Electricity Economics in India-Lessons learned from Europe

Global energy sectors are in transition due to increasing concern over sustainability and climate change. Generation and use of energy is responsible for almost two-thirds of the world’s Green House Gas (GHG) emissions. However, there are indicators that the global economy and the energy related emissions might be starting to decouple, due to an increased interest in the use of low carbon energy generation technologies (1). Nearly half of all the newly added power generation capacity in 2014 were accounted for by renewable energy technologies. In 2014, the European Union agreed on the 2030 climate and energy policy framework for the EU and set new targets for GHG emissions, renewable energy and energy efficiency for 2030 (2). Presently, the situation in Europe is mainly characterized by the need to increase the share of renewables, the de-carbonization of electricity generation and the stagnation of the electricity demand growth rates.
Developing countries like India are now predominantly concerned with rapidly increasing electricity demand growth rates, an ever increasing demand- supply gap and growing concern about environmental consequences. Furthermore, the population explosion situation in India resulting in a high electricity demand growth rate of 6.9% per year elevates the risk of energy scarcity in the coming future. The energy sector today in India is already unrecognizable from the one that existed two decades ago, before the beginning of the large economic reforms in 1991. With the projected exponential growth in the Indian economy, the change over the next decade is expected to be more dramatic. In this study, the main challenges for the transition of the Indian energy sector are identified, and an attempt has been made to compare the Indian and the European sectors to draw conclusions in aiding the transition process of the Indian energy sector.