Energy Policy in the Age of AI and Climate Change

Context

1. India has achieved major progress in energy access, affordability, and supply security.
2. However, new pressures from climate change, rapid technological growth, and the rise of AI-powered data centres are creating complex policy dilemmas.
3. India must now balance economic growth, employment concerns, geopolitical risks, and environmental sustainability within an evolving global energy landscape.

What is Energy Policy?

1. Energy policy refers to the set of plans, measures, and rules that guide how a country produces, distributes, and uses energy.
2. The aim is to ensure reliable supply, affordable access, and environmental sustainability while supporting national economic and security goals.

Why India’s Energy Policy Needs Change?

1. Energy policy must now focus on reducing the link between growth, technology progress, rising energy demand, and environmental damage.
2. This shift is necessary because India is simultaneously facing:
   1. Rising pressure to cut carbon emissions and improve air quality.
   2. Growing energy needs due to digital and AI expansion requiring massive electricity supply.
   3. Strategic concerns about dependency on China for renewable energy technologies.
   4. Social and political challenges related to transitioning away from coal, which is a major employer.

How India’s Energy System Has Functioned Traditionally?

1. Historically, energy management was driven mainly by government-run Public Sector Enterprises (PSEs) such as Coal India, ONGC, and NTPC.
2. When PSEs alone could not meet energy needs, private investment was allowed, resulting in a dual system of public and private players.
3. Responsibilities are now divided among central ministries, states, regulators, and companies, but there is no single integrated authority overseeing national energy strategy.
4. This system has provided broad access but now faces limitations due to fragmentation and slow response capacity.

Key Trade-Offs and Dilemmas in Today’s Energy Landscape

1. Green Transition vs Employment and Political Reality
   1. Coal India employs around 3,50,000 workers, and millions more depend on coal-linked sectors.
   2. A rapid move toward clean energy could lead to major job losses and political resistance, especially in coal-dependent states.
   3. At the same time, fossil fuel use contributes heavily to pollution, with six Indian cities among the world’s top 10 most polluted in 2024.
   4. The challenge is deciding:
      1. What should be the right energy mix for future years?
      2. How quickly should India transition from coal to clean energy?

• What policies are needed to support affected workers and regions?

2. Cheaper Green Supply Chains vs National Security Risks
   1. China controls 80% of global solar panel manufacturing, 95% of polysilicon wafers, and 80% of lithium-ion processing, making it the cheapest global supplier for renewable technologies.
   2. Dependence on China can accelerate green energy growth, but also increases geopolitical and economic vulnerability.
   3. The dilemma is whether India should import cheaper inputs to speed up renewable adoption or reduce dependence to ensure strategic autonomy and supply security.
3. AI Data Centres vs Clean Energy Commitments
   1. Major technology companies are investing heavily in AI hubs in India.
   2. These data centres require gigawatt-scale electricity, and most companies promise to use only renewable power.
   3. However, India currently lacks adequate transmission networks, battery storage systems, and renewable infrastructure to meet such massive demand.
   4. In such situations, priority to AI could force extension of fossil fuel plants, risking climate goals.
   5. Reports indicate some thermal plants have already been kept running to meet growing electricity needs.

Implications

1. These evolving challenges require a new integrated governance structure that can align environmental goals, technology development, job protection, national security, and energy investment.
2. Policy choices made today will shape India’s competitiveness and sustainability for decades.
3. Coordinated planning across government, corporates, research institutions, and civil society is essential for balancing trade-offs and avoiding fragmented decision-making.

Challenges and Way Forward

Conclusion

India stands at a crucial moment where energy policy must balance economic growth, climate commitments, technological advancement, employment stability, and strategic security. A unified and integrated governance structure, supported by long-term planning and coordinated investment, is essential to navigate these trade-offs and build a resilient, clean, and future-ready energy system.