India’s ambitious goal of reaching 500 gigawatts of renewable energy capacity by 2030 hinges on securing significant investment while keeping financing costs low, according to a new report titled India RE 500 GW: Navigating Risks to Unlock 500 GW of Renewables by 2030.

The study highlights key risks that could raise the cost of capital and hinder the country’s clean energy transition.

Investment Needs and Challenges

The report underscores the requirement for over $300 billion in renewable energy investments by 2032 to align with India’s National Electricity Plan-14.

In 2024 alone, renewable investments reached $13.3 billion — a 40 percent increase from the previous year. However, meeting the long-term target demands a 20 percent annual growth in financing, reaching $68 billion annually by 2032.

Key challenges include project commissioning delays, regulatory bottlenecks, and risks from new-age Firm and Dispatchable Renewable Energy projects, which could increase the cost of capital by up to 4 percent or 400 basis points.

FDRE projects are designed to overcome the intermittency challenges of traditional renewable energy sources like solar and wind by ensuring reliable, on-demand power delivery.

Such an increase would limit India’s RE capacity to 400 GW by 2030 — falling 100 GW short of its target. Conversely, a 200 basis point reduction in the cost of capital could enable the country to exceed its target, reaching 540 GW.

Addressing Investment Risks

The report identifies several areas requiring policy interventions to mitigate risks:

  • Project Delays: Issues related to land acquisition, grid connectivity and regulatory approvals contribute to commissioning delays. Streamlining land acquisition laws and pre-emptively expanding transmission infrastructure can reduce uncertainty for investors.
  • Power Market Volatility: FDRE projects, which integrate renewable power with storage solutions, expose developers to fluctuating market prices. Mechanisms such as Contracts for Difference could stabilize revenues.
  • Domestic PV Module Constraints: India’s push for local solar panel manufacturing through tariff barriers has led to cost uncertainties. A roadmap with phased incentives is necessary to ensure competitive pricing without disrupting supply chains.
  • Financial Stability of DISCOMs: State-owned power distribution companies face financial stress, leading to delayed payments to RE developers. Strengthening payment security mechanisms can enhance investor confidence.

The Cost of Capital Factor

The study highlights how financing costs play a critical role in RE expansion. A higher cost of capital discourages project development and raises electricity costs, affecting DISCOMs and consumers.

A 200 basis point increase in capital costs could add ₹27,000 crore ($3.2 billion) annually to electricity generation expenses, while a reduction could save ₹32,000 crore, ensuring affordable power and a smoother energy transition.

The Way Forward

The report calls for enhanced risk management strategies to sustain momentum in India’s clean energy shift. These include improved project planning, innovative financing mechanisms and stronger policy coordination between central and state governments.

As financing conditions evolve, keeping the cost of capital in check will be crucial for India’s ability to achieve its 500 GW renewable energy goal within the decade.