India’s clean energy rise continues, but investment needs remain high
Author: PPD Team Date: 09/06/2025
India is making rapid progress in expanding clean power, with 83% of power sector investment in 2024 going to renewables and a rising share of non-fossil capacity. However, a June 2025 report from the International Energy Agency (IEA), titled “World Energy Investment 2025,” highlights that current policies still fall short of the funding needed to meet long-term goals. While foreign and domestic investment is growing, key risks—like discom payment delays, land issues, and transmission gaps—continue to hold back faster progress.
India has seen one of the fastest increases in electricity demand globally, driven by rising residential and commercial power use and industrial expansion. This demand has pushed India to become the world’s third-largest contributor to new generation capacity since 2019, after China and the United States.
Solar PV has led the clean energy surge, accounting for more than half of non-fossil investments in the past five years. In 2024, India attracted USD 2.4 billion in clean energy funding from development finance institutions (DFIs)—the highest in the world. Non-fossil sources now make up 44% of India’s total installed capacity, closing in on the 50% target for 2030.
Despite this, meeting the 2070 net-zero goal will require much more capital. India will need to invest USD 1.3 trillion in non-fossil power generation by 2035—16% more than the current investment trajectory under today’s policies.
The government is responding with new and expanded programs. The PM Surya Ghar Muft Bijli Yojana received over USD 3.5 billion in 2024 and 2025 to bring rooftop solar to 10 million homes by 2027. India also committed USD 245 million this year to nuclear projects, aiming to raise nuclear capacity from under 10 GW today to 100 GW by 2047.
These efforts are supported by long-running initiatives, such as the Production Linked Incentive (PLI) scheme for domestic solar and battery manufacturing, the solar park program for utility-scale solar, and the Green Energy Corridor, which has already brought in USD 2.6 billion for renewable transmission upgrades.
Foreign direct investment (FDI) has nearly doubled from pre-pandemic levels, reaching USD 5 billion in 2023, thanks to policy clarity allowing 100% FDI in most power segments. However, foreign portfolio investment has declined in the past two years, affected by broader financial and sector-specific concerns.
One major constraint is India’s high cost of capital. While it is low compared to other emerging markets, it remains 80% higher than in advanced economies. This makes financing less attractive and leads to higher energy costs. Around 60 GW of renewable capacity is held up due to weak transmission infrastructure.
Discom payment delays are a key source of investor concern. As of March 2025, distribution companies owed more than USD 9 billion in unpaid dues, and their accumulated losses stood at USD 75 billion in 2023. The government has responded with reforms such as the Ujjwal DISCOM Assurance Yojana (UDAY), late payment surcharge rules, and the Payment Security Mechanism by the Solar Energy Corporation of India (SECI), which includes escrow accounts and state guarantees.
These reforms aim to reduce risk, unlock capital, and keep India’s clean energy plans on track—but the funding gap remains a challenge.