Fueling the future: Key trends and outlook for the Energy sector

Exploring India's Energy Transition: Renewable energy growth, Green Hydrogen initiatives, and a Sustainable energy mix

In brief

• India made significant strides in renewable energy targets, with its ambitious target of 500 GW renewable capacity by 2030
• With crude oil import dependency at approximately 85%, energy security in India remains one of the top priorities for India to support economic activity

India’s energy transition landscape in 2024 was a blend of renewable energy growth in India and continued reliance on fossil fuels. The Indian energy policy is diversifying its crude oil imports, balancing low-cost supplies from new countries, while maintaining ties with its traditional suppliers. 

Despite a heavy coal dependency in India, renewable energy targets, renewable capacity, particularly solar, grew with government and private sector efforts. Other key themes pushing India towards alternative energy innovations include energy storage and energy decarbonization, growth of natural gas and LNG and nuclear power. Government policies promoting natural gas as a cleaner alternative are leading to increased infrastructure investments, including pipeline expansions and power distribution networks for city gas distribution networks. India aims to raise the share of natural gas in its sustainable energy mix from 6% to ~10% by 2030.

2024 also turned out to be the biggest election year, with over four billion people from 50 countries heading to the polls, including key economies such as the US, UK, South Korea, India and South Africa. The outcome of the 2024 US presidential election may directly impact India as a major energy consumer. 

How was 2024 for the sector?

Looming financial and geopolitical challenges

With Middle East supplies navigating away from new currency denominations, interesting perspectives emerged in the sector. Geopolitically, India’s energy trade continued to benefit from low-cost supplies from new countries, bolstering energy security in India.

Integrated energy focus

India’s oil and gas companies have enhanced a more integrated energy approach with public sector undertakings (PSUs), such as ONGC, IOCL announcing their green energy companies to fast-track new energy plans. Major companies also announced oil to chemicals focus with plans of 2-3x jump in petrochemical integration index, while a few reviewed capital restructuring options to enhance investments in petrochemicals spreading from commodities to specialties.

Renewable energy growth in india

India made significant strides in renewable energy targets, with its ambitious target of 500 GW renewable capacity by 2030. While solar energy installations reached record levels, the integration of hybrid systems and energy storage solutions in India and hybrid systems further stabilized the grid and enabled higher renewable energy penetration.

The Pradhan Mantari Suroday Yojana has provided a big boost to the nation’s targets of one crore household roof top solar installations.

The green hydrogen push

The government allocated US$2.4 billion in subsidies to renewable hydrogen projects, aiming to produce five million metric tons annually by 2030. Green hydrogen initiatives gained traction in industries such as steel and fertilizers, though challenges like demand-side policies and infrastructure constraints still persist.

Continued dependency on non-renewable sources, such as coal

Despite advances in renewable energy growth in India, dependence on coal continues. Seasonal hydropower shortages and rising energy demand necessitated continued reliance on coal, highlighting the dual challenge of meeting immediate energy needs while transitioning to cleaner alternatives.

Sustainability commitments

Circularity initiatives, carbon capture technology in India and industrial decarbonization efforts and advancements in carbon capture technologies have gained momentum. Heavy industries such as steel and refining began aligning with global emissions standards, including the EU’s Carbon Border Adjustment Mechanism (CABM).

Power distribution networks continues to focus on infrastructure upgradation

Infrastructure strengthening works will include separation of agriculture feeders to enable implementation of the KUSUM scheme, aerial bunch cables and HVDS for loss reduction, replacement of HT/LT lines as required, construction of new/ upgradation of substations, SCADA and DMS system.

In addition, infrastructure planning is now focusing on future renewable energy integrations to have networks with larger renewable energy penetration capabilities.

What is the outlook for 2025?

Energy security and imports

With crude oil import dependency at approximately 85%, energy security in India remains one of the top priorities for India to support economic activity. The government is incentivizing domestic exploration, production and alternatives like biofuels and hydrogen to reduce this vulnerability.

Growth of renewables and green hydrogen

With continued investments in solar, wind and energy storage solutions in India, the green hydrogen ecosystem is also likely to expand further, supported by industrial collaborations and international partnerships. However, addressing demand-side constraints will be crucial for scaling this nascent sector.

Coal and nuclear energy

Though coal will remain a cornerstone of India’s energy mix, nuclear energy is emerging as a viable low-carbon alternative and Bharat Small Reactors (BSRs), developed through public-private collaboration, can play an important role here.

Oil and gas market dynamics

With global oil supply tightening and potential sanctions on Iranian exports, oil prices may go up, further impacting India’s import costs. Conversely, the US focus on LNG exports presents an opportunity for India to secure reliable gas supplies. Indian oil majors are also increasingly looking beyond domestic markets, with expansion into Africa and the Indian Ocean region. These initiatives aim to secure strategic resources, new energy markets and bolster India’s energy influence globally. India plans to add one million barrels per day of new refining capacity by 2030 to meet rising domestic demand and maintain its status as a key exporter of transportation fuels.

Understanding the role of technology

The sector is poised to benefit from advancements in digitalization, and IT/OT/AI integration. Smart meters and other IT and OT system will generate huge data. Discoms will leverage this data for better operational efficiency, system planning and curbing AT&C losses.

Power distribution expected to focus on resource adequacy planning (RAP) and building a cyber secure infrastructure

Discoms are expected to align with the Central Electricity Authority’s (CEA) mandate of having resource adequacy plans from a long-term generation supply perspective. Most discoms are expected to complete their plans and initiate power procurement bids with an aim to secure both renewable and non-renewable bids.

Regulatory reforms

Though yet to be passed in the Parliament, the government’s approval of the Oilfields Regulation & Development Act (ORDA) bill is set to enhance the ease of doing business for upstream investments and make India self-reliant in the sector. Additionally, the Ministry of Petroleum and Natural Gas (MoPNG) is considering restructuring, re-skilling and capacity building, including integrating emerging tech into operations to improve performance management, which could help the country address its future energy and governance challenges more effectively.