India has always been a country of dichotomies.

It is the world’s most populous nation, fifth biggest economy and home to the highest number of billionaires after China and the U.S. It is a world leader in digital finance, thanks to the creation of digital public infrastructure, and is the world’s third-largest start-up hub.

Yet it remains a lower-middle-income economy, with a large share of the population classified as low-income or poor, and is a highly unequal society.

India’s climate narrative is, similarly, marked by contradictions.

While its contribution to world cumulative emissions is negligible — India accounts for approximately 4% of the global stock of emissions in the atmosphere — and it is one of the lowest emitters on a per-capita basis, India is already the third-largest emitter of greenhouse gasses on an annual basis, and is, worryingly, home to 12 of the world’s 15 most polluted cities.

With India forecast to be the world’s fastest-growing large economy and biggest oil consumer over the coming years, if it does not take action fast, emissions will only continue to rise.

India needs to act not only for the world to achieve the Paris Agreement ambitions, but also for its own survival.

More than 75% of Indian districts are at risk of extreme weather and it is already seeing fiercer cyclones, greater incidences of drought and flooding and more heatwaves. While these climatic changes will impact worker productivity and economic output in aggregate, they will disproportionately impact vulnerable communities and farmers — 60% of which are monsoon-dependent.

While India needs to decarbonize its entire economy, achieving its target of net-zero emissions by 2070 arguably hinges on the “greening” of its power sector.

With a 34% share, India’s power industry constitutes the single biggest source of emissions in India, and its grid ranks as the fourth most carbon-intensive in the world. Coal still accounts for almost 50% of installed power capacity, and more than 70% of power generation.

With greater power demand expected from consumers, as well as existing and emerging areas of industry, in the near future, and the ongoing electrification of the economy also putting greater pressure on the grid, emissions from power will continue to rise if left unabated.

In recognition of the imperative to decarbonize power as a means to drive the whole-economy emissions transition, the government has outlined impressive clean energy targets: achieving a 50% share of renewables in power capacity by 2030 and energy independence by 2047.

India has made impressive strides toward these goals. As a result of significant private sector investment, India now ranks fourth of all countries globally on installed solar and wind power capacity and its addition of renewable power capacity has been particularly strong in recent years.

Unfortunately, this simply isn’t enough. To truly decarbonize its energy sector, India needs to act on three fronts.

Apart from greater renewable capacity installation — for context, India’s additions in 2024 represented only 8% of China’s — India needs to find ways to integrate greater amounts of renewable energy into its grid, a challenge that countries globally are grappling with, while continuing to invest in baseload (or round-the-clock readily available) power.

To do this, India needs to invest more in battery storage infrastructure — including via pumped hydro storage, new and innovative battery energy storage systems, and also green hydrogen.

Indeed, the inability to transmit renewable energy into the grid when it is generated in surplus (for example, solar during summer months in south-western states) often leads to curtailment, or the intentional offloading of power production, as the lack of storage capacity prevents its use in power-scarce states.

Digitalization of the grid will also be key to integrating renewables. Emerging digital technologies can enable power operators to access information from renewable energy assets and consumers in real time, allowing them to operate intelligent load-dispatching systems based on current supply and demand.

In order to have a tangible impact on renewable power integration, grid digitalization will need to take place concurrently with electricity market reform.

Currently, India’s state electricity distribution companies, or DISCOMs, have limited flexibility in incorporating renewables as per availability and demand as they are locked into long-term power purchase agreements (PPAs).

Plans for what’s known as a Market-Based Economic Dispatch System, which would centralize power purchase and dispatch across the country on a real-time basis, will enable India to transition from relatively inflexible locked-in power agreements with thermal power producers to lowest-cost (including renewable) generation.

A digital energy grid overlaid with centralized power purchase and dispatch will improve efficiency in power trading, and also likely lead to lower power prices.

While this transition takes place, greater flexibility is needed at India’s coal power plants to ensure a steady baseload supply of power, while more investment in nuclear is needed to guarantee future energy security. Reassuringly, India has already outlined plans for both.

Professionalization of power distribution can help lower these subsidies and reduce wastage. States that have professionalized distribution have indeed shown a significant reduction in transmission and distribution losses. In a power-hungry — power demand is expected to quadruple by 2050 — and historically power-scarce country, there is no room for waste.

Progress on the installation of rooftop solar has been slow so far, impeded by a lack of affordability, consumer awareness and trained personnel, with only around 16 gigawatts installed versus a target of 40 gigawatts.

Microgrids, meanwhile, remain commercially unviable, and more impact — non-commercially minded — capital will be required to get such initiatives off the ground. Hearteningly, recent government initiatives signal progress on decentralized renewable energy, and this installation will be important in lowering grid load and emissions.

All three prongs of India’s energy sector transition will require funding. According to expert estimates, India needs to spend around $100 billion per year, or 2.8% of current nominal GDP, to achieve net-zero power sector emissions by 2070.

With various imminent and urgent competing demands on the country’s budget, public finance will simply not be enough.

India will need to attract greater amounts of philanthropic, foreign, and private capital, as well as develop creative financing structures, to meet its net-zero target.

Each of these capital sources has a specific role to play.

While philanthropic capital can help in seed funding unproven new technologies ― for example, new battery technologies, nuclear, and green hydrogen ― greater foreign and domestic public capital can play a role in de-risking investments that so far generate lower-than-market returns (for example, microgrids). Finally, more private capital can help finance already commercially viable opportunities, including power distribution and renewables.

The good news is this: India’s mammoth endeavor to transition its power sector paves the way for significant growth across multiple sunrise sectors.

It opens up tremendous opportunities for investment and entrepreneurship across renewables and decentralized energy solutions, emerging technologies in battery storage, nuclear, green fuels, various segments of energy efficiency and in software/ digital capabilities.

India’s clean-tech ecosystem is already emerging, and energy-related enterprises, including those operating in renewables and energy efficiency, directly account for 70% of all green startups in the country.

As the transition ensues, more capital will be needed. With rising incidents of heatwaves crippling productivity whilst raising grid load across the country, and India simultaneously positioning itself as a global data center hub, there is no time to lose — the call for greater green and transition finance is now.