India in a ‘race against time’ when it comes to energy transition

A new report by S&P Global suggests that India at a crossroads from an energy perspective, as it seeks to balance energy security, affordability, and sustainability amidst growing domestic demand and geopolitical challenges. 

The report, Striking the balance: India’s energy security, affordability and sustainability, suggests that meeting all three needs simultaneously is the ‘need of the hour’, particularly given the country’s previously-stated environmental commitments.

India‘s reliance on imported oil, projected to reach 96% by 2035, makes it vulnerable to supply disruptions and price volatility. At the same time, the country has committed to net-zero emissions by 2070, making sustainability a central focus of its green energy transition.

Sustainability targets

India’s approach to sustainability hinges on reducing its dependence on fossil fuels through biofuels, renewable energy, and electric mobility. 

Ethanol blending has been one of the country’s recent ESG success stories, with a 15% blend achieved by 2023, and the country aiming for 20% by 2025. 

This has reduced fossil fuel consumption and enhanced domestic energy security. Electric vehicles, especially in the two- and three-wheeler segments, are also gaining momentum, supported by a broadening charging network.

‘The electric vehicle market in India is closely tied to the development of charging infrastructure,’ the authors state. ‘Major oil retailers in India have played a significant role in expanding this charging infrastructure. By promoting electrification in the transportation sector, India is looking to reduce its dependence on crude oil imports.’

At the same time, however, biodiesel production is lagging due to limited domestic feedstock, highlighting the need for further investment in sustainable fuels. 

Read more: Energy transition ‘couldn’t be more pressing’, S&P Global says

Dependance on crude oil

At present, India remains inexorably dependant on crude oil, threatening its sustainability targets and leaving it open to the challenges of the international market. The shift towards importing discounted Russian oil, following the Russia-Ukraine conflict, has ensured short-term affordability and reduced reliance on Middle Eastern crude.

India’s strategic petroleum reserves (SPRs) are being expanded, but their current capacity covers only a fraction of national demand. While helpful in managing supply disruptions, the reserves alone are not enough to solve the deeper issue of oil dependency.

‘Despite being amid an energy transition, India’s status as one of the world’s fastest-growing economies means that its reliance on imported crude oil is projected to increase to 96% by 2035 from 89% in 2023, with demand expected to continue growing at a high single-digit rate while domestic production lags,’ according to the authors. 

‘Combined with the fiscal pressures of a high oil price environment, this means India will pursue oil security, with the country set to remain a regional refining hub. As India seeks road transport gasification, e-mobility and emerging technology adoption, biofuel growth, and crude oil supply diversification, it is in a race against time to scale up the known and the novel.’ Read the full report here.