"Investing in renewable energy would enable India to develop globally competitive industries and technologies that can provide new opportunities for growth," said Inger Andersen, vice president, sustainable development network, World Bank.
Developing indigenous renewable energy sources which have low marginal cost of generation are more economically viable in the long run and play an important role in increasing India's energy security by diversifying supply, reducing import dependence and mitigating fuel price volatility, says the report.
The report is based on data from nearly 180 wind, biomass and small hydropower projects in 20 states, as well as information from the ministry of new and renewable energy and the central electricity regulatory commission.
According to the report with the demand for electricity expected to grow at an average annual rate of 7.4 percent in the next 25 years, the generation capacity will have to be increased five fold to keep pace with demand growth.
The integrated energy policy report 2006 also estimates that nearly three-fourths of the installed capacity will be thermal-based (with coal and gas as feedstock).
The gap between supply and demand is likely to increase unless adequate measures are taken to bring in new generation capacity and improve operational efficiency in the distribution and management of power utilities.
Currently, more than three-fourths of India's electricity production depends on coal and natural gas. At current usage levels, India's coal reserves are projected to run out in 45 years.
India already imports 10 percent of its coal for electricity generation.