India’s energy trilemma

India is the world's seventh-largest energy producer and the fifth-largest energy consumer, accounting for more than 4 per cent of total global annual energy consumption. But these impressive statistics hide some sobering truths. India has one of the lowest per capita energy consumption levels globally, at only 20 per cent of the world average, according to the World Bank. Moreover, India's energy supply falls well short of growing demand. Even when seemingly available, it is unreliable and erratic, as the power outage in most of northern India in July 2012 highlighted.

In the medium term, pressures on energy supply are likely to persist. Energy demand in India will continue to grow rapidly over the next couple of decades, given the country's relatively high rate of growth and high urbanisation levels, and a growing middle class will drive demand for consumer goods. India has been one of the world's fastest-growing economies over the past five years, with an average annual growth rate of roughly 8 per cent. The Planning Commission of India believes that the country needs to sustain this growth rate over the next 25 years if it is to eradicate poverty and meet its human development goals.

To achieve this ambitious target, India will need to increase its primary energy supply by four to five times, and its electricity generation capacity/supply by six to seven times, as compared to 2003-04 levels. By 2031-32 power-generation capacity should increase to nearly 800 GW from the current capacity of about 206 GW. This represents both a significant challenge and a huge opportunity for such an industrious nation.

For India's economic development to continue apace, it will have to ensure three things. First, that adequate financing is made available for building and upgrading energy infrastructure. Second, that appropriate measures are taken to address skills shortages in the sector. Third, that the country selects and builds the right kind of energy infrastructure in order to diversify and modernise the country's energy mix.

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