupee, which ultimately leads to rising inflation. The volatility in oil prices this year alone has been significant, ruling at over $100 a barrel between March and July, and rising above that level in September.
A clean future is not only possible, but economically necessary for both consumers and the government.
This transition is also necessary to ensure that Indian industry stays globally competitive. The Indian auto industry is the fourth largest passenger vehicle producer in the world. 25 per cent of the sector’s production is exported, with some of the country’s largest markets in EU countries, which have committed to phase out petrol and diesel vehicles by the 2030s.
It is a similar case with India’s steel industry, which is one of the largest in the world and exports heavily to countries that committed to net-zero emissions in the coming decades. Without innovation towards greener technology, Indian industries risk being left behind as the world shifts away from fossil fuels.
A recent report by the UN finds that the world is way offtrack to meet commitments to a 1.5-degree warming future. A pathway towards clean energy is the only way to reduce emissions, while accessing the associated economic opportunities and potential consumer savings. India did not cause the problem of climate change, but it cannot afford inaction when there is a unique opportunity to lead the way forward. Ultimately, India’s clarion commitment to achieve Atmanirbhar Bharat is made imminently possible by the new clean energy landscape.
Moreover, in a current global context where supply of fossil fuels are increasingly volatile, unreliable, and geopolitical, this pathway meets the moment for India’s ambition to become more efficient, competitive, and resilient.
The writers are researchers at the University of California, Berkeley