India's 60% target of non-fossil fuel energy in overall mix by 2035 depends on debt financing

India’s target to reach 500 gigawatts (GW) of renewable energy by 2030 and 60 per cent non-fossil fuel in its energy mix by 2035, under the country’s revised Nationally Determined Contributions (NDC), will depend as much on structure of debt finance as on technology or policy, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).

India’s credit markets are already differentiating between clean and thermal energy assets, with consequences for company balance sheets that are hard to ignore, the report states.

India's dependence on imported fossil fuels — for crude oil and liquefied natural gas (LNG) for power — leaves its economy acutely exposed to geopolitical shocks and supply disruptions, reinforcing the urgent need to accelerate transition.

The report - ‘Financing the energy transition: A credit perspective on India’s power sector’ — examines financial indicators for eight key power generators —Adani Green Energy Limited (AGEL), Adani Power, JSW

Energy Limited (JSWEL), ReNew Power, NLC India Limited (NLCIL), NTPC Limited, SJVN Limited, and Tata Power — together representing roughly one-third of India's installed capacity.

Annual investments in renewables, storage and transmission are estimated to surge from ~USD68 billion (Rs 6.18 trillion) by 2032 to ~USD145 billion (Rs 13.19 trillion) by 2035. With renewable assets being capital-intensive with long operating lives, long-tenor amortising debt is the most efficient form of financing and will determine the pace of India's transition.

“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,” says Kevin Leung, Sustainable Finance Analyst, Debt Markets, IEEFA – Europe, and a contributing author of the report.

“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,” says co-author Soni Tiwari, Energy Finance Analyst, India, IEEFA.

Among the utilities, NTPC is central to unlocking transition finance. It is India’s largest integrated power utility accounting for around 17% of installed capacity, with 51.1per cent government ownership and a credit rating aligned with sovereign debt.

“It is uniquely positioned to anchor large-scale, low-cost financing for the power sector’s shift to clean energy. NTPC’s Rs 7 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,” says contributing author Saurabh Trivedi, Lead Specialist, Sustainable Finance & Carbon Markets, IEEFA - South Asia.