Summary of key pathways to reduce power sector emissions in India
- Clean energy supply expansion: India’s clean energy deployment remains concentrated in a limited number of geographies and relies heavily on utility-scale solar and onshore wind. Scaling clean energy supply requires deploying renewables in underserved regions, enabling new electricity delivery models, and advancing emerging technologies.
- Grid flexibility and resilience: Rapid growth in renewable capacity and electricity demand is outpacing the expansion and modernization of India’s transmission and distribution systems, limiting the integration and utilization of clean power. Strengthening grid planning, transmission infrastructure, storage integration, and DISCOM capacity will be critical to reliably absorb and deliver increasing volumes of clean electricity.
- Clean energy demand growth: Alongside an increase in clean energy supply, accelerating demand for clean electricity will be critical to enable decarbonization of end-use sectors. India’s industrial sector remains heavily reliant on conventional energy, with relatively low levels of electrification. Hence, demand growth will require greater adoption of electrification measures, particularly in the industrial sector.
We prioritize all of the above pathways given their interdependent and synergistic nature, with a cross-cutting focus on strengthening subnational and state-level capacity to accelerate progress in India.
Clean Energy Supply Expansion
India will need to substantially scale clean electricity generation to meet its rising energy needs while staying on a net-zero trajectory. NITI Aayog estimates suggest that clean energy capacity, particularly renewable capacity, must increase from around 283 GW today to nearly 3,000 GW by 2050 to align with a net-zero trajectory, implying a tenfold expansion over the next two decades.14 Current growth is driven largely by utility-scale solar and onshore wind in a few resource-rich regions, supported by favorable economics and policy incentives. However, the next step change in scaling clean electricity capacity will require diversification across several dimensions where current progress remains limited.
Geographic distribution: Despite accounting for roughly 40% of national electricity demand and emissions, five states—Rajasthan, Gujarat, Maharashtra, Karnataka, and Tamil Nadu—account for over 66% of India’s installed renewable capacity, while other regions with comparable resource potential remain underleveraged.15 Although India operates a unified national grid, this geographic concentration strains the transmission infrastructure, slowing deployment and increasing vulnerability to localized disruptions.16 Many lagging states lack a combination of enabling policies, viable market structures, or adequate transmission and grid infrastructure for clean energy deployment.17 Unlocking clean energy in these regions will require policy support and context-specific approaches tailored to local constraints and resources, such as hydropower in the Himalayan belt and distributed energy systems in land-constrained states such as Uttar Pradesh and Bihar.18
Deployment models: Utility-scale renewables dominate capacity additions, followed by rooftop solar. This dominance reflects strong underlying economics and policy support, which reduces risks for developers and investors. However, land acquisition challenges and transmission constraints are likely to limit further expansion in the short to medium term, particularly in densely populated and land-scarce states with limited industrialization.19 At the same time, alternative models remain underdeveloped due to higher perceived risk and weaker policy and financing support. Scaling alternative models—such as community solar, agrivoltaics (agriPV), floating solar, and virtual power plants—will be critical to expand clean energy generation in geographies where utility-scale approaches are not viable.20 Targeted policy support and pilot programs can build the evidence base needed to mobilize capital at scale and attract private sector investment.
Technological pathways: Utility-scale solar and onshore wind account for the majority of clean energy additions in India and will remain central to its transition. However, increasing reliance on such variable renewable energy creates grid management challenges as penetration rises, leading to dependence on conventional energy backup for reliability and stability. Alternative clean firm technologies—such as nuclear, geothermal, and geologic hydrogen—or less variable generation through offshore wind remain nascent in India, with high development risk and limited private investment.21 Scaling these technologies is important for long-term system stability, as they provide dispatchable generation, reduce concentration risk, and enable higher overall clean energy penetration.
Interventions: Given the uncertainty around scaling clean energy supply through new deployment models and emerging technologies, evidence generation is critical to derisk deployment, inform policy and investment decisions, and enable replication of successful models at scale. We think a high-leverage opportunity is to support pilots of new deployment models (e.g., agriPV, floating solar, and community solar), particularly in underserved and land-constrained geographies. We think geographical diversification and adoption of new deployment models will play a meaningful role in scaling clean energy deployment in the near to medium term. For emerging technologies, knowledge creation is particularly important given their early stage of development. We think feasibility and techno-economic assessments of nuclear, geothermal, and geologic hydrogen can help inform technology development and policy design as the ecosystem matures. For more mature technologies such as offshore wind, addressing downstream barriers, including tariff design, supply chain development, and financing mechanisms, will be critical to overcoming implementation bottlenecks.22
Grid Flexibility and Resilience
Accelerating supply of clean power is necessary but insufficient without parallel investment in transmission and distribution infrastructure. Despite contributing 50% of India’s electricity generation capacity, clean energy sources accounted for only 25% of actual generation due to limited storage and insufficient grid flexibility to manage variability.23 These constraints are already slowing new project development, with several renewable projects facing delays or remaining underutilized. Enabling grid flexibility and resilience requires a two-pronged approach focused on transmission expansion and modernization alongside distribution system reform.
Transmission expansion and modernization: India's transmission network is unable to keep pace with rapidly expanding renewable generation capacity, with new build-out and modernization severely lagging.24 As a result, over 50 GW of commissioned renewable energy capacity was stranded as of mid-2025.25 A resulting cascading effect is that state-owned DISCOMs are unwilling to sign new power purchase agreements, developers face steeper financing costs, and participation in competitive transmission bidding has weakened. At the same time, existing infrastructure is often underutilized, as interstate transmission corridors operate below capacity due to mismatches between variable generation and static transmission allocation.26
Transmission challenges stem from both planning and execution gaps. On the planning side, coordination failures between stakeholders in the power sector value chain (e.g., generation companies, demand-side actors, transmission companies, DISCOMs) lead to misalignment between infrastructure investment decisions and emerging demand needs.27 As a result, transmission expansion remains reactive and struggles to keep pace with demand growth driven by electrification, industrial expansion, green hydrogen production, and data center load.28 Long project timelines further compound this issue, as transmission infrastructure typically requires several years to plan and build. On the execution side, high reliance on imported materials and equipment, right-of-way disputes—land acquisition disagreements between developers and landowners for interstate transmission projects—and procedural complexity stemming from multi-agency approval requirements continue to delay project delivery.29
Addressing these constraints will require a combination of policy, infrastructure, and technology interventions. On the policy front, interventions include enabling unified generation–transmission planning, simplifying bureaucratic processes, incentivizing performance-based asset utilization, and supporting asset monetization models. On the infrastructure and technology front, interventions include upgrading congested renewable-rich transmission corridors as a lower-cost alternative to new builds, integrating storage in high-curtailment regions, mobilizing capital through public–private partnership models, building domestic material and equipment supply chains, and modernizing the grid with higher-capacity lines, advanced protection systems, and digital monitoring.
Distribution system reform: DISCOMs are central to India’s power sector decarbonization. They control procurement, tariff design, market access, and the integration of new demand, making their financial and operational capacity critical for the power sector.30 Hence, constraints at the DISCOM level have significant downstream effects, including delays in renewable integration, limited storage deployment, and restricted market development.
Despite repeated reform efforts, DISCOMs remain financially stressed, with accumulated losses estimated at around ₹7.08 lakh crore ($75 billion USD) as of March 2024.31 They face persistent structural challenges, including high electricity procurement costs, politically constrained tariffs, delayed government subsidy reimbursements, and reliance on debt for working capital. At the same time, DISCOMs are losing their paying customers as commercial and industrial consumers are increasingly shifting to open access markets and exploring solar-plus-storage investments to meet their own demand at costs below DISCOM tariffs, while still depending on DISCOM procurement and distribution to fill any gaps in their own generation.32 Although recent improvements in subsidy payments from state governments have reduced reported losses, other underlying structural issues remain unresolved.33 As a result, DISCOMs face constraints on both revenue generation and cost recovery, limiting their ability to invest in grid modernization and expansion. We think that targeted reforms could materially improve DISCOM performance, including regular and predictable tariff adjustments, agricultural feeder solarization, least-cost procurement planning, and cost-reflective pricing for grid services.34
We are skeptical of privatization as a near- to medium-term solution. Evidence from Delhi and Odisha indicates that privatization can improve service quality and reduce losses, but these outcomes require substantial political and regulatory support. More significantly, a change of ownership (i.e., public to private) does not resolve the underlying structural drivers of financial stress, such as politically constrained tariffs and high procurement costs. Further, enabling conditions for successful privatization—such as high aggregate technical and commercial (AT&C) losses, poor service quality, and a significant paying consumer base—are not uniformly present across states.35 Privatization is likely to exacerbate already unevenly distributed outcomes across states and may raise concerns around affordability and access for low-income and rural consumers.36 We think strengthening regulatory, financial, and operational capacity within the existing DISCOM framework is likely to be the most feasible and scalable pathway for reform.37
Interventions: Philanthropy can play an important role in addressing the institutional capacity constraints of state utilities (i.e., transmission and distribution companies) and enabling storage integration, planning and forecasting, and policy and regulatory design for procurement and transmission. Specifically, we think the high-leverage opportunities include a) supporting policy design and modeling for DISCOMs on optimal tariff and market design, storage enablement, and planning and forecasting, b) supporting policy design and modeling for transmission companies on unified generation-transmission planning, streamlined approval processes, performance-based asset utilization, and asset monetization models, and c) supporting evidence-generation pilots and demonstrations (e.g., battery energy storage system (BESS) integration and round-the-clock renewable energy (RTC-RE) procurement models) that bundle regulatory design, financing, and implementation into a single intervention.38
More broadly, subnational institutions, especially state governments, also have limited capacity and technical expertise to navigate and implement energy transition strategies. Hence, sustained technical assistance and institutional capacity-building at the subnational level is critical to enable evidence-driven decision-making, policy design, and implementation. Specifically, we think high-leverage opportunities include providing technical assistance to state governments on a) designing state clean energy policies, regulatory reforms, and market mechanisms, b) conducting energy transition planning and investment prioritization, and c) implementing state energy transition priorities and project-level support (identification, design, development, and execution). While multi-year funding support should be prioritized for technical assistance, these efforts should also be structured to build lasting institutional capacity. Knowledge products such as digital dashboards, data tools, and playbooks can help institutionalize knowledge, while addressing gaps in skills and technical expertise can strengthen the ability of state institutions to sustain systems and processes independently beyond the engagement.
Clean Energy Demand Growth
India’s net-zero trajectory is constrained not only by the pace of clean energy deployment but also by persistent dependence on conventional energy sources. A key structural challenge underpinning this dependence is low levels of end-use electrification, particularly in the industrial sector, which limit the emissions reduction potential of a decarbonizing grid.39
End-use electrification: India's industrial sector accounts for about 50% of the nation’s final energy consumption and a comparable share of energy-related greenhouse gas emissions, yet only around 19% of energy is used in the form of electricity, well below the global average of roughly 29%.40 The sector remains heavily reliant on conventional energy sources for captive power generation, process heat, and, in some cases, feedstock.41 Captive, conventional energy-based self-generation is widespread across energy-intensive industries and a major constraint to India’s industrial decarbonization.42
The barriers to electrification are interdependent and complex to address:
- Economic incentives are misaligned: Cross-subsidization—a DISCOM pricing mechanism where commercial and industrial (C&I) customers pay more to offset losses from lower-paying residential and agricultural consumers—weakens the financial case for grid-connected electrification in the commercial and industrial sectors.43 Hence, electrification is economically unattractive in the absence of targeted policies.44 High upfront capital requirements further reinforce this constraint, particularly for micro, small, and medium enterprises (MSMEs) with limited access to affordable finance.45
- Regulatory support remains limited: The absence of a unified national industrial decarbonization strategy, inconsistent enforcement of Renewable Purchase Obligations across states, and the lack of systematic policy prioritization for end-use electrification collectively suppress the investment signals needed to mobilize private capital.46
- Commercially viable technologies remain either nascent or underutilized: Electrified alternatives for process-related uses in sectors such as iron and steel, cement, and chemicals are at an early stage of deployment or not yet commercially viable in India. At the same time, technologies such as heat pumps, electric boilers, and battery storage for diesel replacement are commercially available and applicable across subsectors, but remain underutilized due to high capital costs and limited financial incentives for switching.47
- Grid reliability remains a constraint: Grid reliability issues further push industrial customers toward captive generation, reinforcing dependence on conventional energy sources.48
We think industrial electrification requires coordinated action across finance, policy, and technology.49 Concessional capital, credit guarantees, and blended finance can reduce the cost of capital and improve bankability for early adopters. Policy measures such as performance standards, procurement mandates, and state-level transition roadmaps can strengthen demand signals. New delivery models, including energy as a service, can further reduce upfront investment barriers for industrial consumers.
Given the scale and complexity of the challenge, we prioritize industrial electrification within our power sector decarbonization strategy and explore additional sub-strategies for industrial decarbonization in India as part of our sector report on Industry.
Interventions: Evidence generation pilots providing clarity on economic viability, technical feasibility, and policy design are critical to unlocking policy reform, derisking financing, and mobilizing larger pools of capital. Hence, we think supporting pilots and demonstrations of industrial electrification measures and technologies is a high-leverage opportunity for philanthropy to generate this evidence and inform regulatory and financing mechanisms needed to accelerate adoption.
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14Table E.1: A snapshot of the power sector by 2050 and 2070. NITI Aayog, 2026; “So far, a total of 283.46 GW of capacity from non-fossil fuel sources has been installed in the country as on 31.03.2026” Press Information Bureau, GoI, 2026
15Calculated based on “National and State level Electricity Demand” data. Vasudha Foundation, 2025; Calculated based on ‘Top-10 emitting states’ data. Usthadian, 2025
16“Rajasthan in the Northern Regional Grid and Gujarat in the Western Regional Grid house the bulk of the country’s utility-scale solar and wind capacities. Such concentration of capacities, combined with delayed transmission and evacuation infrastructure, is producing long queues at key pooling stations. On average, projects awaiting commissioning in FY2026–27 face connectivity delays of four to five months [...] Greater emphasis should also be placed on developing renewable capacity closer to demand centres, including at the intra-state level, that reduces excessive concentration in a few corridors.” EMBER, 2026; “Any major concentration of power generation resources in one area in comparison to the total installed capacity of the country needs to be assessed in terms of vulnerability of the future grid operation due to any unexpected major generation loss by reasons attributable to defence, climate changes and active/reactive power management during fault of transmission lines.” EnergyWatch, 2026
17“Decarbonisation performance across states varies widely. Performance is characterised by a clear concentration effect, with only a few states emerging as strong performers across individual parameters. Importantly, no state demonstrates strong performance across all six parameters. This uneven pattern highlights substantial heterogeneity, where progress remains dispersed across parameters rather than comprehensive [...] Viewed through the market enablers lens, electricity transition readiness varies sharply across states.” IEEFA and EMBER, 2026
18See Figure 1: Characteristics of regions in terms of generation and demand. IFRI, 2025
19“Land acquisition, however, remains a critical concern and barrier. India’s dense population and competing demands for agriculture, housing, infrastructure, and industry make large-scale land acquisition for solar parks increasingly difficult. Without innovative solutions, land scarcity could significantly hinder the pace of solar deployment. New and Innovative Solar Applications (NISA) can address these land-related constraints [...] The key NISA technologies include Agri photovoltaics (AgriPV), Building integrated photovoltaics (BIPV), Floating solar photovoltaics(FSPV) and Rail and Road photovoltaics (RIPV).” Down to Earth, 2025; “A macro-level reassessment estimates India’s total solar potential at roughly 11,000 GW, of which around 45% is from ground-mounted utility-scale solar and 55% from NISA technologies.” TERI, 2025
20“The Variable Renewable Energy led transition extends beyond utility-scale projects to include decentralised solutions such as rooftop solar, building-integrated PV, agrivoltaics, and other behind-the meter resources. These options reduce land-use pressures, ease grid congestion, strengthen resilience, and support more inclusive energy participation, particularly in urban, agricultural, and industrial areas. By improving alignment between local generation and demand, distributed renewables complement utility-scale VRE while enhancing energy access and local economic benefit.” NITI Aayog, 2026
21Offshore wind projects face high implementation risk reflected in higher generation costs. "Two landmark auctions found little interest [in offshore wind] from developers and were eventually called off in 2025 [...] India's tendering model even produced an uncovered gap: even after VGF subsidy, the levelised cost of generating electricity was about INR 5/kWh higher than the pre-determined tariff at INR 4.5/kWh." EMBER, 2025
22“[...]offshore wind requires specialised port infrastructure, marine logistics, robust seabed leasing frameworks, clear risk allocation, and bankable commercial structures, making it one of the most complex segments of the global energy transition.” Akashvani, 2026; “To truly kickstart offshore wind in India, the government’s approach must evolve, building on early groundwork through a blend of domestic innovation and global best practices. The priorities are clear: craft targeted incentives for first-of-a-kind projects, catalyse domestic supply chains and translate them into bankable projects that can come to life.” EMBER, 2026
23“Non-fossil sources contributed about 50% of this [total installed capacity], while coal accounted for 46%. Coal supplied 73% of the total power generation; non-fossil sources contributed roughly 25%.” NITI Aayog, 2026
24 “The current largest structural driver of renewable energy curtailment in India is the mismatch between the deployment of renewable energy generation and associated transmission infrastructure.” EMBER, 2026
25“The implications are significant—over 50GW of renewable energy capacity is currently stranded nationwide, increasing per-unit transmission costs, weakening project viability, and deterring private investment.” JMK Research and IEEFA, 2025
26“There is reluctance among DISCOMs to sign new PPAs, even for competitively priced projects, due to concerns over grid congestion and the risk of non-availability of contracted power during curtailment events [...] In FY2025, only 8,830ckm of new transmission lines were commissioned against a target of 15,253ckm, reflecting a 42% shortfall, with Inter-State Transmission System (ISTS) additions at their lowest in a decade. Alongside this capacity gap, system inefficiencies are emerging, with analysis by the NREL indicating that up to 71% of ISTS corridors operate below 30% utilisation, underscoring the mismatch between infrastructure availability and actual power flows.” JMK Research and IEEFA, 2025
27“This lack of coordination not only weakens the credibility of the national electricity plan but also affects investment decisions by utilities and developers who rely on consistent long-term signals. Fragmented planning also hampers transmission development, storage deployment, and the design of market mechanisms that depend on a shared understanding of future system needs.” Mishra and Sheoran, 2025
28“Setting up a transmission line requires coordination with multiple authorities across different government levels. Key approvals include techno-economic clearance from the CEA, grid connectivity from dispatch centres, and transmission licences from regulatory commissions. State and local agencies must obtain additional approvals, such as land acquisition and route alignments.” JMK Research and IEEFA, 2025
29Right-of-way issues significantly delay transmission development due to the time required to secure land and permits along transmission routes. There is also a clear mismatch between transmission and renewable energy project timelines: renewable projects can be completed in 12-18 months, whereas transmission projects often take 3-4 years. Outlook Business, 2025; “Considering the majority of the equipment and material for high-voltage direct current(HVDC) systems is imported by India, supply chain constraints have and continue to cause delay in building these transmission lines.” IECC, 2026
30“The decisive levers of the transition—land allocation, intra-state transmission, procurement strategies, tariff design, and DISCOM finances—sit with states, not the Centre.” ORF, 2026
31DISCOMs reported ₹7.08 lakh crore in losses as of Mar 2024. Prayas (Energy Group), 2025
32Based on synthesis of section on “Major contributors to increasing losses and liabilities of DISCOMs” Prayas (Energy Group), 2025
33“DISCOM profit is significant, and reflects many much-needed wins in Indian electricity. But these wins were built primarily on a debt swap, subsidy arrears being cleared, and accounting improvements [...] but deeper structural problems like rigid procurement contracts and increasing tariffs remain untouched. Until those are addressed, this profit is best understood as the first milestone on a much longer, steeper road.” Daily Brief by Zerodha, 2026
34Several experts highlighted these approaches, which are aligned with the financial performance analysis for the Sixteenth Finance Commission of India. Prayas (Energy Group), 2025; A feeder transmits electricity from a substation to distribution points. Under agricultural feeder solarization, a dedicated solar power plant supplies a feeder connected to multiple agricultural pumps, rather than connecting solar panels to each pump individually. OrnateSolar, 2025
35AT&C losses include technical losses from energy lost during transmission and distribution and commercial losses arising from theft, faulty billing, and poor revenue collection.
36Privatization is not inherently ineffective. Rather, its effectiveness varies considerably across regions and states, as it may not address the underlying drivers of specific DISCOM challenges. Our perspective is informed by expert interviews, alongside a synthesis of the section on “Experience with Privatisation” by Prayas (Energy Group), 2025 and key arguments from the 2025 reflection paper critiquing DISCOM privatization by CEEP, 2025; “Privatisation, if poorly designed, risks deepening inequalities. Many states may hand over profitable urban circles to private firms while retaining loss-making rural networks. This selective reform could widen the gap in both access and quality of power supply.” PolicyCircle, 2025
37Experts also suggest that state institutions may need to evolve in the long term for improved management of the renewable energy in the grid. Particularly, state load dispatch centers (SLDCs) which are responsible for coordinating generation and system operations within states, will play an increasingly important role in managing these challenges. While India currently does not have entities like distribution system operators (DSOs) who dedicatedly manage distribution operations, creation of DSOs may alleviate pressures on DISCOMs to manage the increasing complexity of distributed energy resources and grid operations. We are uncertain about the near-term feasibility of creating DSOs but remain open to supporting the development of such entities if our assessment is updated.
38While our focus is on state utilities, we will also consider opportunities to support SLDCs where their role in state-level system operations is important for strengthening grid operations and enabling decarbonization.
39We currently prioritize exploration of industrial electrification over broader demand-side measures because of its more direct potential to substitute carbon-intensive conventional energy sources. However, we remain open to exploring targeted demand-side interventions in the future, particularly in rapidly growing applications such as cooling, where there may be opportunities for significant emissions reductions.
40“India’s industrial sector accounts for nearly 49% of the nation’s total final energy consumption, yet only 18.7% of this comes from electricity [...] The industrial sector electrification level in India is much lower than the world and Asian average of 29% and 30%, respectively” GGGI, 2025
41Coal is used as feedstock in manufacturing of steel, cement, and syngas. World Coal, 2014; Syngas is a key building block for producing chemicals like methanol, ammonia, urea, and olefins. Wood Mackenzie, 2017
42Captive power plants are typically set up by industrial or commercial energy users to self-generate electricity primarily for self-consumption, often for reliability and cost advantages. “A significant portion of industrial consumption, around 30%, is met through captive generation rather than supply from DISCOMs.” NITI Aayog, 2026
43“Under this mechanism, C&I consumers have historically paid tariffs above the average cost of supply to offset the below-cost tariffs charged to residential and agricultural consumers.” Prayas (Energy Group), 2025
44We expect the Renewable Consumption Obligation (RCO), introduced by the Ministry of Power in 2025, to incentivize electrification. The policy requires designated consumers—including DISCOMs, open access consumers, and captive power producers—to increase the share of renewable electricity in total consumption from 29.9% in FY2024–25 to 43.3% by FY2029–30. Bureau of Energy Efficiency, 2026
45“India’s domestic and agricultural electricity tariffs are more subsidised than industrial and commercial tariffs. This price distortion led to low electrification rates in Indian industries. High demand charges and banking limits also make electrification challenging.” NITI Aayog, 2026
46“Notably, there is no unified national strategy specifically focused on industrial electrification. Furthermore, current policies are often skewed toward electricity generation, with insufficient attention to end-use electrification.“ GGGI and CII, 2025
47“While electrification is mature for low-temperature heat (<150°C), technologies for high-temperature process heat (e.g., cement kilns, ethylene crackers) are either nascent or commercially expensive. Transitioning from fossil-fuel boilers to efficient electric alternatives like Industrial Heat Pumps or Electric Boilers requires significant capital investment.” NITI Aayog, 2026
48Captive self-generation is preferred due to cost and reliability benefits. India’s captive coal capacity is ~17% of total coal capacity. “As per the latest available data for March 2024, captive coal-based installed capacity is about 46 GW [...] In the Current Policy Scenario, coal capacity rises from 268 GW in 2025 to a peak of 450–470 GW by 2050.” NITI Aayog, 2026
49"Industrial electrification is not merely a technical shift but a systemic transformation requiring coordinated action across policy, technology, finance, and society.” GGGI and CII, 2025
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