Overview

India is the third largest energy-consuming country in the world.  Peak demand reached 207 gigawatts (GW) for the first time in April 2022, and consumption is projected to rise.  Supported by industrial growth, urbanization, government policies, and favorable geopolitics over the past decade, India has installed capacity exceeding 400 GW.  The Indian power sector uses diverse fuel sources, including conventional resources, such as coal, oil, and gas, and environmentally sustainable sources, such as solar, wind, biomass, industrial waste, as well as both large and small hydro plants.

Fossil fuels dominate India’s power sector, with coal comprising over 70 percent, but the country aims to significantly increase the share of renewable and nuclear energy.  Efforts are being made to reduce greenhouse gas emissions and dependence on energy imports, while at the same time enhancing India’s energy security.  The transition from coal to renewables will take decades, and in the interim India requires the flexibility of fossil-fired power generation to balance the grid during intermittent operation of renewables.  India will continue to rely on natural gas and cleaner forms of fossil energy during this transition. 

India has set ambitious renewable energy targets for the medium and long term.  The country aims to have installed renewable electricity capacity of 175 GW this year, and 500 GW by 2030.  As of January 2021, data from India’s Ministry of New and Renewable Energy shows that India’s installed renewable energy capacity reached 113 GW, of which solar and wind comprised 56.95 GW and 40.70 GW, respectively.  The remainder is composed of small hydro, biomass, and other sources.

India is the fourth largest liquefied natural gas (LNG) market in the world.  While natural gas constituted six percent of India’s energy mix in 2019, the Indian government has stated its intent to raise the share of natural gas in the national energy mix to 15 percent by 2030 as part of its effort to support the transition to renewable energy.  However, rising gas prices throughout spring and summer 2022 may impact this goal.  India is the third-largest consumer of crude oil and petroleum products in the world.  It is also the world’s third-largest net importer of crude oil and petroleum products, importing over 80 percent of the crude consumed.

The global COVID-19 pandemic negatively affected the Indian power sector.  Constrained economic activity and unemployment aggravated payment delays from residential, commercial, and industrial consumers to Indian distribution companies (discoms).  Timelines for capacity additions and developmental plans were delayed across the sector.  While the energy sector is already approaching pre-pandemic levels of operation and growth, the weak financial health of many of India’s discoms due to lack of competition, politically motivated subsidies, and expensive legacy power purchase agreements persist.

Overall, the U.S. share of India’s energy-related equipment and commodities market has room for growth.  There is especially opportunity in higher-value manufactured goods with power utilities that have solid balance sheets.  Since 2017, with support from both governments, the United States has become a significant source of energy for India.  U.S. crude oil export value to India went from zero to $9.5 billion between 2016 and 2021, and U.S. LNG exports grew from $104 million to $1.7 billion during the same period.  

U.S.-India bilateral energy commodities and equipment trade reached $14 billion in 2021, a 693 percent increase over 2016.  In 2019, India became the largest export destination for U.S. coal, the fourth-l

Source: Ministry of Power & Central Electricity Authority

Source:  Indian Central Electricity Authority

U.S. Energy Exports to India ($ million)

Source: Trade Policy Information System and USITC DataWeb

Leading Subsectors

Transmission, Distribution, and Smart Grid

In India, the electric power transmission and distribution sector is dominated by public utilities, with the overall private sector role limited to one percent in transmission and five percent in distribution.  Prominent challenges in these sectors include aggregate technical and commercial losses, primarily due to theft or grid inefficiencies, and the growing financial distress of discoms.  India’s aggregate technical and commercial losses were 22 percent in fiscal years 2018-2019 and 21.2 percent in 2020.  In contrast, the world average was 8 percent in 2019.  As of March 2019, Indian discoms were looking at a total outstanding debt of approximately $14 billion.

Addressing the financial stress of indebted discoms, starting in April 2021, the Indian government approved a reform-based, results-linked power distribution sector program with a budget outlay of $41 billion.  The program aims to improve the operational efficiencies and financial sustainability of discoms through fiscal years 2024-2025.  India also plans to privatize discoms in all eight union territories and will explore public-private partnerships for power distribution in some Indian states.  However, as of summer 2022, discoms continue to face crippling financial stress.

India has also begun its ambitious roll out of smart meters, with the aim of installing 250 million by 2024.  The initiative is expected to reduce power loss, improve revenue collection for local electric utilities and discoms, and incentivize energy conservation.

Renewable Energy and Energy Storage

The solar energy sector remains a sunrise sector in India and has the potential to meet India’s growing energy demand.  The government has demonstrated strong support for the renewable energy sector, setting ambitious renewable energy targets, policies, and programs to support growth.  In 2019, India announced a target of 240 GW of solar capacity by 2030 and is positioning itself as a manufacturing destination for solar photovoltaic cells.  To support domestic production and reduce reliance on imports, India included solar manufacturing in its Production Linked Incentive (PLI) Schemes, making foreign imports more costly.

India is a major hub for wind energy manufacturing and is one of only five countries that can produce all six major wind turbine components (nacelles, blades, towers, generators, gearboxes, and bearings).  India’s leading wind companies include Vestas India, Suzlon Energy, ReGen Powertech, Wind World India, Orient Green Power, Indowind Energy, GE Energy India, Inox Wind, Leitwind Shriram Manufacturing, and RRB Energy.

India’s Department of Heavy Industry has issued a PLI notification for Advanced Chemical Cell battery storage.  Investments in manufacturing and value addition for Advanced Chemical Cells are negligible in India, and domestic demand is met entirely through imports.  Several major battery-consuming sectors are expected to achieve robust growth in the coming years, including consumer electronics, electric vehicles, advanced electricity grids, and solar rooftop systems.

In addition to transitioning from coal to renewable energy, the Indian government launched initiatives to reduce greenhouse gas emissions and dependence on fossil energy.  These include the National Electric Mobility Mission to promote the sale of electric and hybrid vehicles and the recent National Hydrogen Mission to help mainstream hydrogen technology.

Natural Gas

India is the world’s fourth largest buyer of LNG, after Japan, South Korea, and China, with international purchases expected to rise to support increasing demand for natural gas and the Indian government’s promotion of a cleaner environment.

Half of India’s supply of natural gas comes from domestic production while the other half comes from imported LNG.  Industry experts expect that rising demand will prompt a mix of 30 percent domestic and 70 percent imported LNG by 2025.  Anticipating future demand, Indian companies broadened their international supplier base and negotiated long-term contracts.  However, longstanding infrastructure challenges at LNG receiving terminals and the lack of gas distribution pipelines create bottlenecks, impacting efficient distribution and importation, and resulting in large quantities of contracted LNG to be sold on the spot market while in transit. 

India is moving toward its goal of “One Nation, One Gas Grid” as it expands its gas pipeline infrastructure.  Over 18,820 km of product pipelines, 10,419 km of crude oil pipelines, and 32,718 km of natural gas pipelines are now operational, with additional pipelines under construction.  Upcoming city gas distribution projects will cover 86 percent of India’s land and reach 96 percent of the total population.  This creates near term opportunities for U.S. companies to partner with Indian entities bidding to implement these projects. 

India has six LNG receiving terminals in operation, five of which are on the west coast including Petronet’s 15 million tons per annum (MTPA) terminal in Dahej and 5 MTPA terminal in Kochi; Shell’s 5 MTPA terminal in Hazira; Ratnagiri Gas and Power’s (NTPC subsidiary) 5 MTPA terminal at Dabhol, and its 5 MTPA terminal in Mundra.  One terminal is on India’s east coast – a 5 MTPA terminal operated by State-owned Indian Oil Corporation.  India’s plan to double the share of natural gas in its energy mix to 15 percent by 2030 necessitates a huge increase in imports and the construction of more LNG terminals.   A terminal in Karaikal is expected to come online in 2022 and four additional terminals (Jaigarh, Dhamra, Jaffrabad, and Chhara) are expected to come online by 2023.

India is gradually increasing imports due to a decline in domestic natural gas production.  India spent $11.9 billion to import 32 billion cubic meters (bcm) of LNG in 2021-2022, as compared to $7.9 billion spent on import of 33 bcm of gas in the previous fiscal year.  India spent $9.5 billion to import 33.9 bcm in 2019-2020.  India currently has LNG regasification capacity of around 42.5 million MTA, and it plans to reach 70 million MTA import capacity by 2030, and 100 million MTA by 2040.

The International Trade Administration’s Energy Resource Guide – India – Oil & Gas contains additional information about the oil and gas regulatory environment in India, as well as links to tender announcements.

Opportunities

The U.S. market share of India’s energy-related equipment and commodities imports remains low.  China was the top foreign competitor for low-cost equipment, but since 2020 India has sought to reduce its supply chain dependence on China, signaling increased opportunities for U.S. companies.  The PLI scheme for solar and energy storage led several large Indian renewable energy companies and public sector entities to scout for partnerships with foreign technology providers.  Increased manufacturing in India may lead to U.S. export opportunities for components in the solar value chain (e.g., U.S. polysilicon).  For example, India’s Reliance Industries, the world’s second largest energy company, has announced plans to invest $10 billion in clean energy between 2021 and 2024, creating U.S. export opportunities for products such as polysilicon, solar trackers, energy storage, and electrolyzers for hydrogen production.

Large Indian energy companies like Adani, Renew Power, and Avaada, and public sector entities like Coal India Ltd. and NTPC Ltd. indicate interest in investing and diversifying into the clean energy space, including solar, energy storage, hydrogen, and smart grid technologies.  The PLI scheme has prompted several U.S. solar companies to rethink their India strategy, and some have now established offices in India.

As India continues to modernize its national power grid, demand remains steady for traditional transmission and distribution equipment, as well as for smart grid innovations that improve reliability and stability.  Transformers, fixed capacitors, fuses for electrical apparatus, lightening arrestors, voltage limiters, electric conductors, microprocessors, amplifiers, electricity meters, and smart communication technologies are frequently imported.

India plans to replace all traditional electricity and gas meters with smart meters to increase the operational efficiency and revenue generation capacity of distribution utilities.  Energy Efficiency Services Limited is the nodal agency for implementing the roll-out of smart meters for electricity and it is the leading smart metering service provider in the country.  Energy Efficiency Services Limited plans to replace 250 million conventional meters with smart meters over the next three years and has signed agreements with various state distribution utilities to undertake smart metering projects.   

As indicated in a recent report from the National Institution for Transforming India Aayog-Rocky Mountain Institute, the annual market for stationary and mobile batteries in India is expected to grow to $6 billion by 2030 based on conservative estimates and could surpass $15 billion.  This is necessary to meet demand for renewable energy integration, frequency regulation, peak management transmission and distribution deferral, and electric vehicle charging.  Currently, U.S. energy storage technology enjoys a global competitive advantage, but suppliers will need to establish strong relationships with local business partners to enter this fast-developing market.  India’s regulatory and policy environment for energy storage is also continuing to evolve.

U.S. exports of crude oil, natural gas, and coal to India are expanding at a steady rate, with Indian buyers open to exploring new partnerships with U.S. suppliers.  India’s imports of U.S. oil and gas commodities grew from $4.1 billion in 2018 to $9.5 billion in 2021.  As domestic production of ethanol will not meet mandated goals of 10 percent ethanol fuel blending for vehicles by 2022, India may lift import restrictions for ethanol, creating substantial opportunities for U.S. ethanol exporters.

Several new refinery and petrochemical projects are planned for the next five years, as well as expansion projects for existing refineries.  India plans to double its refining capacity from 5 million barrels per day to 10 million barrels per day by 2030.   

Natural gas infrastructure will present opportunities over the next several years, particularly as India constructs new LNG terminals, expands pipelines across the nation, and builds city gas distribution infrastructure to include piped city gas for buildings and compressed natural gas dispensers for transportation.  LNG dispensing units and virtual pipelines in the form of cryogenic containers present additional opportunities for U.S. companies.  The requirement for new entrants in the fuel retailing business to invest in new-fuel dispensation will be an opportunity for LNG, biofuels, and possibly hydrogen technology.

For more information on tapping India’s energy sector opportunities, contact Commercial Specialists Anisha Shashidharan and Sanjay Arya.