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India's sunny uplands

To avoid the huge run-up in fossil-fuel demand forecasters expect, India will deploy more renewables and hope to electrify its passenger-transport sector

When Indians celebrate their country's 75th Independence Day on 15 August 2022, things should look very different. They should see fewer vehicles lining up for filling stations; more electric vehicles (EVs); and rooftop solar panels will grace the country's buildings. By then, a new energy policy should have taken root.

Much needs to be done. India is the world's third-largest energy consumer. By 2040, says the International Energy Agency, its energy demand will rival that of the US and be greater than that in OECD Europe.

Imports will be the mainstay of this energy thirst. The government also wants domestic producers to up their game. But big gains, capable of changing the outlook, can also be made in renewable energy, bringing both strategic (reduced imports) and environmental (less pollution and emissions) benefits.

It seems some way off. In 2016, coal remained the most important and abundant fossil fuel used in Indian power generation, meeting 56% of the country's needs. Oil was second, at about 30%, while natural gas accounted for just 6.23%. Renewable energy made up a meagre 2% or so. India's noisy, smog-filled roads are testament that oil retains its domination of the transport sector.

EVs, believes the government, can deal with the last of these problems—though some are sceptical. The new target is for all cars sold in India by 2030 to be electric. Analysts say that would mean 10m EVs sold per year in India by then, although only about 2m are currently on the road globally. India's automobile sector is also powerful, and with fewer moving parts required in an EV than a standard car, the impact of the transition could be negative for parts of the country's manufacturing sector.

The government is certainly keen. The country's minister for roads and transport, Nitin Gadkari, recently warned an audience at the Society of Indian Automobile Manufacturers that they must start building alternative cars, or else. "We should move towards alternative fuel... I am going to do this, whether you like it or not," he said. "And I am not going to ask you. I will bulldoze it. For pollution, for imports, my ideas are crystal clear... The government has a crystal-clear policy to reduce imports and curb pollution."

To help, the government is incentivising companies to develop Indian-built lithium-ion batteries. It will open battery factories over the next couple of years too. Automakers such as Hyundai, Tata Motors and Mahindra & Mahindra are all moving to take a lead in the domestic EV sector.

Further upstream, is a strategy to roll out more renewable energy supply. The government has set a target of 100 gigawatts of solar-generation capacity by 2022, at an estimated capital cost of $100bn—a tenfold increase from 2016. The World Bank is involved. By 2030, the government wants 40% of the country's energy to be sourced from green energy.

As of April 2016, India's total renewable energy capacity reached about 42.85GW (of total capacity north of 300GW): 63% came from wind, while solar contributed nearly 16%. While wind still has much potential-for another 45GW, according to some estimates—solar is increasingly favoured. No wonder: the country is blessed with about 5,000 terrawatt-hours of solar insolation every year. New solar parks are cropping up around the country, such as a 2GW facility in the southern state of Karnataka. The government's Make In India scheme to promote domestic manufacturing capacity, which is also pushing investment in solar, says 10.5GW of solar capacity was added in the 2016-17 fiscal year.

Nuclear should also play a role. India has 22 reactors, with capacity of 6.7GW at eight plants. It plans another 10 heavy-water reactors. Power minister Piyush Goyal says these will offer 7GW of capacity, at a cost of $11bn, although the deadlines for the plants are vague.

With all these targets in hand, India wants foreign investors to come and spend their capital. Goyal told US firms last year that his country hoped for $250bn of investment in the next five to six years; and $1 trillion by 2030. It's an opportunity not just for green investors, but also established energy providers. Alay Patel, an analyst at consultancy Wood Mackenzie, expects the lines between new-energy firms and oil and gas ones to blur in the coming years, as more companies look at India's huge potential and need to try and get a foothold in both the renewable and fossil-fuel sectors.

This article is part of a report series on India. Next article is: Flexing India's muscles

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