BloombergNEF Report: India’s $12.7 Trillion Opportunity for a Net Zero Economy by 2050

India’s ambitious drive toward a net zero economy by 2050 is not only an environmental imperative but also a monumental investment opportunity, according to the New Energy Outlook: India report released today by BloombergNEF (BNEF). The report highlights that India’s transition to a net zero economy could amount to a staggering $12.7 trillion investment opportunity, provided the country accelerates the deployment of clean technologies. Underpinning this transition is the imperative to reach energy independence, or “AatmaNirbhar Bharat,” by 2047. Achieving this goal hinges on maximizing the deployment of clean technologies such as solar, wind, and electric vehicles (EVs) in the country’s energy landscape.

The BloombergNEF report outlines two key scenarios for India’s energy transformation. The first, the Economic Transition Scenario (ETS), is a market-driven shift, aiming to limit global warming to 2.6 degrees Celsius by 2050. While ETS makes substantial strides toward energy independence and decarbonization, it doesn’t quite attain these objectives by 2050. In contrast, the Net Zero Scenario (NZS) envisions robust government support and private sector investments, aligning with net zero emissions by 2050 without relying on unproven technologies. NZS not only achieves mid-century energy independence but does so cost-effectively, offering a promising blueprint for India’s sustainable energy future.

Clean Power Progress

India has already taken substantial steps in decarbonizing its power sector, thanks in large part to its world-leading clean energy auction programs. Between 2018 and 2022, India added an impressive 53 gigawatts of solar and wind capacity, with 16 gigawatts of utility-scale solar installed in 2022 alone. Despite these gains, solar and wind power account for less than a quarter of India’s total power generation capacity, with coal continuing to dominate the energy mix. As a result, India’s electricity generation remains the country’s largest source of emissions. 

The BNEF report emphasizes that an accelerated deployment of solar and wind power, supplemented by nuclear, energy storage, and carbon capture and storage (CCS) for thermal power plants, represents the most cost-effective strategy for India to expand electricity access while decarbonizing its power supply.
Notably, new wind and solar power plants in India have already achieved a lower levelized cost of electricity generation compared to new thermal power plants. By the mid-2030s, it is projected that the cost of electricity generation from these renewable sources will be cheaper than operating existing coal-fired plants.

A Vision for 2050

In the NZS, wind, and solar power capacity undergo a remarkable 30-fold expansion, surging from 99 gigawatts in 2021 to a whopping 2,998 gigawatts by 2050. These renewable sources, wind and solar, account for 80% of India’s electricity supply in 2050, and nuclear provide 9%. The remainder is met by hydro, biomass, hydrogen-fired thermal plants, and thermal power plants equipped with CCS. Even in the ETS, the report’s baseline scenario, solar and wind power become the dominant sources of electricity supply, comprising 67% of electricity generation in 2050.

“India needs to double down on increasing flexibility in the grid to integrate the large capacities of variable wind and solar,” notes Rohit Gadre, India Research Senior Associate at BNEF, who emphasizes that various solutions, including batteries, pumped hydro storage, and peaker gas plants, can coexist to address this challenge.

Investment Imperative

Realizing India’s net zero ambitions comes with a significant financial commitment. Under the ETS, investment in energy supply and demand is projected to reach $7.6 trillion over the period from 2022 to 2050, averaging $262 billion annually. To achieve net zero, as outlined in the BNEF’s NZS, investment levels must increase to 1.7 times higher, totaling $12.7 trillion by 2050, with an annual average of $438 billion (equivalent to approximately 5% of expected GDP).

Fossil fuel power investment decreases from $317 billion in the ETS to $142 billion in the NZS. To mitigate emissions from remaining fossil fuel use in the NZS, India requires $870 billion for CCS. Notably, electric vehicle (EV) sales dominate energy demand investment in both scenarios, with a substantial $3.9 trillion allocated to EV deployment in the NZS.
“Transitioning to a zero-emission vehicle fleet by 2050 will require bold policy efforts by the state and national governments. Falling battery costs are set to accelerate EV adoption post-2030 which will also spur local manufacturing from automobile and battery makers,” stated Komal Kareer, India Research Associate at BNEF.

Shantanu Jaiswal, Head of India Research at BNEF, added, “India can all but eliminate dependence on fossil fuel imports by 2047, its centennial. 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.”

Tackling Industrial Emissions

India’s industrial sector poses a significant challenge in the quest for net zero emissions. Under BNEF’s ETS, the report indicates that industrial CO2 emissions are on track to surpass those from the power sector by the early 2040s, driven by growth in steel, aluminum, petrochemical, and cement industries. India’s largest industrial emitter, the steel subsector, anticipates nearly tripling its emissions from 351 million tons of carbon dioxide (MtCO2) in 2021 to a staggering 948MtCO2 by 2050. Similarly, coal consumption in steel production is expected to surge to 399 million metric tons by mid-century. The cement industry follows suit, with coal use increasing fivefold to 83Mt by 2050, resulting in a fivefold rise in emissions to 289 MtCO2 by mid-century.

To address this, the report underscores the crucial role of green hydrogen and carbon capture and storage (CCS). In the NZS of the BNEF report, clean hydrogen is projected to abate 54% of cumulative emissions in steel production between 2022 and 2050, while CCS helps eliminate 56% of cumulative emissions from cement production.

In the NZS, India’s industrial sector emissions peak in 2031 and subsequently experience a sharp decline in the mid-2030s. This turnaround is primarily attributed to the increased utilization of hydrogen and carbon capture technologies in the steel, cement, and petrochemical industries. The demand for hydrogen within India surges tenfold to 53 million metric tons (MtH2) by 2050. Notably, this rise is spurred by the swift adoption of hydrogen-fired direct-reduction furnaces in the steel sector, pushing hydrogen demand to 33 MtH2 by 2050. Importantly, India’s hydrogen production evolves from primarily unabated fossil fuel sources to flexible grid-connected electrolyzers powered predominantly by renewables by 2050, in line with the NZS.

Considering India’s current commitments outlined in the Nationally Determined Contributions (NDC), which suggest that energy-related emissions in 2030 may rise by 31% compared to 2019 levels, the report underscores the need for accelerated deployment of mature clean technologies. Under the BNEF Economic Transition Scenario (ETS), emissions in 2030 would still be 22% higher than 2019 levels, indicating the necessity for more robust measures. In contrast, the BNEF Net Zero Scenario (NZS) demands that India’s 2030 energy-related emissions drop to 9% below 2019 levels, emphasizing the urgency for swift action and investment in clean technologies to meet these ambitious targets.