India’s industry sector has been the main driver of energy demand growth since 2000.
In the past three decades, industrial energy demand has tripled and now accounts for 36% of final energy consumption, which is higher than its share of GDP (nearly 30%). Due to rapid industrialization and urbanization, this growth is expected to continue, with India accounting for nearly one-third of global industrial energy demand growth by 2040.
India’s anticipated energy demand growth has been accompanied by a deep reduction in clean energy technology costs, especially for wind turbines, solar PV cells, lithium-ion (Li-ion) batteries, and hydrogen electrolyzers.
India is the second-largest steel producer in the world, accounting for about 6% of global steel production. The iron and steel industry is the largest energy consumer among industrial subsectors, accounting for more than 35% of industrial energy consumption. Most of the energy used in this sector comes from coal, out of which nearly 75% is imported. India produces 8% of global cement supply.
Cement is the second-largest energy consumer among industrial subsectors, accounting for more than 20% of energy consumption and is also primarily powered by coal. The third major industrial sector in India is fertilizers, chemicals, and petrochemicals (F, C&PC), which accounts for about 15% of industrial energy consumption. Most of this energy comes from oil and gas (for feedstock as well as energy) and coal (for heat and captive power).
However, it is now possible to decarbonize heavy industries due to the availability of new technologies and other opportunities. Electrification is more energy efficient for most industrial processes, often has lower maintenance and investment costs, and can reduce India’s dependence on fossil fuel imports. Decarbonization of heavy industrial high-heat applications is also technically feasible, although it is not yet commercially available for all applications. Although the economic and commercial viability of green hydrogen based heavy industrial decarbonization is some time away, first steps have been taken in this direction, including the announcement and allocation of investment in India’s National Green Hydrogen Mission. With a financial outlay of ~$2.5 B, the Mission aims to build capabilities to produce at least 5 Million Metric Tonnes (MMT) of Green Hydrogen per annum by 2030.
India is expected to more than double its steel production by 2030. Enabling new industrial stock to use clean energy while maintaining industrial competitiveness would warrant a mix of mandates and incentives. The Indian Government has instituted Production-Linked-Incentive (PLI) scheme targeted at support for domestic manufacturing of electrolysers, and production of green hydrogen.
However, clear policy targets such as a clean mandate on new industrial stock, akin to the Renewable Purchase Obligation (RPO) in the power sector, are missing in industry.