India’s energy market is entering a phase of structural acceleration, combining energy transition, industrial development and new geopolitical alliances.
India’s energy market reshapes global energy dynamics
India’s energy market is evolving along a distinct trajectory compared with China’s earlier development path. The recent trade agreement between the European Union and India reinforces economic and industrial ties between two regions that together account for roughly a quarter of global GDP and two billion people.
In energy terms, India is expanding through renewables, electrification and bioenergy to support industrialisation. While the two markets are not yet directly comparable, India may hold a long-term competitive advantage, as its growth is unfolding with a lower dependence on fossil fuels than China at a similar stage of development.
Key differences between India’s and China’s energy markets
According to an analysis by Ember, when China reached a per capita income of around 11,000 dollars PPP in 2012, solar power generation was negligible. By contrast, at a similar level of development, solar already accounts for 9% of total electricity generation in India, up from less than 0.5% ten years earlier.
Coal use shows an even sharper contrast. Per capita coal generation in India stands at around 1 MWh per person, roughly 40% of the level recorded in China at the same historical stage.
Ember indicates that coal demand in India is approaching a plateau, with projections suggesting stabilisation at least until 2030. In 2025, coal-fired electricity generation is expected to decline slightly year on year, while solar capacity continues to expand.
This profile suggests that India’s rising electricity demand is increasingly being met by new renewable installations rather than additional fossil capacity.
Electrification in India’s energy market
A key indicator of India’s energy market is the level of electrification of final consumption. Electricity accounts for around 20% of final energy use, comparable to China’s share in 2012, but achieved with significantly lower fossil fuel intensity.
On a per capita basis, India reached this threshold using around 4 gigajoules of coal, compared with 24 gigajoules required in China.
In transport, the pattern is consistent. Oil consumption for road transport in India stands at 96 litres per capita, roughly half the level recorded in China in 2012. Electric vehicles surpassed 5% of car sales by mid-2025, while in the three-wheeler segment the electric share approaches 60% of registrations.
In 2024 alone, 1.25 million electric two-wheelers were sold, four times the volume recorded in 2020. These trends are helping to moderate oil demand growth despite an expanding vehicle fleet.
The role of bioenergy
Within India’s energy market, bioenergy is expanding rapidly. A recent International Energy Agency report highlights that India has developed one of the world’s most dynamic biofuel sectors. Since the launch of the National Policy on Biofuels in 2018, annual ethanol consumption has grown from under 2 billion litres to more than 11 billion litres, making India the fourth-largest producer of liquid biofuels globally.
Around 170 compressed biogas plants are currently operational, supported by 11 national policies introduced since 2018, with nearly 300 additional projects under development.
Under the IEA’s baseline scenario, liquid and gaseous biofuel consumption in India is expected to increase by more than 50% by 2030. In an accelerated policy scenario, production could more than double over the same period, reaching six times 2020 levels. Bioenergy therefore contributes both to reducing energy imports and to supporting rural economic development.
Will the EU-India agreement influence India’s energy market?
The EU-India trade agreement is likely to strengthen the role of India’s energy market as both a demand hub and an industrial production centre. The deal foresees the elimination or reduction of tariffs on over 96% of European exports, with estimated savings of around 4 billion euros per year for EU companies.
In 2024, goods trade between the EU and India reached 120 billion euros, representing 11.5% of India’s external trade, while services trade totalled 59.7 billion euros in 2023.
For the energy and industrial sectors, the agreement facilitates access to the Indian market for electrical machinery, renewable technologies, industrial components and energy efficiency solutions. In a context of supply chain diversification and reduced geopolitical dependency, India is becoming a strategic market for European value chains.
India’s energy market in the global balance
Overall, India’s energy market combines quantitative growth in consumption with a transformation of the energy mix. Data point to rapid solar expansion, stabilising coal demand, increasing electrification of final uses and a rising role for bioenergy.
At global level, this trajectory helps contain the growth of fossil fuel demand while strengthening industrial value chains linked to electric and renewable technologies. India is therefore emerging as a key factor in reshaping the international energy landscape over the coming decade.
