India is at the forefront of a green energy revolution, experiencing remarkable growth in renewable capacity and setting ambitious goals to achieve 500 GW of non-fossil fuel-based energy by 2030. Financing this transformation presents both challenges and opportunities, requiring innovative funding models, strong policy backing, and active participation from both domestic and global investors.
Investment Trends: Surge in Capital and Confidence
India’s renewable energy sector has witnessed an unprecedented inflow of capital in recent years. In 2024, the country added 28.64 GW of renewable capacity—more than double the 13.05 GW added in 2023—bringing the total non-fossil fuel-based energy capacity to 217.62 GW by January 2025, with solar and wind leading the charge.
To meet its 2030 target, India needs to add approximately 56 GW of renewable capacity annually—double the record additions of 2024. This ambitious target demands an estimated ₹33 lakh crore (around \$400 billion) in financing by 2030. The funding landscape is evolving, with both public and private lenders, as well as international financial institutions, providing long-term debt and structured financing solutions.
Key developments in Financing:
- Over ₹503 billion in debt financing was secured by Indian renewable companies and financial institutions in the first quarter of 2025.
- Major public sector entities such as State Bank of India, PFC, REC, and IREDA continue to play a pivotal role in supporting large-scale renewable projects.
- IREDA’s loan approvals grew by 27% year-on-year in FY2025, reaching ₹474.53 billion (~~\$5.5 billion), with disbursements increasing by 20% to ₹301.68 billion (~~\$3.5 billion).
- IREDA has set a borrowing plan of ₹30,800 crore for FY26, including the issuance of green and perpetual bonds to diversify its funding sources.
Green Bonds: Unlocking Sustainable Capital
Green bonds have emerged as a key tool for financing India’s renewable energy projects and climate-resilient infrastructure. These bonds are specifically allocated to projects that provide clear environmental benefits and have seen rapid growth in India.
- By the end of 2022, India had issued over \$18 billion in green bonds, placing it among the top emerging markets for green finance.
- The government’s sovereign green bond issuance, alongside corporate and municipal green bonds, is opening up new capital channels. Municipal green bonds could mobilize up to ₹20,000 crore (\~\$2.5 billion) by 2030 with the right policy reforms.
- Key issuers like IREDA, NTPC, Adani Green Energy, and the State Bank of India are funding projects in solar, wind, water management, and energy efficiency through green bonds.
- Green bonds not only lower capital costs for developers but also attract environmentally conscious investors and promote greater transparency in project execution.
Policy Support: The Backbone of Investment
India’s policy framework has been essential in driving investments into the renewable energy sector:
- The 2025 Union Budget allocated ₹1,500 crore for the solar power grid sector and introduced incentives for domestic manufacturing of solar PV cells, batteries, and clean technology components.
- Tariff reductions on solar cells, modules, and smart meters have made imports more cost-effective, enhancing project feasibility.
- The Reserve Bank of India’s priority sector lending guidelines now include loans up to ₹35 crore for renewable projects, making finance more accessible.
- Tax holidays, lower corporate tax rates, and GST rationalization for renewable energy equipment further improve the financial viability of projects.
- Flagship initiatives such as PM Surya Ghar, PM-KUSUM, and the National Green Hydrogen Mission receive substantial budgetary support, fostering both large and distributed renewable energy projects.
Suggestions to Accelerate Financing and Growth
To sustain the momentum and close the financing gap, the following steps are recommended:
- Deepen Corporate Bond Markets: Expanding India’s domestic bond markets can provide more affordable, long-term capital compared to traditional bank loans.
- Expand Green Bond Issuance: Encourage municipalities, corporates, and public entities to issue more green bonds while standardizing the definition of “green” projects to attract global investors.
- Innovative Financial Instruments: Develop risk mitigation solutions, such as partial credit guarantees and blended finance, to draw private investment, especially for emerging technologies like energy storage and offshore wind.
- Policy Consistency and Clarity: Maintain stable, transparent policies and extend transmission charge waivers to reduce project risks and improve investor confidence.
- Boost Domestic Manufacturing: Continue incentivizing the local production of solar, wind, and battery components to reduce import dependency and strengthen supply chains.
- Facilitate Access for MSMEs: Provide expanded credit lines and targeted support for micro, small, and medium enterprises (MSMEs) to help them participate in the renewable energy transition.
- Promote Public-Private Partnerships: Encourage collaboration between the government, financial institutions, and industry players to unlock large-scale investments and accelerate project development.
Conclusion
India’s renewable energy sector is on an extraordinary growth trajectory, supported by robust investment trends, innovative green financing mechanisms, and a forward-looking policy environment. Although the financing challenge is significant, the country’s momentum—driven by record capacity additions, expanding green bond markets, and strong government backing—positions India as a global leader in the clean energy transition. To achieve its 2030 targets and ensure a sustainable energy future, continued innovation in financing, policy, and technology will be essential.