India’s Growing Power Sector in 2025: Investor Outlook

India’s power sector, the sixth-largest globally, is continuously evolving to meet the pace of accelerated manufacturing, rapid urbanization, and expanding agricultural activities. Rising domestic energy demand has driven notable advancements in power generation, transmission, and distribution, with a dynamic shift towards renewable energy sources such as solar and wind.

India’s power sector is one of the largest and most diverse in the world, playing a pivotal role in the country’s economic development. According to the U.S. Energy Information Administration (EIA), as of 2023, the country ranks sixth interm of total energy production with 126.567 quadrillion British thermal units (BTU). 

With a rapidly growing economy, increasing urbanization, and rising energy demand, India has made substantial advancements in power generation, transmission, and distribution. The sector operates under a combination of central and state government policies, regulatory frameworks, and private sector involvement.

A comparative analysis of power generation in India

India’s power sector has undergone a dynamic transformation, with notable shifts in its energy mix, capacity, and sustainability initiatives. As of January 2025, the total installed power capacity stands at 466.26 GW. Despite efforts to reduce dependence on fossil fuels, coal remains the dominant source. However, renewable energy is expanding rapidly.

Source: India Energy, NITI Aayog

Power capacity expansion

Coal-based power remains critical for India’s energy security, increasing from 211.86 GW in 2022-23 to 220.49 GW in 2024-25. Renewable energy sources, particularly solar power, have witnessed the most rapid expansion, growing from 66.78 GW in 2022-23 to 100.33 GW in 2024-25. Wind energy has seen moderate growth, contributing 10.37 percent to total capacity, while hydropower has remained relatively stable at 46.97 GW.

Source: India Energy, NITI Aayog. Unit: GW.

Despite the expansion of renewables, challenges such as grid integration, storage solutions, and financial investment persist. Hydropower is crucial for balancing renewable intermittency, though environmental concerns and project delays hinder its growth. Nuclear power, while accounting for just a small share of the total, has increased from 6.78 GW in 2022-23 to 8.18 GW in 2023-24, with plans for further expansion.

The future of nuclear energy in India

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India is increasingly focusing on nuclear power as a stable, low-carbon energy source. Recent policy amendments, including relaxed liability laws, aim to attract private and foreign investments in nuclear energy. India plans to expand its nuclear capacity to 100 GW over the next two decades, with 14.3 GW of traditional nuclear power targeted by 2032 and the development of small modular reactors (SMRs) by 2033.

With growing electricity demand and the need for reliable baseload power, nuclear energy is becoming an essential component of India’s clean energy transition, complementing renewables such as solar and wind. Collaborations with the U.S. and other international partners are expected to accelerate nuclear infrastructure development.

India’s National Electricity Plan (2022-32)

The National Electricity Plan (NEP) outlines India’s strategy for power expansion over the next decade. Key targets include:

• Peak demand forecast: 277.2 GW by 2026-27, 366.4 GW by 2031-32
• Installed capacity target: 609 GW by 2031-32
• Renewable energy goal: 500 GW of non-fossil fuel capacity by 2030
• Investment requirement: INR 33.6 trillion (US$384.5 billion) over the next decade

While renewables remain central to the NEP, coal-based capacity is expected to increase by 80 GW by 2031-32 to ensure stable baseload power. Nuclear energy is projected to grow to 100 GW by 2047.

The electricity blueprint also includes objectives to promote private sector participation in India’s power sector.

• Private investments in renewable energy: The plan encourages domestic and foreign private investments in solar, wind, and energy storage projects through policy incentives, Production-Linked Incentive (PLI) schemes, and viability gap funding (VGF).
• Public-private partnerships (PPPs): India’s central government promotes PPP models in power transmission and distribution to enhance efficiency and attract capital.
• Independent power producers (IPPs): Private companies continue to play a key role in power generation, especially in solar, wind, hydro, and coal-based plants.
• Foreign Direct Investment (FDI): India has 100 percent FDI allowance in the power sector, attracting global investors like Siemens, GE, EDF, TotalEnergies, and Brookfield Renewable Partners.

 Strengthening transmission and distribution networks is a priority, with measures like grid modernization and inter-regional transmission expansion supporting renewable energy integration.

Power transmission and distribution in India

India’s power distribution comprises central, state, and private entities. The central government primarily oversees power generation and transmission through entities like:

• Power Grid Corporation of India Limited (PGCIL)
• NTPC Limited
• NHPC Limited
• Nuclear Power Corporation of India Limited (NPCIL)
• Damodar Valley Corporation (DVC)

State Electricity Boards (SEBs) manage distribution across states. Some key state-owned companies include:

1. Andhra Pradesh: Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL), Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL)
2. Delhi: Delhi Transco Limited (DTL)
3. Karnataka: Bangalore Electricity Supply Company Limited (BESCOM), Mangalore Electricity Supply Company Limited (MESCOM), Hubli Electricity Supply Company Limited (HESCOM), Chamundeshwari Electricity Supply Corporation Limited (CESC Mysore), Gulbarga Electricity Supply Company Limited (GESCOM)
4. Maharashtra: MSEDCL (Mahavitaran)
5. Tamil Nadu: Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO)
6. Telangana: Southern Power Distribution Company of Telangana Limited (TSSPDCL), Northern Power Distribution Company of Telangana Limited (TSNPDCL)
7. Uttar Pradesh: Madhyanchal Vidyut Vitran Nigam Limited (MVVNL), Paschimanchal Vidyut Vitran Nigam Limited (PVVNL), Purvanchal Vidyut Vitran Nigam Limited (PuVVNL), Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL)

There are three major private-owned power companies operating in India.

1. Tata Power Company Limited (Mumbai, Delhi, Odisha)
2. Adani Electricity Mumbai Limited (AEML) (Mumbai)
3. BSES Rajdhani Power Limited (BRPL) and BSES Yamuna Power Limited (BYPL) (Delhi)

India’s energy security: PLI schemes for power sector

The PLI schemes for India’s power sector aim to strengthen domestic manufacturing, reduce import dependence, and enhance the country’s energy security. These schemes primarily focus on renewable energy, including solar power, battery storage, green hydrogen, and wind energy.

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• PLI scheme for high-efficiency solar PV modules: Launched in 2021, this PLI scheme promotes domestic manufacturing of solar photovoltaic (PV) modules, reducing reliance on imports. With an initial allocation of INR 45 billion (US$515 million), later expanded to INR 240 billion (US$2.74 billion), this scheme supports fully integrated solar module manufacturing. The expected impact includes the addition of 48 GW of solar module manufacturing capacity.
• PLI scheme for Advanced Chemistry Cell (ACC) battery storage: This scheme, first introduced in 2021, supports the domestic production of energy storage technologies, particularly lithium-ion batteries, for electric vehicles (EVs) and grid-scale storage. With an allocation of INR 181 billion (US$2.07 billion), this initiative seeks to establish 50 GWh of battery manufacturing capacity, enhance energy storage solutions for renewable integration, and reduce battery imports from countries like China and South Korea.
• Green Hydrogen PLI scheme: Launched in 2023 under the National Green Hydrogen Mission, this scheme focuses on promoting the domestic production of green hydrogen and electrolyzers. With a budget allocation of INR 174.9 billion (US$2 billion) as part of the larger INR 197.44 billion (US$2.25 billion) mission, this scheme aims to produce 5 million metric tonnes (MMT) of green hydrogen annually by 2030. It will also establish 60-100 GW of electrolyzer manufacturing capacity, accelerating India’s hydrogen economy.

Renewable energy boom fueling India’s employment prospects

On November 13, 2024, the central government reported that India’s renewable energy sector reached a major milestone in 2023, creating approximately 1.02 million jobs nationwide. Citing the International Renewable Energy Agency’s (IRENA) 2024 Annual Review, developed in collaboration with the International Labour Organization (ILO), the central government highlighted India’s expanding role in the global clean energy transition. With the global renewable energy workforce growing from 13.7 million in 2022 to 16.2 million in 2023, India has emerged as a key contributor to this surge, reaffirming its dedication to green job creation and sustainable economic growth.

Meanwhile, the Union Ministry of New and Renewable Energy has noted that the wind energy sector also contributed to employment with approximately 52,200 jobs, nearly 40 percent of which were in operations and maintenance and 35 percent in construction and installation.

Other renewable energy segments, such as liquid biofuels, solid biomass, and biogas, further boosted job creation, employing 35,000, 58,000, and 85,000 people, respectively. Additionally, the solar heating and cooling sector provided 17,000 jobs, showcasing the vast and diverse employment opportunities emerging in India’s renewable energy industry.

Foreign investment inflows in India’s energy sector

India has witnessed a steady rise in Foreign Direct Investment (FDI) inflows into its energy sector, with a particular emphasis on non-conventional energy sources. According to the latest data from the Department for Promotion of Industry and Internal Trade (DPIIT), investors are increasingly attracted to renewable energy, driven by policy incentives, global sustainability goals, and India’s commitment to achieving net-zero emissions. 

Source: Fact sheet on foreign direct investment (FDI) inflow, DPIIT, GoI

FDI in the non-conventional energy sector has been increasing at a remarkable pace. The cumulative FDI inflows into this segment reached US$21.33 billion as of December 2024. This rise underscores investor confidence in India’s clean energy transition, supported by favorable government policies such as the PLI scheme for solar manufacturing and foreign investor-friendly regulations.

 Source: Fact sheet on foreign direct investment (FDI) inflow, DPIIT, GoI

*The data for FY2024-25 is subject to update. The complete data for the financial year will be made available by the central government after March 31, 2025.

In contrast, FDI in the power sector, which includes conventional electricity generation and distribution, totaled US$19.68 billion cumulatively. The sector recorded a year-on-year growth of 144 percent in FY 2023-24, with inflows reaching US$1.7 billion from US$697.92 million in the previous year. This growth suggests increasing foreign interest in India’s power infrastructure, likely driven by modernization efforts, smart grid initiatives, and the expansion of transmission networks to integrate renewable energy sources.

The overall trend in FDI inflows indicates a growing global interest in India’s energy transition. With increasing financial commitments, investor-friendly policies, and a clear roadmap toward sustainability.  

Several foreign companies operating in India’s power sector are also contributing to renewable energy, thermal power, and power distribution. These companies bring advanced technology, expertise, and investments, supporting India’s energy transition.

Major foreign companies in India’s power sector

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1. Siemens (Germany) – A key player in power transmission, grid automation, and renewable energy solutions, the company provides technology for power distribution and smart grids in India.
2. GE Renewable Energy (USA) – A major supplier of wind turbines and hydroelectric equipment, GE supports India’s renewable energy goals and works on grid modernization.
3. EDF (France) – The French energy giant is involved in solar and wind power projects and has partnered with NTPC for renewable energy ventures.
4. Enel Green Power (Italy) – Enel Green Power operates in India’s renewable sector, particularly in solar and wind energy projects.
5. Vestas (Denmark) – Vestas, a global wind turbine manufacturer, supplies equipment for India’s growing wind energy market.
6. First Solar (USA) – A key player in India’s solar energy sector, focusing on manufacturing and deploying high-efficiency solar modules.
7. ReNew Energy Global (Backed by Goldman Sachs, Abu Dhabi Investment Authority, and Canada Pension Plan Investment Board) – Although the company is India-based, ReNew has received notable foreign investment and is a major player in wind and solar energy.
8. TotalEnergies (France) – Partnered with Indian company Adani Green Energy for solar and wind projects, TotalEnergies is working towards India’s renewable energy expansion.
9. Brookfield Renewable Partners (Canada) – Invests in solar and wind power projects in India, focusing on large-scale renewable energy assets.
10. Shell (UK-Netherlands) – Involved in India’s energy transition through investments in EV charging, battery storage, and solar energy projects.

Future outlook

India’s power sector is on a path of transformation, with increased focus on sustainability, digitalization, and decentralization. Key initiatives include smart grids, battery storage, and green hydrogen projects. With continued policy support and technological advancements, the country aims to become a global leader in clean energy transition.

India has made remarkable progress in the power sector but must address financial and infrastructural constraints while promoting renewable energy to ensure a sustainable and reliable power supply for the nation’s growing energy demands.

(US$1 = INR87.36)

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