Renewable energy use may become mandatory for some sectors in India: IEEFA

When India’s government passes the amendments to the Energy Conservation Act, some sectors in India may be compelled to source their power from renewable energy sources, or else they will be penalised up to INR1m (INR10 lakh) for failure of compliance.

The Energy Conservation (Amendment) Bill 2022, or Bill No.177-C of 2022, which was passed by the country’s lower house or Lok Sabha in August and by the upper house or Rajya Sabha in December, will mandate a minimum consumption of energy from non-fossil fuel sources in sectors, which include mining, cement, textile, and transport such as railways and commercial buildings.

Aside from the INR1m penalty, those who fail to comply may also be liable to an additional penalty not exceeding twice the price of every metric ton of oil equivalent prescribed under the law, which is over the prescribed norms.

“They will have to necessarily use some of their energy requirements being met to non-fossil fuel energy. So I think that’s the demand side push, which the bill is trying to get by making this obligatory in some of the industries,”

Vibhuti Garg, Energy Economist and Director, South Asia at

Over time, when the prices for renewable energy and green hydrogen keep going down, most of these companies will increase the share from nonfossil fuel energy

IEEFA, said. Under the proposed measure, the government may specify the standard of processes and energy consumption for appliances, vehicles, vessels, industrial units, buildings, or establishments. Building, under the bill, includes those that have a minimum connected load of 100 kilowatts or contract demand of 120-kilovolt ampere and will be used for commercial, office, or residential purposes.

Energy-intensive industries have to get energy audits and submit a report on the status of energy consumption at the end of a financial year to the designated agency. Those who fail to comply will be liable to up to INR1m (INR10 lakh) and an additional penalty up to INR10,000 daily for continuing failures, the new bill said.

India, which aims to achieve net zero by 2070, pledged to reduce the emission intensity of its gross domestic product by 45% by 2030, from 2005 levels, and have around 50% of its total installed electric power capacity from non-fossil fuel resources at the same period, according to a statement by the Ministry of Environment, Forest and Climate Change.

Fossil fuels accounted for 58.5% of India’s total energy mix, whilst the remaining 41.5% were from non-fossil fuels, data from the Ministry of Power showed as of 30 June 2022. Of the fossil fuels, 50.7% were sourced from coal.

Future of fossil fuel

Generally, it is easier for industries to finance their operations that are linked to environmental, social, and governance (ESG) goals, such as the reduction of carbon emissions, Garg said. Indian industry players are also tapping into international financing through ESG pools or green bonds.

Once the proposed measure is passed and there is now demand to meet the obligations for non-fossil fuel use, this will drag down the demand for coal from these industries.

However, Garg noted that clean technologies, combined with storage or green hydrogen remain expensive.

“Over time, when the prices for renewable energy and green hydrogen keep going down, most of these companies or industries will be increasing the share from non-fossil fuel energy and reduce reliance on coal,” she said.

Renewable energy received more funding than coal for the third straight year in 2020, accounting for 74% of the total US$3.2b loans during the period, all of which were solar and wind.