India's energy consumption has almost doubled since the year 2000. With the steadily increasing urbanization of the country, it is quite likely that the future will see even greater demands for energy. Estimates suggest that by the year 2040, India's energy consumption will be growing by 4.2 per cent per year, faster than all the world's major economies, accounting for 11 per cent of global energy consumption.
However, growth without a sustainable basis introduces several challenges. According to a 2018 study on global air pollution levels by the World Health Organization, fourteen of world's fifteen most polluted cities were in India. The country's dependence on coal, which is the source of nearly 60 percent of India's power generation, is one of the major reasons for India's high CO2 and greenhouse gas emissions. Almost three-quarters of India's energy needs are still met by fossil fuels, a share that has increased since the year 2000.
In order to meet the growing demand for energy and reduce its carbon and greenhouse emissions, India will need shift its energy mix toward low carbon energy by increasing its use and generation of renewable energy. The country also needs to focus on emissions control technologies when it comes to the power sector, industry and transport. An economical way to address this issue is through the adoption of energy efficient techniques that will complement the nation's climate change goals.
India also has a massive energy saving potential-about 15 to 30 percent across all sectors. If industries (large, medium and small), buildings (commercial and government) and municipalities-which are responsible for around 50 percent of India's total electricity consumption-adopt energy efficiency measures, it is quite possible to achieve better results in energy conservation.
To successfully demonstrate the technical viability and commercial feasibility of the India's energy demand objectives, the IFC, in collaboration with the EU is addressing the challenges in the following ways.
First, by enabling the development and adoption of Climate-Smart Infrastructure. This is being done by involving the private sector in such investments through public-private partnerships (PPPs). For instance, several projects already executed include the installation of rooftop solar panels in Maharashtra and Odisha, and LED street lighting in Bhubaneswar and Bengaluru.
Another method by which the IFC is addressing these challenges is by promoting competitive small and medium sized enterprises (SMEs). This is necessary because, firstly, more than 80 per cent of India's industrial sector is made up of SMEs, which generate 60 percent of India's GDP and contribute to 35 percent of direct exports. There is also great scope in this sector for improvement, because SMEs have fallen behind industry benchmarks in terms of productivity and adoption of energy-efficiency technologies. This problem is made worse by the fact that there are few financing options available for SMEs that want to invest in cleaner production technologies, as banks are either are not comfortable lending to energy projects or because they often consider such investments risky.
IFC is addressing the challenges by promoting resource efficiency in selected SME clusters, by addressing access-to-financing barriers, and by engaging with multiple stakeholders and promoting dialogues to raise awareness. The focus is on SME clusters/industrial zones and not individual SMEs to achieve scale and maximize impact.