India’s Power Sector Needs $700 Billion Investment For Net-Zero Transition By 2070: Moody’s

India’s power sector requires an investment of $700 billion over the next decade to support the country’s commitment to achieving net-zero emissions by 2070, according to Moody’s Ratings. The sector, which is the largest contributor to carbon emissions in the country, accounts for nearly 37% of total emissions. Moody’s highlighted that investments between 2026 and 2051 will need to be around 1.5% to 2% of GDP, with the next ten years requiring approximately 2% of GDP. The agency stated that while this level of investment is significant, it remains manageable for India.

Currently, India’s power generation is heavily reliant on coal, which presents a major challenge in the transition to a low-carbon future. The expected economic expansion over the next decade is likely to result in increased coal-based power generation, potentially delaying the country’s shift to cleaner energy sources. The investment required for this transition is estimated to be between ₹4.5 lakh crore and ₹6.4 lakh crore ($53 billion to $76 billion) until the fiscal year 2034-35, with annual investments rising to ₹6 lakh crore to ₹9.5 lakh crore over 2026-2051.

The planned investments will cover electricity generation, including renewable energy, coal, and nuclear power, as well as transmission, distribution, and energy storage infrastructure. These investments will be funded through a combination of public and private sector contributions, along with domestic and foreign capital. Moody’s emphasized that foreign investments will play a crucial role in closing the financial gap needed to achieve the net-zero target.

India’s economy is projected to grow at an annual rate of 6.5% over the next ten years, with power demand increasing at a compound annual growth rate of 6%. The country’s per capita electricity consumption, which stood at 1,255 kilowatt-hours in 2022, is expected to rise significantly as economic growth drives higher energy usage and improves living standards.

Moody’s estimates that India will require an additional 450 GW of renewable energy capacity to support this growing demand. However, this alone will not be sufficient, making it necessary to expand coal-based power generation capacity by 35%, increasing from 218 GW to approximately 295 GW over the next decade. This underscores the need for strategic investments in renewable energy, grid infrastructure, and energy storage to balance the country’s energy needs while progressing towards decarbonization.

The report projects that solar and wind energy will dominate new capacity additions over the next 20-25 years, while nuclear and hydropower expansions will be relatively smaller. By 2034-35, installed generation capacity is expected to double, with power demand rising by 1.7 to 1.8 times the current level. The share of non-fossil fuel power in total electricity generation is anticipated to increase from 23.5% in 2023-24 to 45-50% by 2034-35.

The private sector is expected to play a significant role in India’s renewable energy transition, with increased participation from both private enterprises and government-owned companies. Financial support for under-construction projects will primarily come from conventional banks and non-banking financial institutions, while domestic and international debt capital markets will be crucial for refinancing operational projects. Moody’s underscores that strong investment in renewable energy and related infrastructure is essential for India to achieve its long-term net-zero goals.