Context:

• India is accelerating its clean energy transition to meet climate commitments (NDCs), reduce import dependence, and position itself as a global renewable energy and green hydrogen hub.
• Recent gains in domestic solar manufacturing and clean energy investments signal momentum, but deep structural challenges persist across manufacturing, finance, grid infrastructure, and emerging technologies.

Key Developments:

• Solar manufacturing - From import dependence to domestic capacity:
  • For years, India relied heavily on Chinese solar imports. In 2024, domestic firms added 25.3 GW of module manufacturing capacity, nearly doubling national capacity.
  • The Production Linked Incentive (PLI) scheme catalysed private investment, and signalled India’s intent to move up the global value chain.
  • Adoption of TOPCon (Tunnel Oxide Passivated Contact) cells reflects a shift toward higher-efficiency, higher-value innovation.
• Structural contradictions in solar supply chain:
  • Despite capacity expansion, India imported about 66 GW of solar modules and cells in 2024, while exports marginally declined.
  • Upstream integration is weak - only 2 GW wafer capacity commissioned, compared to nearly 80 GW downstream module capacity.
  • Absence of polysilicon and wafer manufacturing risks dependency substitution, not elimination, highlighting the missing middle of manufacturing.
• Clean energy investment boom with financial stress:
  • $3.4 billion FDI attracted in the first nine months of FY2025 (over 80% of power sector inflows).
  • Competitive auctions pushed tariffs to record lows, making renewables among the cheapest electricity sources
  • However, DISCOM financial distress (unpaid dues), post-auction contract renegotiations in some states, undermine contractual sanctity and investor confidence.
• Grid and transmission constraints:
  • Nearly 60 GW of renewable capacity is stranded due to inadequate transmission infrastructure.
  • Issues include - Grid congestion, curtailment without compensation, etc.
  • Consequences:
    • Difficulty in financial modelling.
    • Higher risk premiums.
    • India’s renewable financing costs are about 80% higher than advanced economies.
• National Green Hydrogen Mission (NGHM) - Strategic promise, economic hurdles:
  • India currently consumes about 5 million tonnes of grey hydrogen.
  • Target under NGHM: 5 million metric tonnes of green hydrogen annually by 2030. Pilot projects in steel, refining, transport (hard-to-abate sectors).
  • Challenges:
    • Current costs of $4.1–$5.0 per kg is projected to be around $2.4 per kg by 2030, which remains uncompetitive without subsidies, carbon pricing, and regulatory mandates.
    • Infrastructure gaps in storage, transport, and end-use.
    • Chicken-and-egg problem - No demand without supply certainty, no supply without assured demand.

Challenges and Way Ahead:

• Weak upstream solar manufacturing (polysilicon, wafers): Promote end-to-end solar value chain integration.
• Regulatory uncertainty and contract renegotiation: Ensure contractual sanctity to protect investor confidence.
• Transmission bottlenecks and uncompensated curtailment: Synchronise transmission expansion with renewable capacity addition. Establish clear curtailment compensation frameworks.
• Green hydrogen’s cost and demand uncertainty: For green hydrogen -
  • Adopt realistic timelines.
  • Create demand through mandates, incentives, and carbon markets.
  • Invest in shared infrastructure for storage and transport.

Conclusion:

• India’s clean energy transition reflects both ambition and complexity.
• While manufacturing gains, low tariffs, and green hydrogen vision signal leadership potential, unresolved structural bottlenecks threaten sustainability.
• Addressing grid, financial, and supply-chain weaknesses—while safeguarding policy credibility—will determine whether India emerges merely as a large clean energy market or as a global model for energy transition in the developing world.