Combating global climate change is contingent on the smooth decarbonisation of India’s economy. Energy consumption in the South Asian country has doubled since 2000, and the International Energy Agency expects the economic powerhouse to overtake the EU as the third-largest global energy consumer by as early as 2030.

Relentless industrialisation and economic growth will only increase the size of India’s carbon footprint over the coming decades. Between 2021 and 2040, the IEA predicts that the Asian country will experience the largest upsurge in global energy demand of any nation, potentially doubling its carbon emissions. The agency warns that this would entirely offset the projected fall in emissions across Europe over the same period.

India is also one of the few growth markets for coal. The Centre for Social and Economic Progress, an Indian think-tank, says that the country has 210GW in installed coal-fuelled power plant capacity already and another 64GW either under construction or awaiting final approval. This means there could be as much as 200GW of thermal capacity still under operation by 2050, while the power sector is unlikely to reach zero carbon emissions until 2070.

But the picture is not all doom and gloom. Over the past five years, India’s renewables capacity has boomed and is primed for more growth. The IEA estimates that the country’s solar photovoltaic capacity has increased at an average rate of 60 percent, while wind capacity has increased by 10 percent.

The Indian government has also stepped up its climate commitments. Prime Minister Narendra Modi had promised to achieve 175GW in renewables capacity by 2022, but at the COP26 climate conference in Glasgow scaled this up to 500GW by 2030. Half of the country’s energy mix should be drawn from renewables by this date, while India is also committed to reaching net-zero carbon emissions by 2070.


India plans to draw half of its energy from rewewables within eight years.

The government estimates that about 750GW of potential solar power could be generated from just over 3 percent of India’s wasteland. Onshore wind could also produce as much as 300GW, with offshore wind significantly boosting this figure.But there is still a long way to go before achieving the government’s ambitions. In 2021, wind and solar generated just 7 percent of India’s total electricity supply, compared with 70 percent from coal. The IEA highlights that in some Indian states, the share from renewables reaches around 15 percent. When winds are at their strongest, this can reach 50 percent.

Energy giant BP expects India to reach 400GW in installed renewables capacity by 2030, a six-fold increase compared with 2019, but still 100GW short of the government’s latest target.

There are also many regulatory and structural barriers that hamper further growth. A report from the Institute for Energy Economics and Financial Analysis, published in April, predicts that India’s rooftop solar target of 100GW in installed capacity, set for 2022, could be missed by as much as 27 percent. On the current trajectory, India will also end the decade around 86GW below the 300GW target set for solar energy.

India still has no uniform solar policy, which explains the patchwork progress and regional disparity. The state of Gujarat has the highest installed rooftop capacity, around 1.6GW, primarily because of its attractive subsidy policy. The state offers a 40 percent subsidy for installed systems of less than 3KW and a 20 percent subsidy on 3KW to 10KW systems. Across the country, policy reversals and regulatory differences have complicated progress and slowed growth, while banking restrictions have hardly helped.

Baby steps

Mobilising private investment will also prove crucial to scaling renewables and meeting government targets. Through to 2050, CSEP estimates that India needs at least $150 billion per year to transition the economy to low carbon energy.

“Private sector participation, both from a commercial and financing perspective, will be an important driver in achieving the renewable energy targets of India,” adds Ruchir Punjabi, co-founder of the investment platform Distributed Energy and of “India’s renewable energy sector is expected to attract investment worth $80 billion in the next four years.”

Several asset managers and private equity branches of major banks have increased or are kick-starting their investments into Indian renewable energy. Multilateral climate financer CIF is investing $200 million in solar infrastructure projects across India, including the world’s largest solar park, Bhadla, in the state of Rajasthan.

“Of the c.110GW that we have, 96 percent is private sector,” adds Utkarsh Patel, associate fellow, sustainability and climate change at CSEP. “Large projects that are coming up are private sector, and there are new private players entering the market.”

In January, EverSource Capital closed India’s largest climate impact fund, Green Growth Equity Fund, on $741 million. EverSource will invest in low-carbon and climate resilient infrastructure projects across India. “Energy transition is a big opportunity for us, from the generation of green energy all the way down to consumption,” Dhanpal Jhaveri, the chief executive of EverSource, told Infrastructure Investor at the time. “Energy demand in India continues to grow above market compared to many other countries.”

The investments are a positive for the industry, but major structural hurdles are still likely to hamper further growth and private participation. The intermittent nature of renewables means that power will need to be shared around the country’s disparate state-run grids to maintain steady, consistent electricity supply.

The country’s distribution companies are also infamously loss-making, combining unviable tariffs with political priorities that often clash with economic sense. For example, in some states the feed-in tariffs for rooftop solar are too low to incentivise installation.

Another issue is that the distribution companies are obligated to purchase all electricity generated by renewable energy producers, forcing them to back down contracted coal and gas-based power producers. “This has discouraged the [distribution companies from] signing new power purchase agreements,” says Patel. “They are required by law to pay the fixed charge to coal power plants when backed down and electricity demand is met from, for example, solar power plants.”

Reforms will be crucial to developing regional co-ordination and encouraging the penetration of green energy throughout the national grid. “The primary challenges are state-owned utilities and distribution companies, regulatory framework, financing, education and grid infrastructure,” explains Punjabi. “A lot of things need to go right for India to achieve its renewable energy targets.”