India is witnessing a rise in renewable energy investment, placing the country on course to achieve 50 percent of its power generation capacity from non-fossil sources well ahead of the 2030 target, according to the latest International Energy Agency (IEA) data. This progress is being driven primarily by a surge in solar photovoltaic (PV) investment, which has accounted for more than half of non-fossil power generation investment in recent years.
In 2024, 83 percent of all power sector investment in India went to clean energy, signaling a decisive shift toward renewables. India has now achieved 44 percent non-fossil power generation capacity, and is fast approaching the 50 percent milestone. To remain on track for its net zero emissions target by 2070, India will need to invest USD 1.3 trillion cumulatively in clean power by 2035, a figure 16 percent higher than current policy trajectories.
The surge in renewable investment coincides with soaring electricity demand driven by rapid urbanization, rising industrial activity, and growing use of residential appliances, including air conditioning. Over the last five years, India has recorded the third-largest increase in power generation capacity globally, behind only China and the United States. While growth spans multiple energy sources, renewables — particularly solar — have led the charge.
India’s policy initiatives are helping catalyze this investment momentum. Key among them is the PM Surya Ghar Muft Bijli Yojana, with an allocation of over USD 3.5 billion for 2024 and 2025, aimed at equipping 10 million homes with rooftop solar systems by 2027. Other measures include continued support through the Production Linked Incentive (PLI) scheme for domestic manufacturing of solar PV modules and batteries, the solar park initiative for utility-scale projects, and the Green Energy Corridor, which has attracted USD 2.6 billion in grid infrastructure investment to facilitate renewable energy transmission.
India is also taking early steps toward scaling nuclear capacity, with a USD 245 million allocation for the current fiscal year and a long-term goal of reaching 100 GW of nuclear power by 2047, up from less than 10 GW today.
On the international front, India has become an increasingly attractive destination for clean energy finance. In 2024, it was the largest recipient of development finance institution (DFI) funding globally, securing USD 2.4 billion in project-based clean energy interventions. Foreign direct investment (FDI) in the energy sector reached USD 5 billion in 2023, nearly double pre-pandemic levels, supported by liberalized policies allowing 100 percent FDI in power generation (excluding nuclear) and transmission.
However, foreign portfolio investment — involving financial instruments like energy stocks — has declined over the past two years due to broader macroeconomic and sector-specific challenges, though the long-term trend remains positive.
India’s renewable energy investment trajectory reflects a strong alignment of climate ambition, policy support, and market opportunity. Yet, closing the remaining investment gap of USD 180 billion by 2035 will require continued efforts to attract both domestic and international capital, accelerate infrastructure development, and ensure inclusive access to clean energy solutions.
While India enjoys some of the lowest capital costs for grid-scale renewables among emerging and developing economies, these costs remain nearly 80 percent higher than those in advanced economies. The elevated cost of capital undermines the financial viability of renewable projects, leading to higher electricity prices and slowing the pace of energy transition, IEA said.
A key deterrent for both domestic and international investors is the array of real and perceived risks associated with India’s renewable energy landscape. Chief among them are issues related to land acquisition, transmission infrastructure limitations, and the financial instability of power distribution companies (DISCOMs). The IEA highlights that 60 GW of renewable capacity remains stalled due to inadequate transmission capacity.
One of the most significant concerns is offtaker risk — the risk that power purchasers, primarily state-run DISCOMs, may default on payments. As of March 2025, DISCOMs owed more than USD 9 billion in unpaid dues, and their cumulative losses had ballooned to USD 75 billion by the end of 2023. These challenges have eroded investor confidence and delayed project implementation.
In response, the Indian government has rolled out a series of reforms aimed at mitigating risks and boosting investor confidence. These include the Ujjwal DISCOM Assurance Yojana (UDAY), which aims to restructure DISCOM debt and promote operational improvements, and the enforcement of late payment surcharge rules to ensure timely payments to power producers. Additionally, the Payment Security Mechanism introduced by the Solar Energy Corporation of India (SECI) offers developers a more secure revenue stream through measures such as escrow accounts, a payment security fund, and state guarantees.
Baburajan Kizhakedath