India’s energy policy has been focused on universal access, affordability and the security of supply. It has, in the main, achieved these objectives. All villages are electrified; the poorest of the poor receive subsidised fuel, and even though India still imports 85 per cent of its oil and gas, it does not face the supply risk it once did when the preponderant share of its imports was sourced from the volatile Middle East. Today, it has multiple supply options including from the more stable export hubs of the US, Australia, Brazil and in the near future, Guyana.

This relative success has been achieved through a governance structure spearheaded largely by the government. Post Independence, Prime Minister Jawaharlal Nehru entrusted the custodianship of the energy sector to government-owned public sector entities (PSEs). He was sceptical about the motivations of the private sector. Decades on, when it became apparent that PSEs could not, on their own, deliver the expectations of energy policy, the government relaxed their hold and permitted the private sector to invest. As a consequence, today, we have an energy sector that operates along the twin tracks of public and private sector investments and a governance structure that shares responsibility across the central and state governments and multiple government ministries. There is no one executive body responsible for formulating and implementing a national energy policy; no one forum is accountable for building an integrated energy ecosystem.

Looking ahead, the focus of our energy policy and governance structure has to change. This is because of a shift, caused by global warming and AI, in the contours of the energy landscape. Our energy policy must now prioritise the weakening of the link between economic growth, technological innovation, energy demand and environmental degradation. This is no easy task as the issues involved sit at the nub of our politicians’ deepest dilemmas. The challenge is to create a governance structure that will enable decision-makers to navigate these dilemmas.

Three trade-offs illustrate my point.

The first relates to the conflict between the dynamics of the “green energy transition” and the political and social reality. The PSE Coal India employs approximately 3,50,000 people (full time and contract) and millions more draw their livelihood from the downstream and cross-sectoral linkages created by its operations. A politician from a coal-producing state who calls for the “phase out” of coal would struggle to get re-elected. Even a “phase down” would raise electoral hackles. On the other hand, the environmental consequences of our fossil fuel energy system cannot be ignored. The World Air Quality report for 2024 has listed six Indian cities in the list of the 10 most polluted cities in the world.

The dilemma distils to three questions. Given these realities, what should be the right fuel mix? How quickly should we endeavour to reach this mix? And what policy instruments are needed to navigate this conundrum?

The second centres around China’s dominance of the green energy manufacturing and supply chain backbone. As is well documented, 80 per cent of global solar panels, 95 per cent of polysilicon wafers and solar cells, and 80 per cent of lithium-ion processing is controlled by China. It is the cheapest source of global supply for these green intermediates.

The dilemma: Should we turn to the cheapest supplier to accelerate the competitiveness and pace of the green transition? Or should we be cautious because of the security implications of overdependence on one supplier — China, at that?

Finally, there is the conundrum created by investment in AI data centres. Google has recently committed to investing $15 billion to create an AI hub in Visakhapatnam. Reliance has announced a JV to do the same in Jamnagar. Reportedly, there are several other tech giants scouting for locations. These data centres require gigawatt-scale amounts of electricity. Most (if not all) companies have committed to meeting this electricity demand from renewables.

The question is: How is this possible without the upgradation of the grid transmission infrastructure, the creation of battery storage, and the establishment of a renewables eco-centre? Who will finance it? What is the fallback if this quantum of clean energy is not available? A report in The Guardian noted that the Maharashtra government had extended the operating licence of Tata’s thermal power plant and postponed the shutdown of a 500 MW plant owned by the Adani group to meet the energy demand of Amazon’s data centres. I cannot vouch for the veracity of this article, but I cite it because it highlights the potential conflict between the government’s interest in establishing world-scale AI data centres and its pledged commitment to decarbonise.

Hitherto, our “energy problem” has been all about dealing with energy. There are multiple ministries and PSEs that focus on harnessing indigenous resources and on figuring out where these are insufficient to meet demand. This is then remedied by arranging imports, creating production capacity, building logistical and distribution infrastructure and, within the frame of political priorities, balancing market forces with administrative direction to meet social and public expectations. This governance structure is diffuse and creates avoidable inefficiencies but as indicated above, it has delivered the objectives of policy.

The emergent energy problem involving climate change and AI, however, goes well beyond “energy”. It, therefore, requires a different governance structure. One that will help the private sector manage the geopolitics of the supply chain issues with China, cut through the thicket of regulations that might constrain the power requirements of AI data centres, create a talent pipeline and incentivise technology innovation. And on the flip side, help the government integrate AI into its energy and security apparatus. It has to be a structure that enables cohesive, coordinated and integrated decision-making across and between governments, corporates, research institutions and civic societies and promotes a societal understanding of how to navigate the trade-offs and resolve the dilemmas.

The writer is chairman, Center for Social and Economic Progress