Power sector investments to be driven by renewable energy, transmission projects: Moody’s

Continued policy support would help India to make significant progress toward its 2030 transition targets and 2070 net-zero targets.

Renewable energy and electricity transmission would continue to drive investments in India's power sector over the next six to seven years, said ratings agency Moody’s in a report.

The report said for India’s target of 500GW renewable energy capacity by 2030, the country would require $190 billion to $215 billion of investment over the next seven years. Another $150 billion to $170 billion of investment would be required for electricity transmission and distribution, and energy storage to cater to the incremental renewable energy capacity, it added.

“The significant increase in capital spending for renewable energy companies, which is largely funded by debt, will lead to high financial leverage over the next three years, a credit negative. However, the stable regulatory environment and policy support continues to facilitate energy transition for power companies,” the report said.

Despite strong capacity addition of renewable energy, the report noted that coal would remain an important source of electricity generation in the next 8-10 years, which mitigates stranding risks for coal-based power assets.

“We expect India to add 40GW-50GW of coal-based capacity over the next five to six years to help meet power demand, which is likely to grow by 5%-6% annually over this period. The utilisation rate for coal-based capacity is likely to remain high at around 65%-70% despite these additions,” it said.

Continued policy support would help India to make significant progress toward its 2030 transition targets and 2070 net-zero targets. The report said strong policy support has helped India increase the share of renewable energy in its power capacity mix to around 43 percent in fiscal 2023-2024.

“The Central Electricity Regulatory Commission’s tariff regulations for 2024-2029 have provided clarity for regulated power companies regarding their returns and cost pass-through mechanisms. This regulatory consistency helps power companies transition toward cleaner energy while maintaining profitability,” the report said.