Navigating India’s Energy Transition: Pathways and Policies

India stands at a pivotal moment in its energy journey. As the world’s third-largest energy consumer, the country faces the enormous challenge of powering a growing economy while meeting its commitment to achieve net-zero emissions by 2070. The energy transition underway involves a complex balancing act-improving efficiency, scaling up renewables, adopting cleaner fuels, and reshaping how energy is consumed. This transformation is not just about swapping one fuel for another; it requires systemic changes across industries, transportation, power generation, and consumer behaviour.

Improving energy efficiency across sectors
Industrial efficiency gains
Transportation sector efficiency
Low-carbon fuels: bridging the gap
The rise of biofuels
Challenges with low-carbon fuel adoption
Scaling up renewable energy
Solar leads the charge
Wind energy momentum
Policy support and public-private partnerships
Demand-side management: reshaping consumption patterns
Smart grids and advanced metering
Promoting public transport and shared mobility
Energy-efficient appliances and buildings
Challenges and the path forward
The promise of integrated solutions

Improving energy efficiency across sectors

Energy efficiency is often called the “first fuel” of the energy transition because it delivers immediate benefits at relatively low cost. For India, where industrial and transport sectors account for significant energy consumption, efficiency improvements can substantially reduce overall fuel demand without sacrificing economic output.

The Bureau of Energy Efficiency (BEE) has been at the forefront of this effort. Its flagship Perform, Achieve and Trade (PAT) scheme targets energy-intensive industries, requiring them to meet specific efficiency benchmarks. The State Energy Efficiency Index 2024, released by BEE, evaluates 36 states and union territories across 66 indicators covering buildings, industry, municipal services, transport, agriculture, and power distribution companies.

Industrial efficiency gains

Industries like steel, cement, aluminium, and chemicals consume massive amounts of energy. According to the International Energy Agency, the industrial sector holds the largest potential for energy savings in India, primarily through the PAT scheme and improvements in motor-driven systems. Mandatory minimum energy performance standards for electric motors are now in place, though making these standards more stringent could accelerate savings.

Transportation sector efficiency

Transport is a major driver of global oil demand, and India is no exception. The country has introduced Corporate Average Fuel Economy (CAFE) standards for both light-duty and heavy-duty vehicles, pushing manufacturers to produce more fuel-efficient models. Electric vehicle adoption offers additional efficiency gains beyond traditional fuel economy improvements. The FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme has been instrumental in promoting EVs, with EV adoption growing from 0.5% of total vehicle sales in 2018 to 7.7% in 2024.

Low-carbon fuels: bridging the gap

While renewable electricity expansion captures most headlines, transitioning from high-carbon fuels like coal to lower-carbon alternatives like natural gas and biofuels plays a crucial role in reducing emissions in sectors where electrification is difficult or slow.

The rise of biofuels

India has emerged as the world’s third-largest producer and consumer of ethanol, with production nearly tripling over the past five years. Ethanol blending in petrol has increased from 1.53% in 2014 to 15% in 2024, with the government targeting 20% blending by 2025.

The IEA forecasts that India will be the fastest-growing bioenergy market globally between 2023 and 2030, accounting for more than a third of worldwide bioenergy demand growth. The country has set multiple targets: 20% ethanol blending by 2025-26, 5% biodiesel blending by 2030, and 5% compressed biogas (CBG) blending in compressed natural gas by 2028-29.

Challenges with low-carbon fuel adoption

Despite progress, significant challenges remain. Achieving the 20% ethanol blending target may realistically take until 2030 given current production trajectories. Biodiesel production has lagged, with India producing only about a third of its installed capacity in recent years. Land use concerns, feedstock competition with food production, and infrastructure costs for distribution all present hurdles.

Natural gas offers another pathway for reducing emissions compared to coal, though it remains a fossil fuel with its own environmental footprint. The government has promoted compressed biogas (CBG) through the SATAT initiative as a cleaner alternative for the transport sector.

Scaling up renewable energy

India’s renewable energy expansion has been nothing short of remarkable. According to the Ministry of New and Renewable Energy, the country added a record 29.52 GW of renewable capacity in FY 2024-25, bringing total installed renewable capacity to 220.10 GW. This trajectory has accelerated further, with 44.51 GW added through November 2025-nearly double the additions during the same period the previous year.

Solar leads the charge

Solar energy now accounts for about 52% of India’s renewable capacity, with the country ranking third globally in solar power. Ground-mounted utility-scale projects dominate, but rooftop solar is growing rapidly, supported by the PM-Surya Ghar: Muft Bijli Yojana scheme, which targets 10 million household installations.

Wind energy momentum

India’s installed wind capacity crossed the 50 GW milestone in March 2025 and continues to expand, particularly in states like Gujarat, Tamil Nadu, and Rajasthan. The government targets expansion to nearly 100 GW by 2029-30, with offshore wind also being explored.

Policy support and public-private partnerships

This renewable expansion has been enabled by strong policy frameworks, including Production Linked Incentive schemes for domestic manufacturing, streamlined land acquisition processes, and green financing mechanisms. Clean energy subsidies increased by 31% year-on-year in FY 2024, while support for fossil fuels has declined to its lowest level in five years.

Foreign direct investment in renewable energy has been permitted up to 100% under the automatic route, attracting significant private capital. The sector received $23 billion in foreign investment from April 2020 to June 2025.

A major milestone was achieved in June 2025 when non-fossil fuel sources reached 50% of India’s total installed electricity capacity-five years ahead of the 2030 target under the Paris Agreement commitments.

Demand-side management: reshaping consumption patterns

Generating clean energy is only part of the equation. Managing how and when energy is consumed can reduce peak demand, improve grid stability, and enable greater integration of intermittent renewable sources.

Smart grids and advanced metering

The National Smart Grid Mission is driving modernisation of India’s power distribution infrastructure. Key components include advanced metering infrastructure (AMI), demand response programs, dynamic tariff implementation, and integration of distributed energy resources. Smart meters provide real-time consumption data, enabling utilities to implement time-of-use pricing that incentivises consumers to shift consumption to off-peak hours.

Pilot projects like the Smart Grid Naroda Project in Gujarat demonstrate the potential, combining AMI for residential and industrial consumers with efficient peak load management and renewable energy integration.

Promoting public transport and shared mobility

Urban transportation contributes significantly to energy demand and emissions. Under the PM e-Bus Sewa scheme launched in August 2023, 10,000 electric buses are planned with a budget of ₹20,000 crore, complemented by the PM E-DRIVE scheme that adds incentives for over 14,000 more e-buses.

India’s smart transportation market is projected to more than double from $10.6 billion in 2024 to $23.4 billion by 2033, driven by investments in intelligent transport systems, electric mobility, and connected infrastructure.

Energy-efficient appliances and buildings

The BEE’s Standards and Labelling programme has transformed the appliance market, with star ratings now covering fans, air conditioners, refrigerators, and more. According to the State Energy Efficiency Index 2024, 24 states have notified the Energy Conservation Building Code (ECBC) 2017, establishing efficiency standards for commercial buildings. Additionally, 31 states have adopted electric mobility policies, signalling widespread commitment to demand-side transformation.

Challenges and the path forward

Despite impressive progress, India’s energy transition faces substantial challenges. The estimated investment required for India’s energy transition is approximately $10 trillion by 2070. Grid infrastructure needs significant upgrades to handle variable renewable generation. Coal still accounts for about 60% of electricity generation, and coal-dependent regions require careful planning for a just transition that protects livelihoods.

Structural weaknesses in the electricity grid, particularly the cross-subsidy pricing mechanism that undermines the financial health of distribution companies, constrain the pace of modernisation. EV charging infrastructure remains inadequate, with around 12,000 stations operational against an estimated requirement of 1.32 million by 2030.

Yet the momentum is undeniable. NITI Aayog’s energy transition guidelines aim to balance employment growth, economic development, and environmental sustainability as India pursues its 2047 vision of becoming a developed nation. Nine inter-ministerial working groups are developing detailed scenarios through the 2040s, with particular attention to coal-dependent regions in Odisha, Jharkhand, and Chhattisgarh.

The promise of integrated solutions

India’s energy transition is not following a single pathway but rather combining multiple approaches: efficiency improvements that reduce overall demand, low-carbon fuels that bridge the gap in hard-to-electrify sectors, renewable expansion that decarbonises electricity supply, and demand management that optimises system performance.

The interconnections matter. Electric vehicles, for instance, deliver maximum climate benefit when charged with renewable electricity. Smart grids enable greater renewable integration by managing variability. Biofuels provide flexibility in transport sectors where batteries remain impractical while utilising agricultural residues that might otherwise be burned.

Success will require continued policy support, technological innovation, and unprecedented collaboration between government, industry, and consumers. The stakes extend beyond India’s borders-as one of the largest and fastest-growing energy markets, India’s choices will significantly shape global emissions trajectories and demonstrate whether emerging economies can pursue development while decarbonising.

What do you think? How can India balance the urgency of climate action with the need for energy access and economic growth? What role should individual consumers play in supporting the energy transition through their daily choices?

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Table of Contents

Improving energy efficiency across sectors 🔗

Industrial efficiency gains 🔗

Transportation sector efficiency 🔗

Low-carbon fuels: bridging the gap 🔗

The rise of biofuels 🔗

Challenges with low-carbon fuel adoption 🔗

Scaling up renewable energy 🔗

Solar leads the charge 🔗

Wind energy momentum 🔗

Policy support and public-private partnerships 🔗

Demand-side management: reshaping consumption patterns 🔗

Smart grids and advanced metering 🔗

Promoting public transport and shared mobility 🔗

Energy-efficient appliances and buildings 🔗

Challenges and the path forward 🔗

The promise of integrated solutions 🔗