As capital markets sharpen their focus on the energy transition, India’s story is neither a binary choice between coal and clean energy, nor a reluctant pivot. It will need to be a carefully managed, structurally ambitious bet on building the world’s most consequential energy economy.
The Scale of the Challenge and the Opportunity
India’s energy equation is unlike any other in the world. With a population of 1.4 billion, an economy on course to become the world’s third largest by 2030, and electricity demand growing faster than almost any comparable peer, the pressure on India’s energy system is structural, not cyclical. The Central Electricity Authority’s National Electricity Plan projects that India’s total installed power capacity must reach approximately 900 GW by 2032 — more than double today’s 520 GW — to keep pace with demand.
Yet what makes India’s energy story genuinely compelling from an investment standpoint is not the size of the challenge alone, but the strategic clarity with which the government is navigating it. India is not choosing between energy security today and clean energy tomorrow. It is sequencing both simultaneously, i.e: a dual-track strategy that deserves far more analytical attention than the headline numbers alone suggest
The Conventional Anchor: Why It Still Matters
Any serious investor in India’s energy space must first reckon with a structural reality: thermal power (predominantly coal), still accounts for roughly 47.7% of installed capacity and approximately 70% of actual electricity generated in 2025. Power shortages, which once plagued the grid at 4.2% in 2013–14, have fallen to near-negligible levels of 0.1% in 2024–25 — a feat achieved partly because conventional thermal capacity remained available as a dispatchable backstop while renewable infrastructure scaled up.
This is not a failure of ambition. It is the logic of a responsible energy transition. Thermal capacity provides the load-following flexibility that intermittent solar and wind cannot, at scale, yet replace. As renewable penetration rises, the operational role of coal is already shifting — from baseload generation to peak-load balancing. India’s grid operators are progressively moving thermal assets from ‘must-run’ status to ondemand, merit-order dispatch. This structural role change has meaningful implications for how we value thermal assets and price transition risk in project finance models.
Conventional energy’s continued relevance also reflects energy equity. India added over 18 crore LPG connections between 2014 and 2025, while PNG (piped natural gas) connections grew nearly sixfold to 1.47 crore households. Energy access, affordability, and reliability for a still-developing population base cannot be sacrificed on the altar of decarbonisation timelines that were designed for advanced economies.
The Clean Energy Surge: A Capital Story in Real-Time
The velocity of India’s renewable energy buildout is, frankly, extraordinary. Solar installed capacity crossed 100 GW in January 2025 and had reached 140.6 GW by November 2025 — a 41% increase in a single year. Total renewable energy capacity breached 263 GW by December 2025, a 23% year-on-year jump. India now ranks third globally in both solar and total renewable installed capacity, behind only China and the United States — a positioning that has direct implications for where global institutional capital looks next.
Critically, India achieved its Paris Agreement NDC commitment of sourcing 50% of installed electricity capacity from non-fossil fuel sources in June 2025 — five years ahead of its 2030 deadline. For an investment banker structuring green bonds, project finance, or infrastructure funds, this is not a minor data point. It signals a government with demonstrated delivery capacity — the single most important factor in de-risking long-duration capital commitments.
The flow of capital confirms the narrative. According to the IEA’s World Energy Investment 2025 report, 83% of India’s power sector investment went to clean energy in 2024. EY’s energy transition investment analysis for 2017–2025 estimates total green energy deal flow at over USD 62 billion, with private equity dominating at 70% of deal value, reflecting the capital-intensive, lower-risk profile of utilityscale solar and wind. India also emerged as the world’s largest recipient of development finance institution (DFI) funding in clean energy in 2024, receiving approximately USD 2.4 billion in project-type interventions.
The Investment Thesis: A Portfolio Approach to the Energy Stack
From my vantage point in investment banking, the most sophisticated framing of India’s energy transition is not ‘clean vs. conventional’ but rather the construction of a diversified energy portfolio. One where different asset classes serve different return profiles, risk horizons, and policy dependencies. Utility-scale solar and wind today offer stable, long-duration yield assets — particularly attractive to infrastructure funds, pension capital, and green bond issuers. India’s Production Linked Incentive (PLI) scheme has catalysed indigenous solar module manufacturing capacity to 121 GW per annum by late 2025, materially reducing import dependence and improving project economics.
Energy storage is becoming the next frontier for infrastructure capital. Battery energy storage system (BESS) deal volume rose from 1% to 9% between 2017 and 2024 (specifically for Lithium-ion batteries), driven by grid stability demands from data centres and EV penetration. As transmission infrastructure catches up , storage assets that unlock stranded renewable generation will command significant premium valuations. E-mobility is the highest-growth, venture-stage story within India’s clean energy landscape. By 2024, e-mobility represented 49% of green deal volume, up from just 6% in 2017 — driven by FAME II incentives, state EV policies, and a rapidly maturing consumer market. Bengaluru alone accounted for 60% of VC deals in clean tech startups during this period.
Green hydrogen, while still nascent, is the longdated option in the portfolio. NITI Aayog has identified green hydrogen as central to India’s USD 30 trillion GDP ambition by 2047. The National Hydrogen Mission is attracting early institutional interest, and a USD 60-billion investment commitment from Adani Group in power and renewable energy through FY32 signals that domestic conglomerates are building positions ahead of the curve
Navigating the Structural Risks
Intellectual honesty demands that the investment thesis also acknowledge the friction points in India’s energy transition, not as barriers, but as areas where disciplined capital can extract alpha.
The cost of capital remains structurally elevated. India’s grid-scale renewable financing costs are still approximately 80% higher than in advanced economies, despite being among the lowest in the emerging market universe. This gap creates a persistent deal-structuring opportunity — blended finance, DFI firstloss tranches, and rupee-denominated green bonds (India’s January 2023 sovereign green bond debut was oversubscribed fourfold) are all mechanisms that sophisticated arrangers can deploy to compress spreads and unlock institutional participation.
Distribution company (DISCOM) off-taker risk remains the most persistent structural concern in Indian renewable project finance. As of March 2025, DISCOMs owed over INR 3000 Cr. in unpaid dues. Structuring around DISCOM risk through direct-to-consumer models, open-access frameworks, group captive structures, or sovereign-backed payment security mechanisms is increasingly where deal differentiation lies. Transmission infrastructure gaps require active navigation. With 60 GW of renewable capacity curtailed due to grid bottlenecks, transmission and grid modernisation is an underinvested segment offering significant deal flow in the near term — particularly through InvITs and infrastructure bonds.
The Macro Thesis: India’s Energy Economy as a Sovereign Asset Class
There is a broader macro argument that I believe is underappreciated in global capital markets. India’s energy transition is not merely a domestic infrastructure programme. It is the construction of a sovereign strategic asset — one that simultaneously addresses energy security (India imports over USD 180 bn. worth of crude oil annually), climate commitments (net zero by 2070), and industrial competitiveness (green manufacturing, green hydrogen exports, and a domestic EV supply chain).
India’s announcement at COP26 of a 500 GW non-fossil fuel target by 2030 — backed by a government that has now shown it can deliver ahead of schedule — creates a policy-credibility premium that global LPs and DFIs are beginning to price in. The government’s ambition to attract INR 30 lakh crore (~USD 360 billion) in clean energy investment by 2030 is not merely aspirational, it’s laying the basis for a structured procurement approach.
The energy transition represents one of the most complex, and consequently, most interesting deal-structuring environments of the decade. The interplay of conventional energy asset monetisation, renewable project finance, green bond issuance, climate-linked structured products, and impact capital creates a full-spectrum advisory mandate that very few markets in the world can offer at this scale.
Conclusion: The Balance is the Strategy
India’s energy transition is often discussed as a tension between the short-term reliance on conventional fuels and the long-term promise of clean energy. But for those who engage with this market at the level of capital structure and policy mechanics, the more accurate description is one of deliberate sequencing: managing the pace of transition so that economic development, energy access, and decarbonisation can proceed in tandem rather than in conflict. And for capital that understands that nuance, it remains one of the most attractive long-duration investment opportunities in any emerging market, anywhere. RM
