Backed by air-conditioning demand, India to lead global electricity consumption growth over next 25 years: IEA | Mint

New Delhi: India will lead global electricity consumption growth over the next 25 years as emerging markets and developing economies consume ever-more power due to rising demand of household cooling appliances in heatwaves, industrial demand and the penetration of electric vehicles (EVs), the Paris-based International Energy Agency said.

In its World Energy Outlook 2024 released Wednesday, the IEA said global electricity demand growth is set to accelerate further in the years ahead, propelled by clean sources of electricity.

India’s soaring electricity demand—estimated to accelerate at over 4% every year till 2050—tops the global average annual electricity demand growth for the same time period, as per the IEA’s assessment.

From 2023 to 2050, the average annual electricity demand growth rate across the globe is likely to accelerate to over 3% if all countries meet their national energy and climate targets, including net-zero emission goals, the IEA said.

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“India becomes the third-largest electricity consumer in the world by 2050 on the back of growth in demand of over 4% a year,” the IEA said, citing data to indicate that only China and the US will have a higher demand.

This means India would retain its position in the list of top power consumers, with its 5.6% rise in electricity consumption from 1,076.7 billion units (BU) consumed in FY22 to 1,137.3 BU in FY23, according to data from the Niti Aayog’s India Climate and Energy Dashboard.

The IEA’s forecast indicated that growth in electricity consumption in emerging markets and developing economies would be driven by the demand for cooling appliances as heatwaves raged across the world.

“The combination of rising incomes and increasing global temperatures (will) generate more than 1200 TWh (terawatt-hours) of extra global demand for cooling by 2035,” the IEA said, adding that this amount was greater than all of West Asia’s electricity use today.

The IEA estimated that demand for cooling buildings will rise 3.7% annually till 2035, and that 90% of this demand is likely to take place in emerging market and developing economies, where economic growth and rising incomes drive air conditioner ownership, while a warming global climate boosts demand and leads to air conditioners having to work harder to provide cooling.

“As well as raising overall demand, cooling is projected to lead to higher peaks in demand, putting additional strain on power grids,” the IEA said.

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India’s Niti Aayog data aligned with the IEA’s conclusions, and showed that the country’s power consumption was driven by domestic use and industrial activity. While industrial activity had an approximately 30-32% share in India’s consumption mix from FY16 to FY23, domestic usage such as household appliances also made up 28-30% of the mix.

Consumption mix

The share of domestic usage in the consumption mix even saw a marginal rise in the wake of the pandemic as industrial activity slowed in that period. The share of household usage in the consumption mix rose nearly 2 percentage points to 32.71% in FY21, before moderating to 31.29% in FY23.

Notably aligning with the IEA’s forecast is India’s rapid rise in electricity consumption from EVs. The nation’s EV power consumption has nearly quadrupled from FY21 to FY23 to 202.61 million units (MU), as per Niti Aayog data.

The IEA has also taken note of India’s policies for EV penetration, including the PM E-drive scheme launched earlier this month, with a ₹10,900 crore outlay, and the country’s goal of reaching 30% EV penetration by 2030.

Over the long run, the IEA, however, also noted that the impact of home appliances in boosting electricity demand may be lesser over the next decade as governments across the globe focus on developing green hydrogen using electricity to meet their net-zero emission targets. India has set a target of having net-zero emissions by 2070.

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Energy transition

The IEA also identified climate change as a risk to the global energy transition, indicating that unpredictable weather phenomena as well as prolonged heatwaves may be a dampener to energy security policies worldwide.

“Energy security and climate action are inextricably linked: extreme weather events, intensified by decades of high emissions, are already posing profound energy security risks,” the IEA said.

Such impediments could potentially moderate India’s overall power consumption, as the country’s agriculture sector—which faces the brunt of climate change across the world—also consumes a little over 20% of the country’s electricity.

Overall, the IEA forecast continuity in the clean energy transition, adding that nations’ reliance on fossil fuels is likely to fall, thus cutting prices and creating opportunities for diversified investments in the sector.

“The breathing space from (fossil) fuel price pressures can provide policymakers with room to focus on stepping up investments in clean energy transitions and removing inefficient fossil fuel subsidies. This means government policies and consumer choices will have huge consequences for the future of the energy sector and for tackling climate change,” said IEA executive director Fatih Birol in a statement.

“The push to increase the share of manufacturing in India’s GDP (gross domestic product) will certainly drive growth in the country’s electricity consumption. Moreover, the growing adoption of electric vehicles will support the electricity demand growth over the long term. Herein, measures to develop the charging infrastructure would remain important,” said Vikram V., vice-president and co-group head, corporate ratings, at ratings company Icra Ltd.