Overview 

India is the third-largest consumer of energy in the world. According to the Ministry of Power, the country’s peak demand reached a record high of 223 gigawatts (GW) in June 2023, a rise of 3.4% from the highest level in 2022, and consumption is projected to continue rising. Supported by industrial growth, urbanization, government policies, and favorable geopolitics over the past decade, India has achieved an installed capacity exceeding 400 GW. The Indian power sector employs a wide range of fuel sources, including traditional sources such as coal, oil, and gas, alongside environmentally sustainable sources such as solar, wind, biomass, industrial waste, and both large and small hydro plants. With a population of approximately 1.4 billion and the world’s fastest major growing economy, India’s energy demand is growing rapidly.

Fossil fuels dominate India’s power sector, but the country has ambitious goals to significantly increase the share of renewable and nuclear energy. As reported by the Government of India’s Press Information Bureau, the share of non-fossil fuel in total electricity production during the year 2022-23 and current year (up to May 2023) was 25.44 percent and 22.45 percent, respectively. Significant efforts are being made to reduce the growth of 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-fuel based energy 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. In 2021, Prime Minister Modi addressed the COP26 climate summit in Glasgow and announced the “Panchamrit” or the five-point agenda to fight climate change. The targets announced at COP26 include reaching 500 GW non-fossil energy capacity by 2030; fulfilling 50% of its energy requirements through renewable energy by 2030; reducing total projected carbon emissions by one billion tons from now to 2030; reducing the carbon intensity of the economy by 45% by 2030 over 2005 levels; achieving the target of net zero emissions by 2070. 

As of May 31st, 2023, data from India’s Ministry of New and Renewable Energy shows that India’s installed renewable energy capacity reached 179 GW, of which solar and wind comprised 67 GW and 43 GW, respectively. The remainder is composed of small hydro, biomass, and other sources. The gap between India’s installed renewable energy capacity and the actual electricity production from non-fossil fuel sources is due to the intermittent nature of the renewable energy sources such as wind and solar.

India is the third largest consumer and fourth largest importer of liquefied natural gas (LNG) in the world. While natural gas constituted 6% 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% by 2030 as part of its effort to support the transition to renewable energy. India is also the world’s third-largest net importer of crude oil and petroleum products, importing over 80% of the crude consumed. 

In November 2020, the Indian government issued a public procurement order to encourage domestic production of goods and services under the “Make in India” initiative. The order gives preference to Indian suppliers in government tenders, but there are still opportunities for US companies in India despite this policy. Overall, the U.S. share of India’s energy-related equipment and commodities market has room for growth. U.S. companies especially have opportunities 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. oil and gas export value to India reached $12.5 billion in 2022. 

U.S.-India bilateral energy commodities and equipment trade reached $18.5 billion in 2022 from $14 billion in 2021. The growth is being driven by several factors, including both the country’s growing demand for energy, and their commitment to clean energy cooperation.

India’s Total Installed Capacity by Power Source (GW) 

Source: Ministry of Power & Central Electricity Authority 

Renewable Energy Mix by Source (GW)

Source: Indian Central Electricity Authority

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

Source: Trade Policy Information System and IHS Markit 

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 distribution companies (discoms). India’s aggregate technical and commercial (AT&C) losses were 21.64% in FY21 and 17% in FY22. In contrast, the world average AT&C losses were 8%. As of April 2023, Indian discoms had a total outstanding debt of approximately $11.38 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, discoms continue to face significant financial stress. 

India has also begun its ambitious roll-out of smart meters, with the aim of installing 250 million by 2025. This initiative is expected to reduce power loss, improve revenue collection for local electric utilities and discoms, and incentivize energy conservation. As of March 2023, India has installed 6.9 million smart meters. 

Renewable Energy and Energy Storage: The renewable energy sector shows potential for substantial and rapid growth in India and has the potential to meet India’s growing energy demand. In March 2021, the government announced basic customs duties of 25% on solar photovoltaic cells and 40% on solar photovoltaic modules in effect from April 1, 2022, to encourage indigenous manufacturing. The government has demonstrated strong support for the renewable energy sector, setting ambitious renewable energy targets, and establishing policies and programs to support growth. In 2019, India announced a target of 280 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, to given manufacturers greater incentives to produce in India while making 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 has 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. 

In January 2023, the government approved the National Green Hydrogen Mission with an outlay of approximately $2.4 billion between FY2023-24 to FY2029-30, and with the aim of making India a global hub for production, usage and export of green hydrogen and its derivatives.

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% domestic and 70% imported LNG by 2025. Anticipating future demand, Indian companies have broadened their international supplier base and have 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 being 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 22,335 km of natural gas pipelines are operational, and 12,995 km of pipelines are under construction, with a target to increase the pipeline infrastructure to 34,500 km by 2025. Upcoming city gas distribution projects will cover 86% of India’s land and reach 96% 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 seven 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. Two terminals are on India’s east coast – a 5 MTPA terminal operated by State-owned Indian Oil Corporation and a newly commissioned 5 MPTA Dhamra joint venture terminal between Adani and TotalEnergies. India’s plan to double the share of natural gas in its energy mix to 15% by 2030 necessitates a huge increase in imports and the construction of more LNG terminals. A terminal in Karaikal and some additional terminals (Jaigarh, Jaffrabad, and Chhara) are expected to come online by 2024. India is gradually increasing imports due to a decline in domestic natural gas production. India imported 212.4 MMT of crude oil, worth $120.7 billion, and 31.02 BCM of LNG worth $13.5 billion, in FY 21-22. 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 such as 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 two 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 growth 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 likely 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. India’s average ethanol blending rate with petroleum for the calendar year 2023 is estimated at 11.5% and is on track to achieve the target of 20% ethanol blending by 2025. 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.

In April 2023, the government of India issued notification of bids for 50 GW of renewable energy capacity annually for the next 5 years, to achieve the target of 500 GW by 2030. These annual bids for inter-state transmission connected renewable energy capacity will also include setting up of wind power capacity of at least 10 GW per annum.

India is moving rapidly to become a major player in the green hydrogen economy. The government has taken several steps to promote the development of green hydrogen. In 2022, the government launched the National Hydrogen Mission, aiming to achieve a green hydrogen capacity of 5 million tons per annum by 2030. U.S. companies may find new opportunities for technology collaboration with Indian companies looking for forays into the green hydrogen sector. 

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 U.S. & Foreign Commercial Service Commercial Specialists Anisha Shashidharan in New Delhi and Sanjay Arya in Mumbai.