This report does not constitute a rating action.
Key Takeaways
- India's renewable sector will need to double its annual capacity addition to 50 gigawatts (GW) over 2025-2030 to meet the country's lofty 500GW target.
- Capacity addition will require US$175 billion and up to US$150 billion for the expansion and strengthening of the transmission and distribution network.
- S&P Global Ratings anticipates that for most renewable energy companies, high capex--at twice the level of EBITDA--will keep leverage above 8x net debt-to-EBITDA. Onshore financing will help support this.
Time is ticking for India's renewable sector. The next five years will be crucial as the country strives to meet its target of 500GW renewable capacity by 2030. This is a huge jump from the 214GW capacity as of March 2025. S&P Global Ratings believes onshore financing will aid capacity expansion.
The sector is now firmly in its third phase of evolution. The emphasis is on hybrid projects--battery or 24/7 power--to provide power for longer. The sector has evolved from its 1.0 phase of feed-in tariffs and a 2.0 stage marked by intense competition and falling tariffs. Renewable developers and distribution companies now recognize renewables can only become part of the solution if they provide more stable power. Otherwise, inherent intermittency causes greater network instability.
Renewables companies will improve scale and diversity but continue to face high leverage and execution risks as they align with the national transition target. Most companies will use debt to fund expansion, though the sector remains attractive for both equity and debt investors.
Renewable Capacity Addition Needs To Pick Up Pace
More work needs to be done to expand India's renewable energy capacity. We forecast at least 50GW of annual renewable capacity addition will be required over 2025-2030 to achieve the 500GW target by 2030. This will mean almost doubling last year's capacity addition of 29GW.
Developers have made decent progress in recent years. The year 2024 was a record in both capacity additions and capacity awarded.
Chart 1
Chart 2
Shift to large projects, energy storage increases execution risks
In our view, India's renewable energy sector has reached something of an inflection point. The focus is now on boosting utilization, addressing intermittency, and reducing curtailment risk. Solar remains the country's preferred renewable energy source because it is cheap and easy to execute. However, there has been a rise in tenders for hybrid, round-the-clock, and energy storage projects.
Like other markets, there is a greater push for energy storage systems to integrate large-scale renewable additions in the grid, ensuring grid balancing and reliability.
The existing project pipeline is robust at about 175GW. This comprises:
- Solar (78GW);
- Hybrid renewables with or without storage (70GW);
- Onshore wind (13GW);
- Pumped storage (12GW) and;
- More than 2GW of stand-alone battery storage.
This mix should sustain the target renewables capacity addition of 50GW a year over 2025-2027.
Chart 3
Chart 4
Energy storage projects in India started predominantly with pumped hydro, given it is an established technology and widely used in markets such as China, Japan, and the U.S. Companies that already own hydro assets have been the first to enter the pumped hydro arena. They see it as one of the most cost-effective storage options, thanks to its large scale and long lifespan.
Pumped storage projects may also offer different revenue streams, typically providing either flexible on-demand energy or storage services. In our view, storage-service contracts offer more stable revenue, as developers are protected from resource risk, and carry no price risk (given a monthly fixed-fee profile).
However, such projects are often capital intensive, costing at least US$1 billion. Execution risk is also higher because of more complex civil works, right-of-way issues, and onerous environmental approvals. The country's first pumped hydro storage project is a 1.68GW facility in the state of Andhra Pradesh, led by Greenko Energy Holdings. It has faced delays, and now has a commissioning date in the second half of 2025.
Other established players are jumping into battery energy storage systems (BESS). ReNew Energy Global plans to build a 1-gigawatt-hour (GWh) BESS-integrated project in Andhra Pradesh, which it estimates will cost US$2.6 billion. Over the next decade, battery storage will likely complement pumped hydro, given land constraints limit large-scale hydro development.
The pace of BESS adoption ultimately depends on achieving economies of scale (particularly beyond two hours) and the country's ability to expand domestic battery manufacturing.
Top renewables players will lead from the front
Top developers will play a prominent role in helping India achieve its transition target. We look at the top 10 players with the highest operational capacity as of end-March 2025. Many have also set aspirational goals for 2030. NTPC Ltd. has the highest target at 60GW. Adani Green Energy and Greenko both have a target of 50GW.
These developers account for about 36% of the country's operational capacity in renewable energy. This contribution could increase to about 57% in 2030 if they reach their targets.
Charts 5 and 6
Hefty Investment Required For Expansion
We forecast India's renewable sector will require at least US$175 billion (about Indian rupee (INR) 15 trillion) of capex investment over 2025-2030 to meet its 500GW target. This forecast assumes capex costs of INR50 million/megawatt (MW). This could be higher due to the rollout of newer and more complex technology.
Debt will continue to dominate financing of renewable energy because developers typically fund their capex using a debt-to-equity mix of at least 70:30, while taking on more debt against projects that are operational.
Upgrading the transmission and distribution grid is just as critical as adding renewables--and could require another US$100 billion-US$150 billion of spending until 2032. This includes strengthening of the national grid and integrating renewable energy into it.
Capex intensity for the sector is at record high
Total capex of the key renewable players is about five times higher than the levels in fiscal 2020 (ending March 31). Increased capex has also greatly outpaced EBITDA generation. Over the past two years, capex intensity--capex as a percentage of EBITDA--has exceeded 200%.
Even during non-peak cycles, this metric remains at 90%-100%, which we view as fairly high. This reflects the sector's overall high growth targets and massive spending needs.
Chart 7
High Leverage Trend To Continue
High leverage still weighs on the sector and shows no signs of abating over the next five years, in our view. The median net debt-to-EBITDA of the top renewable developers has increased to about 8.4x in fiscal 2025 from 7.1x in fiscal 2020.
We forecast the sector's steady state leverage to inch toward 8.0x-10.0x because many players are in or entering heavy expansion mode. After 2030, increased capacity could lead to improvement in leverage.
We believe diversified and integrated utilities can better accommodate higher spending than pure-play renewable players. Tata Power Co. Ltd. and NTPC have stronger balance sheets, despite ramping up investments in the sector.
Chart 8
Watch out for operating risks
Apart from outsized capex, the sector continues to face the following obstacles:
Resource variability and lower generation volumes than we expect (particularly for wind assets). Consistently weak wind conditions have cause wind power projects to fall short of P90 estimates (meeting power generation probability of at least 90% of the time) in fiscal 2025 (year ending March 31). This shortfall is weighing on earnings, as a 2%-3% drop in output can reduce cash flow by about 5%.
Execution risk remains for greenfield projects. Land acquisition and right-of-way issues have increased over the past one to two years, affecting both generation and transmission projects. On the transmission side, a long-term strategy for evacuation infrastructure is being implemented under the country's National Electric Plan. Any material delays could lead to bottlenecks and potential power curtailment.
Receivables could again weigh on financials (see chart 9). However, collection has improved over the past two years with the rollout of a late payment surcharge scheme in 2022. Receivables plunged to 25% of revenue in fiscal 2024 compared with peak levels of 63%-64%.
Chart 9
The Sector Remains Attractive For Investment, Funding
Many renewable players relied on dollar-bond funding in the growth stage, seizing on the relatively lower cost of funding and flexibility of bullet bonds to redeploy cash flow for growth rather than amortization.
U.S.-dollar bond issuances have since tapered, given the higher cost of funding compared with competitive onshore lending rates. The latest dollar bond was raised by Greenko (US$1 billion) in March 2025.
Developers are increasingly shifting to the onshore banking system and domestic bond markets for their financing needs--either for expansion or refinancing. Funding has been available in larger amounts than before, with the equivalent of benchmark-sized U.S.-dollar issues becoming more common, and at times provided by a single lender.
Funding is also available from policy-backed finance companies focused on renewables such as Indian Renewable Energy Development Agency Ltd. (BBB-/Stable/A-3) or the broader power and infrastructure sector (such as Power Finance Corp. and REC Ltd.). Power Finance Corp. and REC Ltd. have become active in the renewable space, with 10%-15% of their loan mix exposed to the sector.
Equity play to be shaped by valuations
Some developers are also considering equity markets for alternative funding channels. In late 2024, ACME Solar and NTPC Green turned to the domestic IPO market for equity raising. Continuum Green Energy Ltd. is also contemplating a domestic listing, following the markets regulator's approval for an IPO in April 2025.
High growth and funding needs continue to drive sector multiples. India's renewable sector is less exposed to external trade tensions though supply-chain disruptions could slow the pace of execution, as they have in the past few years.
Lingering risks remain. The sector will face potential execution challenges--including transmission infrastructure--and a backlog of power-purchase agreements that await signoff with offtakers.
Any delays could not only derail transition targets but dampen cash flow for the top players that are chasing growth.
Editor: Lex Hall
Related Research
- Tear Sheet: Continuum Green Energy Holdings Ltd., May 9, 2025
- India: Firms Protected By Growth, Funding, Credit Strength, March 31, 2025
- Industry Credit Outlook 2025: APAC Utilities, Jan. 14, 2025
- India Corporate And Infrastructure Ratings: The Momentum Is Positive, Aug. 11, 2024
- Indian Renewables: A Deep Dive Into Operating Performance, March 6, 2024
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