India is accelerating its transition toward clean energy, targeting 60 percent non-fossil fuel capacity in its energy mix by 2035. However, a new report from Institute for Energy Economics and Financial Analysis highlights that financing – not technology – is emerging as the biggest hurdle in achieving this goal.
Rising Investment Needs Put Pressure on Debt Markets
India’s renewable energy expansion will require a sharp increase in capital. Annual investments in renewables, storage, and transmission are projected to rise from about $68 billion by 2032 to nearly $145 billion by 2035.
Given the capital-intensive nature of renewable projects, long-term debt financing will play a decisive role in determining how quickly capacity can be scaled. The availability, cost, and tenure of financing will directly impact project viability and execution timelines.
Credit Markets Favor Renewable Energy Over Thermal Assets
India’s financial markets are already showing a clear preference for clean energy assets. Renewable energy companies benefit from lower operating costs, stronger margins, and greater access to both domestic and global capital.
Companies such as Adani Green Energy and ReNew Power are outperforming traditional thermal players, while fossil fuel-based firms face tightening access to international funding. This divergence reflects a structural shift in investor sentiment toward sustainable energy.
“Adani Green Energy outperforms Adani Power on EBITDA margins within the same corporate group. Similarly, NTPC Green outperforms NTPC’s legacy thermal operations. These are not cyclical differences. They reflect a structural shift in the economics of power generation that will compound over time as renewable portfolios mature and generate stable, contracted cash flows,” says co-author Soni Tiwari, Energy Finance Analyst, India, IEEFA.
Power Sector Giants Play a Critical Role in Transition Finance
India’s transition strategy relies heavily on large utilities that can mobilize capital at scale. NTPC Limited stands out as a key enabler, backed by strong government ownership and a sovereign-aligned credit rating.
With a planned capital expenditure of INR7 trillion through FY2032, NTPC is expected to anchor low-cost financing for renewable expansion and influence broader capital flows across the sector. Other players such as SJVN Limited and Tata Power are also contributing to the evolving clean energy landscape.
Weak Corporate Bond Market Limits Financing Options
Despite the scale of investment required, India’s corporate bond market remains underdeveloped. Most power sector companies rely heavily on bank loans, which account for nearly 80 percent of their total debt.
This dependence limits access to diversified funding sources and increases vulnerability to liquidity constraints. Expanding the bond market, particularly for long-term infrastructure financing, is critical to sustaining the energy transition.
Reducing Dependence on Foreign Capital is Key
India’s reliance on international capital flows introduces additional risks. In times of geopolitical instability, foreign investors may withdraw funds quickly, disrupting financing for long-term energy projects.
Strengthening domestic capital pools through pension funds, insurance companies, and provident funds will be essential to building a stable and resilient funding ecosystem for clean energy investments.
Energy Transition Linked to National Security
India’s dependence on imported fossil fuels such as crude oil and LNG exposes the economy to global price volatility and supply disruptions. Accelerating renewable energy deployment is not just an environmental priority but also a strategic move to enhance energy security and reduce external vulnerabilities.
Outlook: Financing Will Decide the Pace of India’s Energy Transition
India’s ambition to reach 500 GW of renewable capacity by 2030 and significantly increase non-fossil fuel usage by 2035 is achievable, but only with robust financial backing.
The shift toward clean energy is increasingly becoming a debt market challenge, where success will depend on strengthening credit ecosystems, mobilizing domestic capital, and enabling large-scale financing through institutions like NTPC.
BABURAJAN KIZHAKEDATH