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India’s Renewable Energy in 2025: Growth Drivers, Capacity Milestones, and Future Outlook

Review Report June 30, 2025
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Review Point

  • India’s renewable energy sector is experiencing robust expansion, led by strong policy support, declining technology costs, and rising investor interest. Nearly half of the nation’s power capacity is now non-fossil, with solar and wind installations accelerating. However, grid integration bottlenecks and financing constraints pose challenges to sustaining this momentum.
  • Data from Mordor Intelligence (10%+ CAGR to 2029), official capacity figures showing 49% non-fossil power, and recent JV investment news underpin both the rapid growth narrative and the structural hurdles ahead.

1. Market Growth and Future Projections

  • As of mid-2025, India’s renewable energy sector is projected to continue its robust trajectory, with a compound annual growth rate (CAGR) exceeding 10% until 2029. This growth is primarily driven by a combination of government initiatives, technological advancements, and a growing emphasis on clean electricity. According to the latest analysis from Mordor Intelligence, the improved policy framework and increasing demand for sustainable energy solutions are setting the stage for extensive market expansion.

  • Key drivers of this market growth include substantial government support through various schemes like the National Solar Mission, which focuses on scaling solar energy installations and enhancing domestic manufacturing capabilities. For instance, the Production Linked Incentive (PLI) scheme introduced in February 2022, which allocates INR 19,500 crore to promote the manufacturing of high-efficiency solar PV modules, reflects the government's commitment to fostering a self-reliant solar ecosystem. These measures not only boost capacity expansion but also minimize reliance on imports, bolstering India's position as a significant player in the global renewable energy landscape.

  • In terms of installed capacity, solar power remains the largest contributor, with utility-scale solar capacity rising from 34.6 GW in FY 2019-20 to 40.1 GW in FY 2020-21. With this momentum, the government has set ambitious targets, including a goal of achieving 500 GW of non-fossil fuel capacity by 2030, comprising over half of India's total installed capacity. This target underscores the urgent need for investment and scaling of renewable technologies to meet rising power demands while simultaneously adhering to international climate commitments.

  • Despite these encouraging trends, the sector faces challenges, particularly regarding grid integration and financing. India’s electricity supply still largely depends on coal, with 74% of its electricity generated from fossil fuels as of now. Additionally, as the country aims to address the growing electricity demand, enhancing the integration of renewable sources into the existing power grid remains a significant hurdle. Furthermore, there is a reported constant challenge of power shortages during peak demand periods, attributed to issues such as transmission and distribution losses.

  • In conclusion, the outlook for India’s renewable energy market is compelling. While there are structural challenges to overcome, the combination of strong government policies, increasing investment in technology, and favorable market conditions present numerous opportunities for growth. Stakeholders can expect an evolving landscape where renewable energy is central to achieving economic resilience and sustainability goals, thus ensuring that India remains on track to meet its energy commitments and targets.

2. Installed Capacity and Milestones

  • As of June 2025, India has marked a pivotal advancement in its energy sector with a total installed power capacity of 476 gigawatts (GW). This noteworthy achievement indicates a strong movement toward sustainable energy, as approximately 49% of this capacity, equivalent to 235.7 GW, now comes from non-fossil fuel sources. The significant increase in non-fossil power is a clear testament to India's commitment to adopting cleaner energy solutions, reflecting both strategic policy initiatives and favorable market dynamics.

  • The renewable energy landscape in India has seen remarkable growth in recent years, particularly in solar power. As of May 2025, solar energy alone constituted 23.3% of the total installed power capacity, with the sector witnessing an addition of 13 GW in the year up to that point. India's cumulative installed solar capacity surged to approximately 110.9 GW, marking a more than 39-fold increase from just 2.82 GW in 2014. This expansion underscores India's strategic direction towards utilizing renewable sources and is complemented by significant investments in technology and manufacturing capabilities, notably in the solar photovoltaic (PV) sector, which has increased module capacity from 2.3 GW to 88 GW since 2014.

  • In conjunction with solar growth, wind power has also made substantial contributions, now standing at 51.3 GW. Overall, the total installed renewable energy capacity has tripled from 76.37 GW in March 2014 to 226.79 GW in June 2025, positioning India as a global leader in both renewable energy and solar power capacity. However, despite the rise of renewables, coal remains a dominant force in the energy mix, responsible for 50.52% (approximately 240 GW) of the power generation capacity. This persistent reliance on coal highlights an ongoing challenge for the country as it strives for energy sustainability while ensuring energy security amid rising demand.

  • Looking forward, the Indian government has set ambitious targets to further enhance non-fossil fuel sources to 500 GW by 2030. As of now, there are active projects adding 176.70 GW, with an additional 72.06 GW in the bidding stages. This proactive strategy is crucial given the remarkable decrease in power shortages, which have dropped from 4.2% in 2013-14 to a minimal 0.1% in 2024-25. The surge in per capita electricity consumption—up 45.8% over the last decade to a current average of 1,395 kilowatt-hours (kWh)—underscores the urgency and importance of these targets to meet both current and future energy needs.

  • In conclusion, as India navigates the complexities of energy transition, the significant milestones achieved in installed capacity, particularly in renewables, reflect both the challenges and opportunities ahead. The nearly half of total power capacity sourced from renewable and non-fossil origins not only marks a transformative phase for the country but also positions India as a key player in global energy discussions, paving the way for a sustainable energy future.

3. Policy Framework and Investment Landscape

  • India's renewable energy sector is significantly influenced by its policy framework, which has evolved to meet the country's ambitious targets for sustainability and emission reductions. The government has established several key mandates, including the goal of achieving 500 GW of non-fossil fuel power capacity by 2030. This target aligns with India's broader commitments to reduce emissions intensity of GDP by 45% relative to 2005 levels and to achieve net-zero emissions by 2070. Such commitments reflect a strategic shift toward enhancing both energy security and environmental sustainability in light of increasing power demands.

  • The regulatory environment supports this transition through initiatives such as the National Solar Mission and various schemes aimed at promoting renewable energy technologies. For example, the Production Linked Incentive (PLI) scheme recognizes the necessity of bolstering domestic manufacturing capabilities in solar photovoltaics (PV). With an allocation of INR 19,500 crore, this scheme is expected to reduce import dependency and promote local production, fostering a more self-sustaining ecosystem for solar energy generation.

  • Investment in renewable energy projects has surged, illustrated by recent joint venture activities. A notable transaction includes the JV between Ayala Corporation's ACEN and UPC Renewables, which aims to divest a significant stake in three renewable projects valued at approximately $600 million. This underscores the attractiveness of the Indian market for international investors and reflects robust interest in utility-scale projects as the country seeks to expand its renewable footprint amid rising energy demands.

  • Despite these advancements, challenges persist in the investment landscape, particularly regarding the integration of renewable energy sources into the grid. India continues to experience power shortages, particularly during peak demand, indicating that while installed capacity may exceed demand, systemic issues like transmission and distribution losses hinder effective energy distribution. Recent figures indicate that peak electricity demand has escalated to approximately 2.4 lakh MW as of 2023-24, highlighting the critical need for infrastructure upgrades and innovative solutions to enhance grid reliability and integration.

  • Looking ahead, stakeholders in the sector must navigate this complex landscape, balancing investment opportunities with the realities of operational and infrastructure challenges. As India continues to refine its renewable energy policies and investment frameworks, there are significant opportunities for growth, particularly in emerging technologies and market segments. The engagement of private players and sustained government support will be essential for maintaining momentum in the transition to a cleaner energy future, thereby positioning India as a key player on the global renewable energy stage.

4. Challenges, Opportunities, and Outlook

  • As of mid-2025, India's renewable energy sector faces a complex set of challenges that could impact its ambitious growth trajectory. Despite the significant strides towards a sustainable energy future, including achieving approximately 49% non-fossil fuel capacity, critical issues persist, particularly concerning grid integration and financing. Approximately 74% of India’s electricity still originates from coal, highlighting a reliance that contrasts sharply with its renewable commitments and threatens to stall future growth.

  • One of the primary challenges is the integration of renewable energy sources into the existing power grid. Despite having installed capacity that exceeds peak demand at times, disparities between generation and consumption persist due to transmission and distribution inefficiencies. For example, during peak seasons, power shortages remain a recurrent issue, with demand reportedly escalating to around 2.4 lakh MW in 2023-24. Consequently, these contradictions underline the urgent need for infrastructural upgrades in India's energy transmission network.

  • Financing poses another significant hurdle. High capital costs and perceived risks associated with renewable projects deter investors, as evidenced by infrequent funding for large-scale solar and wind projects. The financing landscape is compounded by the fact that over 80% of India's total active power projects are still funded through debt, which may not be sustainable in the long term. This necessitates a rethinking of financing strategies to encourage more equity investment and international partnerships, which could drive innovation and growth in the sector.

  • On the opportunity front, the Indian government remains committed to enhancing policy frameworks aimed at addressing these challenges. The ambitious target of 500 GW of non-fossil fuel capacity by 2030 underscores a proactive stance on clean energy investments. Notably, the Production Linked Incentive (PLI) scheme has been earmarked to encourage domestic solar PV manufacturing, reducing reliance on imports and fostering local job creation. These measures are likely to attract both domestic and foreign investment, providing vital capital necessary for expansion.

  • Moreover, technological innovations in energy storage solutions and smart grid solutions present avenues for overcoming integration issues, allowing for better distribution of power generated from renewables. Stakeholders are encouraged to explore opportunities in emerging areas such as battery storage technology and grid modernization, which may enhance energy resilience and stability.

  • In conclusion, while India’s renewable energy sector is poised for substantial growth, successfully navigating the prevailing challenges will be crucial. By leveraging innovative financing mechanisms, addressing grid integration issues, and promoting technological advancements, India can not only meet its 2030 targets but also solidify its position as a leader in the global renewable energy sector.

Key Takeaways

  • Strong Market Growth

  • India's renewable energy sector is on a robust growth path, with projections indicating a compound annual growth rate (CAGR) of over 10% until 2029, supported by favorable policies and rising demand for clean energy.

  • Nearly Half Non-Fossil Capacity

  • As of mid-2025, non-fossil fuel sources contribute to approximately 49% of India's total installed power capacity of 476 GW, marking significant progress towards a cleaner energy mix.

  • Government Initiatives Drive Expansion

  • Key government schemes, like the National Solar Mission and the Production Linked Incentive (PLI) scheme, play a crucial role in promoting domestic manufacturing and expanding renewable energy installations, targeting 500 GW by 2030.

  • Challenges with Grid Integration

  • Despite advancements, India faces challenges in integrating renewable energy into the grid, with persistent issues of transmission and distribution inefficiencies resulting in power shortages during peak demand.

  • Investment Opportunities Ahead

  • The sector remains attractive to investors, evidenced by increased joint ventures and funding in renewable projects. However, innovative financing and infrastructure upgrades are needed to overcome the prevailing gaps and sustain growth.

  • Technological Innovations on the Horizon

  • Emerging technologies, including energy storage solutions and smart grid advancements, present vital opportunities to enhance grid reliability and facilitate the effective distribution of renewable energy.

Glossary

  • 🔍 Renewable Energy: Energy generated from natural sources that are constantly replenished, such as solar, wind, and hydro power. Unlike fossil fuels, renewable energy reduces greenhouse gas emissions and has a smaller environmental impact.

  • 🔍 CAGR: CAGR stands for Compound Annual Growth Rate. It's a useful measure that shows the average annual rate of growth of an investment or market over a specific period of time, expressed as a percentage.

  • 🔍 Non-Fossil Fuels: These are energy sources that do not involve the burning of fossil fuels like coal, oil, or natural gas. Examples include solar, wind, hydroelectric, and geothermal energy, which are more environmentally friendly.

  • 🔍 Installed Capacity: This term refers to the maximum output that a power plant can produce under specific conditions, usually expressed in megawatts (MW) or gigawatts (GW). It indicates how much electricity a facility can generate.

  • 🔍 Grid Integration: The process of connecting various power generation sources, like renewables, to the existing electrical grid. It involves ensuring that power from different sources can be effectively and reliably distributed to meet demand.

  • 🔍 Production Linked Incentive (PLI) Scheme: A government initiative aimed at incentivizing local manufacturing of specific products, such as solar photovoltaic (PV) modules, by providing financial rewards linked to production levels, thus reducing reliance on imports.

  • 🔍 Joint Venture (JV): A business arrangement where two or more parties collaborate to achieve a specific goal, sharing resources, risks, and profits. JVs are common in the renewable energy sector to pool expertise and capital.

  • 🔍 Energy Storage: Technologies that capture energy produced at one time for use at a later time, such as batteries. Energy storage is essential for balancing supply and demand, especially for renewable energy sources that are not always available.

  • 🔍 Smart Grid: An advanced electrical grid that uses technology to monitor and manage the transport of electricity from all generation sources to meet varying electricity demands. It enhances efficiency and reliability of electricity supply.

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