| PYQ Relevance[UPSC 2015] To what factors can the recent dramatic fall in equipment costs and tariff of solar energy be attributed? What implications does the trend have for the thermal power producers and the related industry? Linkage: The question examines the reasons behind declining solar energy costs and its impact on conventional thermal power generation. The article shows that cheaper solar and wind energy enabled renewables to meet global electricity demand growth for the first time, reducing coal dependence globally. |
Mentor’s Comment
The global energy transition reached a historic turning point in 2025 as renewable energy (RE) met almost the entire rise in global electricity demand for the first time. This marks a sharp departure from the fossil fuel-led growth pattern that dominated industrial expansion for over two centuries. However, the article simultaneously exposes a major contradiction in India’s energy transition: while renewable electricity capacity is rising rapidly, dependence on imported crude oil, LNG, and LPG from West Asia remains deeply entrenched. The closure of the Strait of Hormuz during the Iran-Israel conflict highlighted India’s strategic vulnerability, causing spikes in crude prices, disruptions in LNG supply, and pressure on domestic energy security.
Why Is the Global Renewable Energy Transition Being Considered a Historic Turning Point?
- Historic Shift: Renewable energy met almost the entire increase in global electricity demand in 2025 for the first time in history.
- Electricity Growth: Global electricity generation increased by nearly 850 terawatt-hours (TWh) in 2025.
- Solar Contribution: Solar energy alone contributed 636 TWh of additional electricity generation.
- Wind Contribution: Wind energy added another 204 TWh globally.
- Other Renewables: Additional renewable sources contributed nearly 23 TWh.
- Fossil Fuel Decline: Coal generation fell by 67 TWh globally, while oil generation declined by 12 TWh.
- Structural Change: Expanded electricity demand no longer required a corresponding increase in fossil fuel consumption.
- Energy Transition Milestone: Coal generation declined in absolute terms globally for the first time despite rising electricity demand.
- Cost Decline: Sharp reductions in solar panel costs, battery storage prices, and grid integration costs accelerated renewable adoption.
- China’s Role: China recorded a 5% rise in electricity demand while simultaneously expanding clean energy generation significantly.
- China’s Solar Expansion: Solar energy generation in China rose by nearly 40% compared to 2024.
- China’s Wind Expansion: Wind generation in China increased by nearly 14%.
- Demand Coverage: Solar energy alone met almost two-thirds of the increase in China’s electricity demand.
Why Does Fossil Fuel Dependence Continue Despite Rapid Renewable Expansion?
- Absolute Demand Growth: Global electricity demand continued rising faster than renewable expansion for most of the last two decades.
- Base Load Dependence: Coal and gas remained essential for stable baseload electricity supply.
- Industrial Dependence: Heavy industries, transport, and petrochemicals continued relying on fossil fuels.
- Energy Storage Constraints: Battery storage infrastructure remains insufficient for complete renewable substitution.
- Grid Limitations: Renewable integration requires advanced transmission and balancing infrastructure.
- India’s Energy Mix: Coal remains India’s dominant energy source despite renewable growth.
- Energy Composition: Coal accounts for nearly 60.21% of India’s energy sources.
- Renewable Share: Renewables constitute around 29.83% of India’s energy mix.
- Oil Dependence: India imports nearly 89% of its crude oil requirements.
- Natural Gas Dependence: India imports around 47% of its natural gas needs.
- Coal Imports: India imports approximately 26% of coal despite being the world’s third-largest coal producer.
How Did the West Asian Conflict Expose India’s Energy Vulnerabilities?
- Geopolitical Shock: The Iran-Israel conflict triggered the closure of the Strait of Hormuz in March 2026.
- Strategic Importance: The Strait handles a major share of global oil and gas shipments.
- Import Exposure: India imports significant crude supplies from Qatar, UAE, and Saudi Arabia.
- Crude Import Decline: India’s crude imports fell by 17% year-on-year in March 2026.
- Import Volume: Crude imports dropped to 18.9 million tonnes compared to 22.8 million tonnes in March 2025.
- Price Shock: Indian basket crude prices increased from $72.47 per barrel in March 2025 to $113.49 per barrel in March 2026.
- Inflationary Impact: Rising crude prices increased import bills and inflationary pressure.
- Domestic Shortfall: Domestic natural gas production declined by 4.9%.
- Import Compensation: LNG imports rose by 20.5% to offset supply shortages.
- Record LNG Imports: India’s LNG imports reached 27 million metric tonnes in 2024-25, the highest on record. LPG imports rose to 18 million metric tonnes in 2025-26 from 16.48 million metric tonnes in 2020-21.
- PMUY Expansion: Pradhan Mantri Ujjwala Yojana (PMUY) increased LPG access from 62% of households in 2016 to nearly 100% by 2025.
- Retail Price Increase: LPG cylinder prices increased by ₹60 after the conflict began.
- Fiscal Burden: India allocated nearly ₹30,000 crore to oil marketing companies in FY 2025-26 to cushion LPG losses.
Why Has Renewable Capacity Growth Not Yet Ensured Energy Independence?
- Electricity vs Total Energy: Renewable growth primarily addresses electricity generation, not transport fuels or industrial fuels.
- Infrastructure Lag: Renewable capacity addition takes years to translate into stable energy supply.
- Storage Gap: Large-scale battery storage systems remain expensive and underdeveloped.
- Capacity Utilisation: Solar and wind generation remain intermittent and weather-dependent.
- Immediate Supply Constraints: Fossil fuel systems continue providing emergency and peak-load energy support.
- Short-Term Dependence: During the Hormuz crisis, India relied on coal and gas infrastructure instead of renewables.
- Import Continuity: India accelerated LNG and LPG imports from alternate suppliers during the disruption.
- Energy Security Challenge: Renewable growth has reduced emissions intensity but not eliminated fossil fuel import dependence.
- Transition Complexity: Clean electricity expansion alone cannot ensure strategic energy autonomy.
How Is India Responding to the Emerging Energy Security Challenge?
- Renewable Expansion: India’s renewable energy capacity increased by over 210% during the last decade.
- Capacity Addition: Renewable energy accounted for nearly 89% of India’s new capacity additions in FY 2024-25.
- Diversification Strategy: India increased procurement from alternate fossil fuel suppliers.
- Domestic Prioritisation: Domestic energy users received supply prioritisation during disruptions.
- Coal Maximisation: Existing coal infrastructure operated at higher output levels during the crisis.
- Gas Infrastructure Use: Existing gas facilities were used to stabilise short-term supply.
- Strategic Reserves: India expanded focus on petroleum reserve management.
- Energy Diplomacy: Greater emphasis emerged on diversified import partnerships.
- Grid Modernisation: Renewable integration requires stronger transmission networks and storage systems.
- Battery Ecosystem: India is accelerating battery manufacturing and storage infrastructure development.
What Are the Major Implications for India’s Energy Transition and Climate Strategy?
- Climate Significance: Renewable growth reduced global dependence on fossil fuels for incremental electricity demand.
- Energy Security Lesson: Clean energy transition without import diversification remains strategically vulnerable.
- Economic Risk: Fossil fuel import shocks increase inflation and current account pressures.
- Geopolitical Exposure: India’s energy dependence links domestic stability with West Asian geopolitics.
- Policy Contradiction: Renewable capacity leadership coexists with high fossil fuel import dependence.
- Transition Requirement: Energy transition must include storage, grid reform, green hydrogen, and transport electrification.
Conclusion
The global energy transition reached a historic milestone in 2025 as renewables met the entire rise in electricity demand for the first time. However, India’s continued dependence on imported crude oil, LNG, and LPG highlights that renewable expansion alone cannot ensure energy security. India must combine clean energy growth with storage, grid reforms, strategic reserves, green hydrogen, and import diversification to achieve secure and resilient decarbonisation.




