Energy use in developing countries is heterogeneous across households. Present day global energy models are mostly too aggregate to account for this heterogeneity. Here, a bottom-up model for residential energy use that starts from key dynamic concepts on energy use in developing countries is presented and applied to India. Energy use and fuel choice is determined for five end-use functions (cooking, water heating, space heating, lighting and appliances) and for five different income quintiles in rural and urban areas. The paper specifically explores the consequences of different assumptions for income distribution and rural electrification on residential sector energy use and CO2 emissions, finding that results are clearly sensitive to variations in these parameters. As a result of population and economic growth, total Indian residential energy use is expected to increase by around 65–75% in 2050 compared to 2005, but residential carbon emissions may increase by up to 9–10 times the 2005 level. While a more equal income distribution and rural electrification enhance the transition to commercial fuels and reduce poverty, there is a trade-off in terms of higher CO2 emissions via increased electricity use.