India’s Renewable Targets hinge on generating Debt Finance: Report
Because renewable assets are capital-intensive with long operating lives, long-tenor amortising debt is the most efficient form of financing and can determine the pace of India’s transition
Annual investments in renewables, storage, and transmission have to surge from $68 billion to as much as $145 billion by 2035
Visual Credits: Wikimedia Commons
There is a widening credit divergence between renewable and thermal energy assets, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA). It argued that the success of India’s target to reach 500 GW of renewable capacity by 2030 depends heavily on the country’s ability to mobilise sustainable debt finance.
Titled ‘Financing the energy transition: A credit perspective on India's power sector’, the report evaluated eight major power generators — NTPC, Tata Power, Adani Green, Adani Power, JSW Energy, ReNew Power, NLC India, and SJVN — roughly one-third of India’s installed capacity.
According to the report, India’s dependence on imported fossil fuels — for crude oil and liquefied natural gas (LNG) for power — left its economy acutely exposed to geopolitical shocks and supply disruptions, which reinforced the urgent need to accelerate the transition.
Structural advantage for renewables
Because renewable assets are capital-intensive with long operating lives, long-tenor amortising debt is the most efficient form of financing and can determine the pace of India’s transition, according to the report.
“The power sector is already among the largest borrowers in India’s domestic debt markets, and this role is likely to expand as investments accelerate. In this context, transition planning is, fundamentally, a question of debt market planning. The availability, tenor and cost of debt will decide how fast capacity can be added — and who gets left behind,” said Kevin Leung, Sustainable Finance Analyst, Debt Markets, IEEFA – Europe, and a contributing author of the report.
The study found that renewable platforms are already delivering stronger profit margins and lower variable costs compared to their thermal peers. Because renewable projects lack fuel costs, they possess a structural margin advantage that is expected to compound as portfolios mature. Renewable projects also have broader access to offshore and international financing, and stronger interest from global institutional lenders.
Chart: IEEFA
On the other hand, thermal-linked credits are not raising much interest in the international capital markets.
“Adani Green Energy Limited consistently outperforms Adani Power on EBITDA margins within the same corporate group. Similarly, NTPC Green outperforms NTPC's legacy thermal operations. These are not cyclical differences. They reflect a structural shift in the economics of power generation that will compound over time as renewable portfolios mature and generate stable, contracted cash flows,” said co-author Soni Tiwari, Energy Finance Analyst, India, IEEFA.
Looming risks
Given the capital-intensive nature of solar and wind assets, debt remained the natural form of finance for the sector. IEEFA estimated that annual investments in renewables, storage, and transmission have to surge from $68 billion to as much as $145 billion by 2035. However, the report warned that nearly all analysed companies generated negative free cash flow in FY2025, which reflected a heavy reliance on debt to fund massive infrastructure buildouts.
While renewable energy held a financial edge, India’s corporate bond market remained a significant structural bottleneck, according to the report. Approximately 80% of the debt for the country’s top utilities was still raised through bank loans rather than deeper, more liquid bond markets, the report found. Furthermore, an over-reliance on international capital exposed the energy transition to risks of sudden foreign capital repatriation.
Thermal assets faced their own set of existential threats. Global rating agencies like Fitch flagged elevated climate transition risks for Asia-Pacific power companies that derived more than a quarter of their revenue from coal. Under certain carbon-pricing scenarios, the unpriced cost of carbon represented one to four times the EBITDA for Indian thermal utilities by 2030.
The report positioned NTPC Limited, India’s largest state-owned utility, as the central anchor for this transition. “It is uniquely positioned to anchor large-scale, low-cost financing for the power sector’s shift to clean energy. NTPC’s INR7 trillion (USD80 billion) capex plan through FY2032 makes it the single most consequential capital allocator in the sector. If NTPC can demonstrate credible transition to a clean energy company, it would facilitate broader capital flows via a coherent transition finance agenda alongside other catalytic efforts,” said contributing author Saurabh Trivedi, Lead Specialist, Sustainable Finance & Carbon Markets, IEEFA, South Asia.
Ultimately, the analysis suggested that while debt levels are rising, a well-executed transition can strengthen India's financial markets. By aligning debt with sustainability goals through green bonds and credible transition planning, Indian utilities can attract a larger and more resilient global investor base.