India was the world’s largest recipient of global development finance for energy in 2024, according to the World Energy Investment Report released by the International Energy Agency (IEA).
The report, published in June, shows that India received $2.4 billion in project-based clean energy investments. Most of this funding went to solar photovoltaic (PV) projects, which led the expansion in non-fossil fuel capacity.
Overall, India’s power sector investment stood at 3.6 percent of its GDP, with a majority directed toward renewable energy. This level of funding has helped India reach a significant climate milestone: 50 percent of its installed power generation capacity now comes from non-fossil fuel sources.
On July 14, the government confirmed that it achieved this goal five years ahead of its 2030 deadline. The Ministry of Power called it “the success of visionary policy design, bold implementation, and the country’s deep commitment to equity and climate responsibility.”
Despite the surge in development finance and long-term project investments, the IEA report notes a decline in foreign portfolio investment in clean energy over the past two years.
The report attributes this to various macroeconomic and sector-specific challenges, including inflation, high interest rates, and structural issues in the Indian energy sector.
One of the main concerns is the limited capacity of the country’s grid to absorb intermittent renewable energy. Another is investor risk due to delays in payments from state-run distribution companies, known as discoms. These factors have slowed down the deployment of some new projects, despite growing demand.
Electricity demand in India has surged. This is due to rapid growth in commercial and residential space, a sharp rise in the use of air conditioners and appliances, and increased demand from heavy industry.
Over the past five years, India recorded the third-largest increase in power generation capacity after China and the United States. While capacity growth came from all sources, solar PV led the renewable surge, accounting for more than half of total non-fossil investment during this period.
In 2024, clean energy received 83 percent of the country’s power sector investment. These investments brought India’s non-fossil power generation capacity to 44 percent , edging closer to the 2030 goal of 50 percent .
While portfolio investments have declined, foreign direct investment (FDI) in clean energy has grown sharply.
India has also invested in battery energy storage and improved payment security mechanisms, further strengthening investor interest.
According to data from the Ministry of New and Renewable Energy, the largest foreign investors in India’s solar sector in 2023 were:
- Singapore: $780 million
- United Kingdom: $778.2 million
- Mauritius: $632.5 million
To support long-term growth, the Indian government has rolled out policy measures that promote domestic manufacturing of batteries and solar PV modules. It has also committed to upgrading transmission and distribution systems to accommodate more renewable power.
FDI in the energy sector is encouraged through a rule allowing 100 percent foreign ownership across all electricity generation and transmission sources, except nuclear. These policies helped FDI in power reach $5 billion in 2023, nearly double the pre-Covid level.
The IEA report notes that India saw the third-largest growth in power generation capacity globally between 2019 and 2024, after China and the United States.
India also received the highest share of development finance for energy globally in 2024, about $2.4 billion in project-based clean energy support. Most of this went to solar PV projects, which remain central to India’s clean energy rollout.
India remains a preferred destination for renewable energy investors among emerging economies. Its cost of capital for grid-scale renewables is lower than in many developing countries. But compared to advanced economies, it is still 80 percent higher, according to the IEA.
Higher financing costs mean higher electricity prices, which can reduce demand and profitability. Land acquisition issues and inadequate transmission infrastructure further limit the pace of new project development.
A critical concern for developers and investors is discom debt. As of March 2025, discoms owed over $9 billion in unpaid dues to renewable energy generators, the IEA report said.
Several reform efforts have aimed to reduce these losses, including the Ujwal Discom Assurance Yojana (UDAY). But problems persist.
“The distribution companies are mandated to procure power through long-term contracts, but they often fail to meet those obligations,” said Vibhuti Garg, Director, South Asia, at the Institute for Energy Economics and Financial Analysis (IEEFA).
“They sometimes turn to more expensive or less efficient alternatives, especially fossil fuel-based power, which they see as more reliable,” she added.
According to Garg, the intermittent nature of solar and wind energy, combined with the lack of adequate storage, makes it difficult for discoms to rely solely on renewables.
To address investor concerns, the Ministry of Power and renewable energy agencies like the Solar Energy Corporation of India (SECI) have introduced reforms aimed at reducing payment risk.
Developers had long complained about delays in receiving payments, which affected their ability to meet financial obligations. The government responded with rules that restrict defaulting discoms from buying power through exchanges.
“Payment discipline has improved, and this has helped restore investor confidence,” said Garg.
Sidhu pointed out that having trusted intermediaries helps attract foreign capital. “India has more than 100 discoms, and many foreign investors are unfamiliar with them. Agencies like SECI, NTPC, NHPC, and SJVN act as central buyers and sellers. Their 25-year contracts offer a sense of security,” he said.
These agencies function as quasi-sovereign entities, making them more reliable partners for global investors.
India is now working toward its next major target, installing 500 gigawatts (GW) of non-fossil fuel capacity by 2030. As of mid-2024, the country had already installed 234 GW.
“This target gives long-term investors confidence that if they put money in today, they will continue to find opportunities in the future,” said Sidhu.
He added that the government’s clear policy framework and support for central agencies make renewable energy an increasingly strong investment option in India.
Globally, energy investment is expected to reach a record $3.3 trillion in 2025, the IEA report said. Clean energy will account for $2.2 trillion, or double the projected spending on fossil fuels.
Solar PV is expected to lead low-emission power investments, reaching $450 billion. Battery storage investment will rise above $65 billion. But while clean energy is growing, grid investment, at $400 billion a year, is lagging.
China remains the top global energy investor, followed by the United States. Africa, by contrast, represents just 2 percent of clean energy investment, despite housing 20 percent of the world’s population.
The IEA has called on governments and global lenders to increase public finance to unlock private investment in emerging economies.
India’s experience shows that clear policies, strong intermediaries, and investor protections can attract large sums of clean energy capital. But long-term success will depend on fixing weak grids, lowering financing costs, and improving discom performance to keep the energy transition on track.
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