India’s Energy Demand Up 40% in Decade as AI, Gas and Renewables Reshape Mix: Shell

Despite global disruptions over the past few years, India has made considerable progress in transforming its energy system. India’s energy demand grew by nearly 40% over the past decade, driven by rapid economic and population growth. In a report shared by Shell India, this surge in demand is expected to help India  surpass energy demand in the United States in the 2040s and China in the 2060s.

The report identifies India’s recent shift from imported fossil-based energy to domestic renewable-based energy as a key driver of energy independence and security, while also supporting decarbonisation.

Shell estimates that natural gas and LNG will play a transitional role across all scenarios. Gas demand is projected to increase by more than 50% over the next decade, supporting grid reliability during renewable expansion, meeting industrial and household demand, and serving AI-driven electricity growth in the Surge scenario.

Buildings are also projected to shift towards cleaner energy, with expanded electrification and greater use of natural gas in households, reflecting a move away from traditional biomass. Energy consumption in commercial buildings could rise two to four times across scenarios, driven by growth in the services sector and increasing demand from data centres.

On the other hand it also supported the prominence of renewable energy deployment and electrification, to the mix with solar and wind increasing from approximately 3% of final electricity consumption in 2015 to over 20% today. Electricity’s share of final energy consumption is now comparable to that of advanced economies. Renewable energy is expected to account for 59% or more of total power generation across scenarios by 2050.

India stands at a pivotal moment in its energy transition. As the country advances towards its ambition of becoming a developed and self-reliant economy by 2047, energy demand continues to rise rapidly.

Key Factors Contributing to India’s Rapid Renewable Energy Growth

Building on Shell’s Global Energy Security Scenarios 2026 and its earlier Scenarios Sketch on India (2023), the report outlines three pathways for India’s energy transition — Archipelagos, Surge, and Horizon. It examines what will be required for India to meet its long-term commitments under the Paris Agreement while ensuring energy security, reliability, and affordability.

Shell's report noted that the archipelagos scenario reflects a world shaped by geopolitical and economic tensions, resulting in new global alignments and collaborations. Under this scenario, India benefits from its manufacturing capacity, young workforce, and growing economy.

The surge scenario assumes productivity gains driven by artificial intelligence and digitalisation. However, the report suggests India may need to adopt a calibrated approach to avoid rapid job displacement while strengthening digital infrastructure, skills, and governance.

India’s Future Energy Demand Hinges on a Diversified Fuel Mix

Shell's report showed that the fossil fuels share in India’s energy demand is projected to peak this decade, although the rate of decline varies across scenarios.

Even with a declining share, absolute fossil fuel consumption continues to rise in the Surge and Archipelagos scenarios as overall energy demand doubles over the next two to three decades. In this case, low-carbon fuels are expected to play a major role in India’s future energy mix, particularly in hard-to-electrify sectors, supported by domestic bioenergy potential and policy measures.

Across end-use sectors, industry accounts for the largest share of future energy demand growth. While energy efficiency improves, competing in global low-carbon markets will require deeper industrial transformation, including carbon pricing, policy support to scale renewable hydrogen, Carbon Capture and Storage (CCS) deployment, and stronger demand for low-carbon products.

EVs to Displace Up to 41% of Oil Demand by 2050

Supporting the transport transition, the report notes that rising EV adoption across vehicle categories will accelerate electrification. It projects that EV penetration could displace the equivalent of 41% of oil demand by 2050 in Archipelagos, 53% in Surge, and 58% in Horizon, compared to travel by internal combustion engine vehicles.

In aviation and maritime transport, cleaner fuel adoption is expected to increase gradually, including Sustainable Aviation Fuel (SAF) and LNG as a lower-carbon alternative to heavy fuel oil used in ships.