Energy transition

Topic: Environment and Sustainable Development · NCERT: Beyond NCERT

Meaning

Energy transition is a long-term, structural shift in how an economy gets its energy. It moves away from fossil fuels (coal, oil, gas) and towards low-carbon sources: renewables (solar, wind, hydro), nuclear and green hydrogen.

It matters because it changes much more than one fuel. It changes power plants, factories, transport, jobs and state budgets. For India, it has to happen while the economy keeps growing and poverty keeps falling.

Explanation

Why it is a "structural" shift

• More than a fuel swap: new power plants are built, factories change their processes, vehicles change, and workers move to new jobs. States that earn money from coal also lose income.
• Link to sustainable development: the Brundtland Report (1987) defined sustainable development as meeting today's needs without harming the ability of future generations to meet theirs.
• Fossil fuels are a finite stock, so burning them uses up what future generations could have used.
• Burning them also harms the climate those generations will live in.

• The energy transition is how this idea is put into practice.

• SDG link (2015-2030): SDG 7 (affordable and clean energy), SDG 8 (decent work, which links to a fair transition for workers) and SDG 13 (climate action).

The energy trilemma: the balancing problem

• Energy trilemma: a country must meet three energy goals at the same time:
• Security: a steady supply, with little dependence on imports or unreliable suppliers.
• Affordability: prices that households and industry can pay.

• Sustainability: low emissions and low pollution.

• Why it is hard: gaining on one goal can mean losing on another.

• Cheap domestic coal → good for security and affordability → bad for sustainability.

• Imported LNG or solar modules → cleaner → but more dependence on imports, which is a security risk.

• A good transition policy balances all three goals. It does not pick just one.

How progress is measured

• Energy intensity = Total energy used ÷ GDP. It shows how much energy the economy needs to produce one unit of output.
• Worked example: an economy uses 1,000 units of energy to produce ₹100 lakh crore of GDP, so its intensity is 10. Next year energy use rises to 1,050 and GDP rises to ₹110 lakh crore. Intensity falls to about 9.5.

• The economy grew faster than its energy use. This is decoupling: growth needs less energy for each rupee of output.

• Emissions intensity: CO2 emitted per unit of GDP. It measures how "dirty" each rupee of output is.

• Non-fossil share of installed capacity = non-fossil capacity ÷ total capacity × 100.
• Worked example (31.12.2025): 2,66,788 MW ÷ 5,13,730 MW × 100 = 51.93% [7].
• This counts capacity (the maximum a plant can produce), not generation (the electricity actually produced). Solar and wind plants run for fewer hours in a day, so coal still produces most of India's electricity.

What slows it down, and what speeds it up

• Green premium = Cost of clean option − Cost of fossil option. It is often shown as a % of the fossil cost.
• Worked example: grey hydrogen costs ₹200/kg and green hydrogen costs ₹350/kg. The green premium is ₹150/kg, which is 75% of the grey price. Industry will not switch until this gap closes.
• It is the main barrier, especially in steel, cement, fertiliser and shipping.

• It falls when technology gets cheaper (solar is now cheaper than new coal in many places), when production grows larger, and when carbon pricing (a charge on each tonne of CO2) makes the fossil option costlier.

• Hard-to-abate sectors (cement, steel, chemicals): renewables alone cannot cut their emissions. They need CCUS (carbon capture, utilisation and storage: catching CO2 at the plant, then using it or storing it deep underground) or green hydrogen.

• Critical minerals (lithium, cobalt, rare earths): clean energy needs them, but a few countries mine or refine most of them. Resource nationalism (governments tightening control through export bans, higher royalties or state ownership) makes their prices volatile.
• China controls exports of gallium, germanium and rare earths.

• Indonesia bans exports of nickel ore.

• Stranded assets: coal plants, mines and reserves that lose value before the end of their expected life because of climate policy or cheaper renewables. If they close early, their loans may not be repaid.

In India

• Climate targets (NDC):
• Updated NDC (August 2022): cut the emissions intensity of GDP by 45% by 2030 from the 2005 level. Reach about 50% of installed electric power capacity from non-fossil sources by 2030 [6].
• Emissions intensity fell by 36% between 2005 and 2020 [8].

• NDC for 2031-2035: a 47% cut in emissions intensity and 60% non-fossil installed capacity by 2035 [8].

• Progress: the non-fossil share was 51.93% on 31.12.2025 [7] and 52.57% in February 2026. India met the 2030 capacity target five years early [8].

• Energy efficiency: the Energy Conservation Act 2001 created the Bureau of Energy Efficiency (BEE), a statutory body. BEE runs star labelling of appliances and building energy codes. Both have helped reduce India's energy intensity.
• Coal: at COP26 (Glasgow, 2021), India pushed for a "phase-down" of unabated coal (coal burned without technology to capture its CO2) rather than a "phase-out". Coal is India's cheapest domestic energy source and is central to energy security.
• Green hydrogen:
• The National Green Hydrogen Mission (NGHM) was launched in January 2023. Its target is 5 MMT per year by 2030. Its outlay is ₹19,744 crore up to FY 2029-30, of which ₹17,490 crore goes to SIGHT (Strategic Interventions for Green Hydrogen Transition), which gives incentives for making electrolysers and producing green hydrogen [1].
• The expected gains by 2030 are about ₹1 lakh crore less in fossil fuel imports and nearly 50 MMT per year less CO2 [3].

• The Green Hydrogen Standard (19 August 2023): hydrogen counts as "green" only if total emissions are not more than 2 kg CO2 equivalent per kg of hydrogen [2].

• Critical minerals: India has identified 30 critical minerals, and 24 of them are in Part D of Schedule I of the MMDR Act, 1957 [4].

• The National Critical Mineral Mission (2025) has an outlay of ₹34,300 crore over seven years [4].
• KABIL buys mineral assets abroad, for example lithium in Argentina.

• India joined the US-led Minerals Security Partnership in 2023.

• Just transition: moving to a low-carbon economy fairly, so that coal workers and coal regions are not left behind.

• The most exposed states are Jharkhand, Chhattisgarh and Odisha.
• The income at risk includes coal royalties, District Mineral Foundation (DMF) funds (money from miners that is spent on welfare in mining districts), Indian Railways' coal-freight revenue, and jobs.

Don't confuse with

• Just transition: the energy transition is the shift itself (from fossil fuels to clean energy). A just transition is about making that shift fair for workers, districts and states that depend on fossil fuels.
• Phase-down vs phase-out: phase-down means reducing unabated coal use over time, and it is the COP26 wording India pushed for. Phase-out means ending coal completely.
• Installed capacity vs generation: the 51.93% non-fossil share (31.12.2025) is capacity [7]. Coal still produces most of the electricity actually generated.
• Energy intensity vs emissions intensity: energy intensity is energy used per unit of GDP. Emissions intensity is CO2 emitted per unit of GDP. India's NDC target (45% by 2030 [6], 47% by 2035 [8]) is for emissions intensity.

Prelims Hooks

• Energy intensity = Energy consumed ÷ GDP. BEE is a statutory body under the Energy Conservation Act 2001.
• NDC 2022: 45% cut in emissions intensity by 2030 from the 2005 base year [6]. NDC 2031-35: 47% cut and 60% non-fossil capacity by 2035 [8].
• The 50% non-fossil installed capacity target was met five years early. The share was 51.93% on 31.12.2025 [7]. Trap: this is capacity, not generation.
• Green hydrogen comes from electrolysis using renewable power, with ≤ 2 kg CO2e per kg H2 (standard notified 19 August 2023) [2]. Blue hydrogen comes from natural gas with CCUS. Grey hydrogen comes from natural gas without CCUS.
• NGHM (January 2023): 5 MMT/yr by 2030. Outlay ₹19,744 crore, of which SIGHT gets ₹17,490 crore [1].
• The Just Transition Work Programme was created at COP27 (Sharm el-Sheikh, 2022), not COP26 or COP28 [5]. JETPs: South Africa (2021), then Indonesia and Vietnam (2022). India has no JETP.

Mains Points

• Managing the trilemma through sequencing: coal gives India security and low cost, while renewables give sustainability. India is adding clean capacity quickly (51.93% non-fossil capacity by December 2025 [7]) and phasing down coal gradually instead of exiting suddenly. Missions such as SIGHT (₹17,490 crore [1]) and NCMM (₹34,300 crore [4]) spend public money to close the green premium and reduce mineral supply risk. This links to Atmanirbhar Bharat and to cutting about ₹1 lakh crore of fossil fuel imports by 2030 [3].
• Federal and fiscal justice: Jharkhand, Chhattisgarh and Odisha depend on coal royalties, DMF funds and coal jobs, and Indian Railways uses coal-freight earnings to keep passenger fares low. Answers can suggest reskilling workers, building other local industries, repurposing old mine land (for example, solar parks on closed mines) and Finance Commission support for states that lose revenue.
• Equity versus stranded-asset risk (GS-II/III): India has low per capita emissions and relies on CBDR-RC (Common But Differentiated Responsibilities and Respective Capabilities: rich countries caused most past emissions, so they should do more). This supports a "nationally defined" transition without JETP-style conditions [5]. The counter-point is India's young coal fleet. If plants built after 2010 close early, their unpaid loans could hurt PSU power and coal companies and public sector banks.

Related concepts

• Energy trilemma
• Energy intensity
• Coal phase-down
• Grey hydrogen
• Blue hydrogen
• Green hydrogen
• Green ammonia
• Hydrogen economy
• Green premium
• Carbon capture, utilisation and storage

Read more

• The energy transition and a just transition