India's power transition: From renewable scale to system strength

This is a thought leadership report issued by the S&P Global Institute. This report does not constitute a rating action, neither was it discussed by a rating committee.

The next phase of India's energy transition will be shaped by climate ambition and the need for resilience in an increasingly uncertain world. The Strait of Hormuz is a reminder of how external energy risks can sharpen the case for self-reliance. The key challenge for the power sector is to build a system that can deliver clean, reliable and affordable electricity at scale. By 2035, electricity will have to power a larger share of India's growth, so the generation mix, grid architecture and clean-technology base are central to India's energy transition.

Renewable energy will remain the main source of incremental capacity, but its value will depend on the system built around it. Reduced dependence on imported fuels must not create new dependencies on imported components and minerals. India's transition to 2035 should be viewed as both a decarbonization pathway and a power-sector resilience strategy.

When growth turns electric 

India's energy growth story is becoming more electric, with electricity demand expected to grow much faster than energy demand between 2025 and 2035, at 5.56% and 2.47%, respectively. Electricity's share in the total energy basket could rise to nearly 25% by 2035, from about 19% in 2025.

This shift is already visible — electric vehicles are reducing fossil fuel use, for example — but the transition is broader. Industrial processes will change through greater use of electricity and green hydrogen-linked production, while industrialization, rising incomes, appliance ownership and cooling will expand conventional electricity consumption.

New demand sources will add another layer of complexity. Data centers and green hydrogen production will become increasingly important, with their combined electricity demand potentially rising nearly ninefold to about 240 terawatt-hours by 2035. These loads are important because of their scale and because they demand reliability. 

Demand will also be served differently. The grid will remain central, but a growing share of electricity demand is expected to be met closer to consumers through distributed generation. This share could increase to about 16% by 2035, from about 13% in 2025. 

This creates both opportunity and pressure. India's power system must prepare for higher electricity consumption and more unpredictable demand. Meeting this demand reliably will require a diversified supply mix, stronger transmission and distribution networks, storage, and flexible generation and market design that can support a more dynamic electricity system.

Coal will remain central to India's electricity supply, but its dominance is expected to decline. Continued utility-scale solar additions through 2035 are expected to reduce coal's share, potentially toward 60%, from 70% in 2025, S&P Global forecasts. Beyond baseload, coal is likely to evolve into a flexible resource that supports evening peaks and low-renewable periods.

Renewable energy will meet the majority of incremental electricity demand through 2035. Utility-scale solar will remain the main engine of supply growth, supported by wind, hydro and storage-backed renewable projects. S&P Global expects India to add about 300 gigawatts of solar photovoltaic capacity between 2026 and 2035, plus roughly 95 GW of storage. The next phase of supply growth must pair renewable capacity with flexibility. 

Deep decarbonization technologies such as small module reactors and carbon capture and storage-based coal will gain strategic importance, although their contribution to the generation mix will be minimal over the next five to 10 years. 

The source of renewables demand will be another important shift. Apart from distribution companies, commercial and industrial (C&I) consumers are expected to become a dominant force behind renewable capacity additions. S&P Global estimates that the share of C&I will increase to about 30% by 2035, from nearly 19% in 2025, making it an important force in shaping India's renewable supply pipeline.

India's changing supply mix creates both momentum and risk. The momentum is visible in the growth of renewables, storage-backed projects and C&I procurement. The risk is that supply growth outpaces the systems built to support it. The real measure of the transition will therefore shift from capacity installed to electricity delivered, balanced, economically absorbed and securely supplied.

Making clean power deliverable, flexible and secure 

India's renewable build-out now faces three linked tests. 

• Spatial: Can the grid move power from resource-rich regions to demand centers fast enough? 

• Operational: Can the system balance a rising share of variable solar and wind without rising curtailment? 

• Strategic: Can India build the ecosystem needed to scale clean power without creating new import dependencies?  

Unblocking India's transmission grid: Turning bottlenecks into build-out

India's transmission network has been a quiet enabler of the power transition, but the next phase of renewable growth will test whether the grid can remain ahead of generation. The country has built a relatively strong national transmission backbone, and total transformation capacity was about 1,486 gigavolt-amperes as of July 2026. However, recent delivery trends point to emerging execution risks, and substation capacity additions have slowed. In fiscal year 2024-25, about 77% of targeted additions were achieved, compared with previous rates above 90%. Despite an improvement in fiscal year 2025-26, additions are below the pace required for the next phase of renewable integration. This signals a widening gap between transmission planning and on-the-ground delivery. 

This matters because renewable projects can be built faster than transmission corridors. As solar and wind capacity grow in resource-rich states such as Rajasthan, Gujarat, Karnataka and Andhra Pradesh, evacuation infrastructure must be ready before projects are commissioned. Transmission lags result in congestion, commissioning delays, stranded capacity and higher curtailment risk. The Indian Ministry of New and Renewable Energy said that more than 6 terawatt-hours of solar generation was not delivered to the grid between April and June 2026 because of delays in transmission development.

The issue is less about the absence of planning and more about the speed and adaptability of execution. India has planned transmission around renewable resource zones and solar parks, but project development is increasingly dispersed and market-driven. Grid development must be planned in such a way that interstate corridors, intrastate networks and last-mile evacuation capacity are aligned with where renewable capacity is being built.

Curtailment is the warning light: India needs flexibility before solar outruns the system

Solar photovoltaic technology has led to an increase in India's renewable capacity in recent years. Significant additions were made in 2024 and 2025, and capacity growth should remain elevated in 2026. But as renewable penetration rises, curtailment risk emerges. During 2025 and the first six months of 2026, India's grid experienced renewable curtailment of about 2,800 gigawatt-hours and 3,300 GWh, respectively, with solar accounting for more than 85%.

Transmission bottlenecks explain about 10% of curtailment, according to an S&P Global Energy assessment, with the other 90% attributed to grid-security concerns linked to system inflexibility. The system may have insufficient flexible demand, storage or dispatchable capacity that can ramp down during daylight hours when solar PV generation is high. A comparison of low- and high-curtailment days in April 2026 illustrates how insufficient flexible generation support led to higher curtailment for solar PV (peak curtailment of 22 GW on April 5, versus 1 GW on April 17). 

The solution is to increase system flexibility. Thermal plants must operate at lower minimum levels and improve ramping capability, with suitable compensation for cycling and flexibility services. Storage additions must accelerate, with battery energy storage systems playing a role in short-duration balancing and evening peak shifting, and pumped storage supporting longer-duration flexibility. Market design must also evolve to reward flexibility. 

From fuel security to technology security

As India's power system becomes more renewable-heavy, energy security will increasingly depend on domestic availability and manufacturing depth. Solar modules, cells, wafers, batteries, inverters, power electronics and critical minerals will become as strategically important to the power system as coal logistics and gas supply were previously. Trade protection, domestic-content rules and manufacturing incentives are reducing this risk. Basic customs duties have raised the cost of imported solar cells and modules, while the approved list of models and manufacturers (ALMM) requirements has created demand for approved domestic supply, and production-linked incentives have supported local manufacturing.

Solar PV shows both progress and vulnerability. Module capacity is no longer the main constraint; the deeper vulnerabilities lie upstream in cells, wafers, ingots and polysilicon. The implementation of ALMM List-II for solar cells from June 2026 has exposed the risk of policy mandates moving faster than the certified domestic supply. Cell capacity should improve, but wafers and upstream materials could become the next bottleneck if localization requirements are extended before domestic capacity is ready.

Battery storage is a more difficult localization story. India's battery ecosystem is weighted toward downstream pack assembly, battery management systems and project integration, while commercial-scale cell manufacturing and upstream active-material production are at an early stage. The Advanced Chemistry Cell Production-linked Incentive scheme provides an important policy foundation to address this challenge, targeting 50 GWh of domestic advanced chemistry cell manufacturing capacity. Government support and private sector announcements suggest that capacity could scale rapidly. Although execution-dependent, some early estimates indicate that India's cell manufacturing capacity could rise to 140 GWh by 2030.

However, most battery manufacturing plans in India are being driven by mobility demand, where scale, cost economics and policy support are stronger. The power sector, by contrast, is more price-sensitive and likely to retain a smaller share of total battery demand. Mobility may underwrite the economics of battery manufacturing, but the resulting scale can become the cost and supply foundation for stationary storage.

Looking forward: From clean capacity to strategic power

India's next energy security challenge will be to manage the supply chain, infrastructure and markets that make a renewable-heavy power system work, rather than access to fuels or exposure to maritime chokepoints.  

Solar and wind will scale, but the harder work will be in the layers around them. This also changes the investment story, and generation assets and the upstream ecosystem may offer the most attractive opportunities. A conservative estimate suggests that India's clean-technology supply chain localization could require between $40 billion and $50 billion of investment by 2035. A phased plan to prioritize critical components for indigenization is paramount. A clear supply chain security and diversification road map is needed for items that must be imported.