Where next for India’s transition to green energy?

India has made substantial progress in shifting towards more renewable energy sources, with both wind and solar capacity having grown rapidly in recent years. But many challenges remain, with energy independence now a central part of the government’s economic ambitions.

India’s energy story is a striking one. Driven in part by rapid urbanisation and a growing middle class, the country’s primary energy demand is projected to rise by nearly 80% between 2023 and 2040, surging from 1,074 ‘million tonnes of oil equivalent’ (Mtoe) to 1,921 Mtoe.

Against this demand, India has made bold climate commitments of 500 gigawatts (GW) of non-fossil fuel capacity by 2030, 50% of its energy from renewable sources by the same year, and net zero missions by 2070 (Prajapati et al, 2025). The question is whether these targets are credible.

The answer is complicated. India has moved faster than almost anyone expected in the first phase of its transition, building renewable energy capacity at a surprisingly rapid rate. But the second phase of achieving energy self-sufficiency is harder. It requires solving a technology dependency problem that the installation numbers alone do not reveal.

Whether India can do that will determine not just its climate goals, but also the trajectory of its broader economic ambitions.

How has India performed so far with its energy transition?

The scale of India’s renewable energy expansion over the past 15 years is substantial. Total installed capacity grew from 17GW in 2010 to 190GW by 2025, a compound annual growth rate of nearly 18% (Kumbhar et al, 2026).

Solar power has dominated this effort, growing almost 30-fold over a decade. Solar energy now accounts for 57% of India’s grid-interactive renewable power. Wind energy has also expanded significantly, reaching 47GW last year (Prajapati et al, 2025).

While solar power has higher installed capacity, the wind sector has developed a more self-sufficient domestic supply chain. India has built a globally competitive wind manufacturing base, meeting 70-80% of its domestic equipment needs and even exporting components to Europe and the United States (Kumar and Majid, 2020). When it comes to harnessing the power of wind, India has already moved from being a buyer of technology to a builder of technology.

The clearest sign of the country’s early momentum is the progress made on its Paris Agreement commitments. Having pledged to reach 40% non-fossil fuel capacity by 2030, India reached its target in 2021, nine years ahead of schedule (Prajapati et al, 2025). This is a huge achievement for a country of 1.4 billion people, still industrialising at speed, and facing the kind of growth in energy demand that most developed nations have never had to manage.

But the installation figures only tell part of the story. India’s energy demand is set nearly to double by 2040, and there remain some major gaps that stand between current progress and that target.

What challenges does India face?

India is the world’s third largest solar market. Even so, it still imports nearly 90% of its solar cells from China. This poses a strategic vulnerability: the country’s relationship with its giant neighbour deteriorated sharply after the 2020 Galwan Valley clash, which killed 20 Indian soldiers in a border confrontation. While the tensions are gradually settling, Indian policy-makers now view technological dependence on China as a direct security threat (Takahashi, 2020).

This tension affects the solar sector. India already imports 85-90% of its crude oil and between 45-50% of its fossil gas. This exposes the economy to global price volatility, which has become increasingly apparent in the face of the current conflict in the Middle East (Das, 2026). If India’s solar transition remains reliant on Chinese-manufactured components, it risks replicating that same dependency in a new form.

China’s dominance of the current supply chain makes self-sufficiency in the solar transition especially difficult to achieve. The country currently controls 91% of global polysilicon production, 97% of wafers and 80% of solar cells (Chadly et al, 2024). These are all raw inputs to solar cells: control their supply and you control the industry.

India has no meaningful level of production of any of these materials. It depends on China for 98% of its polysilicon and wafer supply, and while module assembly capacity has reached 100GW, domestic cell production stands at just 27GW against 560GW in China (Takahashi, 2020; Bhambhani, 2026).

Indian-built modules are also more expensive to produce than units made in China, costing around $0.18 per watt compared with $0.10 per watt for Chinese equivalents. This 80% cost gap reflects not just cheaper Chinese labour or electricity, but also 20 years of accumulated manufacturing experience, scale and technological depth that India is only beginning to try to build (Takahashi, 2020).

This means that the country’s solar industry has not followed the path of the wind sector, whose domestic supply chains were built over decades. The consequences of this delayed growth are increasingly apparent. In India’s high-radiation zones such as Andhra Pradesh and Rajasthan, cheaper imported modules are degrading faster than expected, threatening the long-term viability of projects that look sound on paper but may not perform over a 20-30 year lifespan (Srikanth, 2018).

The Indian government has tried to respond, with both tariffs on imports and production-linked incentives (PLI) on domestic production. India has imposed 40% tariffs on imported solar modules and provides 2.4 billion dollars in PLI subsidies to domestic manufacturers (Takahashi, 2020). The PLI for solar modules targets 54.5GW of annual domestic cell manufacturing capacity by 2030 (Prajapati et al, 2025).

Despite these efforts, the country still imports about nine in ten of its solar cells (Takahashi, 2020). This points to a deeper problem within the production process. India’s spending on research and development (R&D) stands at 0.7% of GDP compared with China’s 2.4%. And as of 2017, India held around 2,501 solar-related patents against China’s 26,168 – a towering imbalance (Dinesh Pakki, 2026; Hayashi, 2020). Without sufficient innovation, manufacturing subsidies can only encourage simpler production processes, such as module assembly, rather than the technological capability required for domestic cell production.

Beyond the solar cell manufacturing problem, India faces an equally serious challenge in storage. Solar and wind are intermittent sources of power. Without sufficient storage capacity to capture and dispatch electricity when the sun is not shining or the wind is not blowing, installed renewable capacity cannot reliably replace coal on the grid.

Reaching 500GW of non-fossil fuel capacity by 2030 requires over 60GW of storage to make that energy usable. India currently has less than 5GW (Raizada, 2025). This is one of the largest gaps in the country’s climate ambitions.

The investment figures reinforce this gap. India’s investments currently constitute only half of the required annual investment of $30-40 billion required to reach its 2030 targets (Katoch et al, 2022). Closing that gap in under five years, while simultaneously building grid infrastructure and domestic manufacturing capability, is a difficult task.

What’s at stake in the green energy transition?

Solving these challenges would transform India’s economic position in addition to satisfying its climate goals. The cost of solar electricity generation in India has already fallen from 17 rupees per kilowatt hour in 2010 to 2.6 rupees in 2024 (Kumbhar et al, 2026). Cheaper energy can lower input costs for manufacturers, which could help to attract global businesses.

This shift could also contribute to improving India’s trade balance. The country currently spends a significant share of its foreign exchange on fossil fuel imports (National Statistics Office, 2025). A shift to domestic clean energy could make the public purse $1.4 trillion better off by 2040 (International Energy Agency, 2021). This has direct implications for the current account deficit and currency stability.

The industrial benefits of India building a domestic renewable manufacturing base are also substantial. The solar equipment market alone could generate $42 billion in value by 2030 through import substitution (Energy and Resources Institute, 2022).

The combined market for solar panels, wind turbines, batteries and other technologies could reach $80 billion dollars per year under an aggressive transition effort (International Energy Agency, 2021). At that scale, renewable energy manufacturing would become one of India’s significant industrial sectors.

This is why the prime minister, Narendra Modi, has described energy independence as essential to the Viksit Bharat 2047 vision – India’s ambition to become a fully developed economy by the centenary of its independence. The renewable transition is central to the country’s economic growth strategy (National Statistics Office, 2025).

Conclusion

India’s first phase of its energy transition is a success story – just look at the capacity numbers, the cost reductions and the early delivery on Paris commitments. But the targets that the country has now set for itself require more than installation at scale. They require domestic technology, grid infrastructure and levels of investment that are not yet in place.

Whether India closes those gaps will shape not only its climate credibility, but also its industrial future and broader economic ambitions for 2047 and beyond.