India stands at a critical juncture in its energy policy evolution, facing unprecedented challenges from artificial intelligence and climate change that demand a fundamental rethinking of traditional approaches. According to energy expert Vikram S Mehta, the country must now navigate complex new trade-offs that sit at the heart of political and economic dilemmas.
From Past Success to Future Challenges
India's energy policy has historically focused on three core objectives: universal access, affordability, and security of supply. The country has largely achieved these goals, with all villages now electrified and the poorest citizens receiving subsidized fuel. While India still imports 85% of its oil and gas, the risk profile has improved significantly since the days when most imports came from the volatile Middle East.
Today, India has diversified its supply options to include more stable export hubs like the United States, Australia, Brazil, and soon Guyana. This success emerged from a governance structure initially spearheaded by government-owned public sector entities after Independence, when Prime Minister Jawaharlal Nehru expressed skepticism about private sector motivations.
As decades passed, it became clear that public sector entities alone couldn't meet energy policy expectations, leading to private sector investment opportunities. The current energy sector now operates on twin tracks of public and private investment, with governance responsibility shared across central and state governments and multiple ministries.
Three Critical Energy Dilemmas for Modern India
The Coal Conundrum: Jobs vs Environment
The first major trade-off pits the green energy transition against political and social realities. Coal India employs approximately 350,000 people directly through full-time and contract positions, with millions more depending on downstream and cross-sectoral linkages from its operations.
This creates an electoral challenge where politicians from coal-producing states face re-election risks if they advocate for coal phase-out, or even phase-down initiatives. Meanwhile, environmental consequences remain severe, with the World Air Quality Report 2024 listing six Indian cities among the world's ten most polluted.
The fundamental questions become: What should India's optimal fuel mix look like? How quickly should the country transition to this mix? And what policy instruments can effectively navigate this complex conundrum?
China's Green Dominance: Cost vs Security
The second dilemma centers around China's overwhelming control of green energy manufacturing and supply chains. China currently controls 80% of global solar panel production, 95% of polysilicon wafers and solar cells, and 80% of lithium-ion processing.
This creates a stark choice: Should India prioritize cost efficiency by sourcing from the cheapest global supplier to accelerate green transition competitiveness? Or should the country exercise caution due to security implications of over-dependence on a single supplier, particularly China?
AI's Energy Hunger: Growth vs Decarbonization
The third emerging challenge comes from massive AI data center investments requiring gigawatt-scale electricity. Google has committed $15 billion for an AI hub in Visakhapatnam, while Reliance announced a joint venture for similar development in Jamnagar. Several other tech giants are reportedly scouting locations.
While most companies have committed to meeting electricity demands through renewables, serious infrastructure questions remain. How can this be achieved without upgrading grid transmission infrastructure, creating battery storage capacity, and establishing renewable energy eco-centers? Who will finance these developments, and what fallback options exist if sufficient clean energy isn't available?
A Guardian report highlighted this conflict, noting that the Maharashtra government extended Tata's thermal power plant operating license and postponed shutdown of a 500 MW Adani group plant to meet Amazon's data center energy demands. This illustrates the tension between establishing world-scale AI centers and maintaining decarbonization commitments.
Rethinking Energy Governance for New Challenges
Historically, India's energy problem focused primarily on energy management itself, with multiple ministries and public sector entities working to harness indigenous resources, arrange imports where necessary, create production capacity, build infrastructure, and balance market forces with administrative direction.
While this diffuse governance structure created some inefficiencies, it successfully delivered on policy objectives. However, the emergent energy challenges involving climate change and AI extend far beyond traditional energy concerns, requiring a fundamentally different governance approach.
The new structure must help the private sector manage supply chain geopolitics with China, navigate regulatory constraints affecting AI data center power requirements, create talent pipelines, and incentivize technological innovation. Simultaneously, it must help government integrate AI into energy and security apparatus while enabling cohesive, coordinated decision-making across governments, corporations, research institutions, and civil societies.
Most critically, this governance framework must promote societal understanding of how to navigate these complex trade-offs and resolve the fundamental dilemmas facing India's energy future in an era defined by both artificial intelligence and climate imperatives.
