Powering the Transition: India’s Clean Energy Bet

Executive Summary India’s renewable energy push is moving faster than its transmission, storage and grid infrastructure can absorb.

This shifts the risk from generation targets to system execution .

Despite crossing 50% non-fossil installed capacity , coal continues to dominate actual power generation .

Energy procurement is now a strategic decision , balancing cost, flexibility and sustainability through various models.

India’s clean energy supply chain remains heavily dependent on Chinese imports . Recent trade agreements do little to change this.

Green hydrogen and CBAM compliance are key areas to watch.

The next phase of the transition will be defined by implementation challenges , not targets alone.

. The global energy system is being massively reconfigured, and India sits at a clear inflection point in this regard. Non-fossil sources now account for more than half of India’s installed electricity capacity – a milestone that would have seemed implausible a decade ago. Yet installed capacity is not the same as delivered power, and the distance between those two measures is precisely where India’s corporate energy risk is concentrated today.

In discussions with the India Sustainability Forum, Akanksha Golchha, Fellow and Chair on India and Emerging Asia Economics at the Washington-based Centre for Strategic and International Studies (CSIS), examined what India’s transition means for business leaders navigating difficult energy procurement, supply chain exposure and capital allocation decisions.

The Capacity–Generation Disconnect India’s clean energy story increasingly reflects a divergence between installed capacity and usable generation. Coal continues to driver ~70% of actual power generation. The explanation lies in load factors: a coal plant operates at a minimum 45% capacity, while solar generation typically achieves 20–22%. Installed gigawatts are not interchangeable, and India needs substantially more renewable capacity to displace an equivalent quantum of coal generation. This simple arithmetic shapes the pace of the transition.

Transmission infrastructure is the most immediate constraint. Renewable energy assets can often be commissioned within two years, but transmission networks often take far longer because of delays in regulatory approvals, land acquisition hurdles and right-of-way constraints.

Renewable generation is also geographically concentrated. Rajasthan and Gujarat carry the greatest potential, but inter-state evacuation remains a constraint. India’s grid is ageing, and while national programs exist to rehabilitate and expand it, the pace of new capacity addition has consistently outrun the grid’s ability to absorb it.

DISCOM (distribution company) stress is the third main fault line. After decades of cumulative losses running into billions of rupees, distribution companies collectively reported a modest profit for the first time in recent memory, driven by improved recovery rates and selective privatisation in urban centres. That improvement may be real, but it does not yet signal that DISCOMs are equipped to manage the operational complexity that a 60%-plus renewable grid will require.

The Procurement Decision Increasingly, energy procurement is becoming a strategic business function. Organisations are no longer simply purchasing electricity from distribution companies. Rather, they are constructing diversified energy strategies shaped by cost pressures, sustainability commitments and operational resilience. In this regard, there are multiple procurement pathways available to businesses:

DISCOM supply: This is the default route, involving low complexity, no financial commitment, but also the highest tariffs. It is most appropriate for smaller consumers, or where procurement management capacity is absent.

Open access: Bypasses DISCOM supply by contracting directly with generators while continuing to use the DISCOM’s network. State-level variations in open access charges are significant. Gujarat and Maharashtra apply minimal levies, while Tamil Nadu and Karnataka impose substantially higher ones, making landed cost highly geography-dependent. The minimum connected load threshold is 1 MW.

Power exchanges: Short-term or seasonal procurement via day-ahead bidding. This is appropriate for businesses with variable or episodic demand profiles rather than continuous baseload requirements.

Rooftop solar: The most flexible and (where feasible) cheapest source of renewable power available today. Two models exist: a capex model, where the organisation owns and operates its own system, and RESCO, where a third party installs and maintains the system in exchange for a fixed 25-year offtake commitment.

Captive generation: Viable only for large industrial consumers with the land, capital and operational capacity to own and run a dedicated power plant.

A sensible procurement strategy assembles a mix calibrated to the business’s load profile, renewable energy commitments, location and available capital – with each layer of the mix serving a different risk and cost objective. The broader implication is that energy sourcing is moving closer to the balance sheet.

Supply Chain Dependence and Industrial Vulnerability India’s continued dependence on imported energy creates vulnerabilities. While domestic assembly capacity has expanded across electric mobility and solar manufacturing, upstream dependence on China remains significant. This dependence extends across lithium-ion cells, solar modules, electrolysers, semiconductors and critical minerals. Geopolitical disruption anywhere along that chain is an operating reality today.

India’s trade agreement record is less reassuring than headline announcements suggest. A CSIS analysis of India’s four most recent bilateral trade agreements – including those with Australia and the UK – found minimal overlap between the materials those agreements unlock and the critical inputs India’s clean energy sector actually requires. Upcoming agreements with Chile and Peru may partially address this, but the timeline is uncertain. India’s PLI schemes are supporting domestic manufacturing capacity. However, many of these programs remain more accessible to large conglomerates than to smaller enterprises.

Battery recycling offers a partial route to reducing import dependence, but the ecosystem is nascent. Research suggests that EV batteries, typically retired from vehicle use after roughly 8 years, can be repurposed into smaller-format applications such as 2-wheelers, and later into stationary storage systems, extending their usable life to nearly 20 years. If recycling and refurbishment scale effectively, India’s battery import dependence could decline by an estimated 30%. Yet significant regulatory, safety and commercial viability challenges continue to constrain the sector’s expansion.

Green Hydrogen’s Commercial Constraint Thanks to its low renewable energy prices – among the lowest in the region – India possesses a significant advantage in terms of green hydrogen economics. Yet, while this implies production costs that are significantly below Western benchmarks, green hydrogen still costs roughly twice as much as grey hydrogen, largely because electrolysers remain imported and capital-intensive.

The more immediate constraint is not production capability but off-take demand. India’s hydrogen market currently resembles the early years of solar deployment, when buyers delayed long-term commitments while waiting for prices to fall further. Hydrogen investment will not scale without committed buyers, while buyers remain reluctant to lock into long-duration contracts before costs decline.

For hard-to-abate industries such as steel, fertilisers, refining and cement, the calculus is different. Where decarbonisation is linked to market access and regulatory compliance, green hydrogen might shift from a discretionary sustainability investment to a strategic industrial input. The challenge is therefore less about whether adoption will happen, and more how organisations sequence capital commitments as costs fall and domestic manufacturing capacity develops.

CBAM and the New Compliance Burden The EU Carbon Border Adjustment Mechanism entered its reporting phase in 2025, with full financial obligations taking effect by 2030. For Indian exporters with Europe as a primary market, this is a present-tense compliance obligation, not a future scenario. The sectors most directly exposed are those already operating on thin margins and high energy intensity. Many companies operating in this space will need to actively consider green hydrogen investments, carefully sequencing their capital commitment as electrolyser costs decline and domestic manufacturing capacity builds.

For the wider exporter base, compliance costs will continue to rise. Monitoring and verification infrastructure, the cost of transitioning to green inputs, and reporting obligations that apply across the entire production cycle represent a burden that scales poorly for MSMEs. For large industrial exporters, these costs are material but manageable within the context of a European revenue stream.

No low-friction compliance pathway yet exists for smaller businesses, but fiscal support to build MSME compliance capacity would be welcome. SEZs designed as CBAM-compliant enclaves – where power supply and production inputs meet European carbon standards – are under active discussion, but the model is yet to be validated.

Preparing for the Transition The next phase of India’s energy transition will be defined less by the ambition of renewable targets and more by the institutional and industrial systems required to sustain them. Transmission networks, financing structures, recycling ecosystems, storage economics and domestic manufacturing capacity now matter as much as megawatts installed.

For businesses, this requires a shift in mindset. The energy transition is no longer an external policy story unfolding in parallel to commercial operations. Rather, it is becoming part of the operating environment itself – shaping procurement choices, supply chain resilience, export competitiveness and long-term capital planning.